1 RAC Business Breakdown Pay On Use Booklet Terms and Conditions PLEASE READ AND KEEP FOR YOUR RECORDS rac.co.uk/business
2 Who to contact This is the number that you and/or a driver will need in the event that the vehicle has broken down, or has been involved in a road traffic accident. Broken down or been involved in a road traffic accident? Phone The RAC accident helpline is operated by Quindell Legal Services Limited who are authorised and regulated by the Solicitors Regulation Authority. Checklist Certain information is required when calling for service. 1. Your or the driver s name 2. The vehicle registration number as shown on the RAC Business Breakdown card 3. The make and model of the vehicle 4. The exact location of the vehicle 5. Your or the driver s contact number 6. The nature of the fault Remember 1. Please call us back if the vehicle gets going before the RAC patrol or RAC contractor arrives 2. Only accept help from the RAC patrol or RAC contractor that has been sent to assist the vehicle by us otherwise we may still charge the applicable fee Telephone charges Call charges may apply. Please check with your telephone provider. Please note that we do not cover the cost of making or receiving telephone calls. Calls may be recorded and/or monitored. 3
3 Contents Page Who to contact...3 Important information about RAC Business Breakdown...5 Period of service...5 Additional services provided by the RAC (Including Accident Care)...5 Definition of words...7 Your services: Section A: Roadside...9 Section B: Recovery...9 Section C: At Home...10 General exclusions...10 General conditions...11 Renewal reviews...12 RAC Business Breakdown cancellation...12 Changes to your details...13 Changes to RAC Business Breakdown terms and conditions...13 How to contact us...13 Complaints...14 Your data
4 Important information about our services Any words in this booklet that are in bold type are defined. Please see the Definition of words which explains the meaning of each defined term. This booklet contains the services, conditions and exclusions that apply to each individual Section of services (see Sections A to C) and the general conditions and exclusions that apply to all Sections of services in this booklet. You and the drivers must meet these conditions or we may not provide you with service. We will provide you with an RAC Business Breakdown pack for each vehicle which includes the RAC Business Breakdown card for that vehicle. This should be kept in the vehicle to ensure we are able to provide the services under RAC Business Breakdown. This booklet together with your schedule is the contract for the provision of pay on use services between you and RAC. Please ensure these documents are kept in a safe place. If you cannot find any of your documents, call us on to request a replacement. Use of language Unless otherwise agreed, the contractual terms and conditions including this booklet and the schedule and other information relating to this contract will be in English. Law The parties are free to choose the law applicable to RAC Business Breakdown. Unless specifically agreed to the contrary, this contract will be subject to the laws of England and Wales. Your terms and conditions Service type RAC Business Breakdown is intended to offer services relating to the breakdown of the vehicles or road traffic accidents involving vehicles that are owned, contract hired, leased or fleet managed by you, subject to a fee being payable on each occasion that we provide the service. This fee is subject to VAT at the current rate. RAC Business Breakdown provides services to you and any driver with a full, valid driving licence when driving a vehicle that has been notified to us. You and each driver must comply with the terms and conditions under RAC Business Breakdown. Any failure of a driver to do so may impact on your rights under this RAC Business Breakdown, including whether you can obtain services from us. You should ensure that each driver is made aware of this as well as the level of services available under RAC Business Breakdown. If you would like to change the vehicles which receive service under RAC Business Breakdown, please see Changes to your details in this booklet. Period of service RAC Business Breakdown is for a 12 month period. The administration fee for a 12 month period of service will be due in full in advance. Payments by credit card We may charge a credit card fee of up to two per cent of the total transaction value if you pay for the fee, administration fee or a fee for any other services by credit card. The credit card fee may also apply in circumstances, including but not limited to the renewal of RAC Business Breakdown or including additional vehicles under RAC Business Breakdown. You will be advised of when the credit card fee applies in advance of payment and the amount payable. We will also tell you, in advance, about any other charges that may apply relating to RAC Business Breakdown. Pre-authorisation of costs of parts To enable us to repair or provide a temporary repair to a vehicle following a breakdown and where this can be done safely at the roadside you authorise us to fit parts that cost up to the value of 300, exclusive of VAT, so that the vehicle can continue its journey as soon as possible with the minimum of disruption to your business. We will then send you an invoice for the cost of these parts. You must pay this invoice within 30 days of the invoice date. Additional services provided by the RAC If you or a driver requires additional services that are not covered under Sections A to C of RAC Business Breakdown, we may be able to arrange appropriate additional services at your or the driver s request for an additional cost. For example to: 1. Purchase any parts, including batteries and replacement glass, necessary to complete a repair of the vehicle above the 300 value set out above; 2. Receive specialist services to complete a repair of the vehicle; 3. Receive road traffic accident assistance in the territory; 4. Provide any other services that may be available for an additional cost, as stated in this booklet. The charge for any additional service provided or arranged by us will be agreed with you or the driver when the service is requested and before any costs are incurred. If any person requests an additional service under RAC Business Breakdown that is not covered by Sections A to C, you will become liable for any costs relating to the additional service provided. To limit the risk of you having any unexpected costs, we will ask for your or the driver s proof of identity and, where possible, we will charge you or the driver for the costs of the additional service in advance. However, we recommend that you ensure all drivers obtain your prior consent before we provide such 5
5 additional services outside the terms of RAC Business Breakdown under any Section. Accident care In the event that any driver has been involved in a road traffic accident within the territory, we may be able to provide you and the driver with the following additional services: Road traffic accident assistance If the vehicle cannot be driven as a result of a road traffic accident within the territory, we can arrange for the recovery of the vehicle up to a maximum of 150 miles as measured by us from the location of the road traffic accident for an additional charge (as RAC Business Breakdown does not provide attendance for a road traffic accident, fire, flood, theft or act of vandalism). The charge for this service will be agreed with you or the driver when road traffic accident assistance has been requested and before any costs are incurred. This charge will vary depending upon the level of assistance required. You or the driver will be liable to pay the road traffic accident assistance charge within 30 days of the recovery, in a single instalment. However, you or the driver may be entitled to recover this from their motor insurer. This will be subject to the terms and conditions of the relevant motor insurance policy. Alternatively, you or the driver may be able to recover this cost from a third party or their insurer, if the third party is considered liable for the road traffic accident. Post accident assistance If you or a driver notifies our legal claims handler of a road traffic accident within the territory, our legal claims handler will record all of the relevant information about the road traffic accident provided by you or the driver and provide a copy of such record to you or the driver, if requested. In addition, with the permission of the insurer of your or the driver s motor insurance policy that will or may provide insurance cover for the road traffic accident, our legal claims handler can report details of the road traffic accident to them and ask them to contact you or the driver at a convenient time to discuss the insurance claim or motor insurance policy. Our legal claims handler can also assist you or the driver in determining whether the vehicle can be driven following the road traffic accident through asking you or the driver a series of questions. Replacement vehicle assistance If you or the driver is involved in a road traffic accident within the territory, our legal claims handler will assist you or the driver in hiring a replacement vehicle for the period that the vehicle is immobilised as a result of and/ or whilst it is being repaired following the road traffic accident if: 1. You or the driver complete a hire and credit agreement with the hire car company; 2. You or the driver comply with the terms and conditions of the hire car company selected by us, which may include age, licence and geographical restrictions; 3. You or the driver confirm that there is not a courtesy car benefit included within your motor insurance policy as a result of the road traffic accident in question; 4. A third party driver is responsible for the road traffic accident and their insurers do not dispute that the third party is responsible for the road traffic accident; and 5. You or the driver provides us with the name, address, vehicle registration, insurance company name and policy number of the responsible third party driver. We or our legal claims handler cannot guarantee that the hire car company will be able to provide any particular make or model of replacement car and the make and model of the replacement vehicle may vary from the make and model of the vehicle. We or our legal claims handler will not pay any costs relating to the replacement vehicle. Personal injury claims assistance Our legal claims handler can provide a personal injury consultation with a firm of solicitors to assess the prospects of pursuing a claim for compensation for the driver and/or passenger s injuries and associated uninsured losses. If our legal claims handler feel that the driver and/or passengers have a claim then they may be able to act on the drivers and/or passenger s behalf and will advise the driver and/or passengers of any relevant terms and conditions of such assistance. RAC Motoring Services is regulated by the Claims Management Regulator in respect of regulated claims management activities. Our registration is recorded on the website 6
6 Definition of words Certain words in this booklet have special meanings. These words and their meanings are listed below and apply wherever they are in bold type. administration fee means the annual fee for administering RAC Business Breakdown, payable by you to us during the period of service as shown on the schedule; breakdown / break down / broken down means the vehicle, caravan or trailer (as applicable) is inoperative and/or has ceased to function as a whole as a result of a mechanical or electrical failure including any failure of the battery, but not as a result of a road traffic accident, fire, flood, theft or act of vandalism. A component failure (e.g. air-conditioning failure) in itself does not constitute a breakdown unless it causes the vehicle to cease to function as a whole. Illumination of a vehicle s warning light does not always constitute a breakdown. If the illuminated warning light does not constitute a breakdown, you will need to make your own way to a place of repair and any break down service under this booklet will not apply; caravan / trailer means any caravan or trailer that complies with the following specifications: Max Weight (gross) Max Length Max Width 3.5 tonnes 7.6 metres (25ft) including tow bar 2.3 metres (7ft 6in) call out / service means any request for service under any Section of RAC Business Breakdown; customer / you / your means the person or entity shown on the schedule and that, in respect of an individual is permanently resident in the territory or in respect of an entity has its registered office/trading address in the territory; driver / their / they means any driver of a vehicle at the time a breakdown occurs who is authorised by you to be driving the vehicle and is permanently resident in the territory, including you where you are an individual person; effective date means the date that this RAC Business Breakdown agreement begins as shown on the schedule; emergency service means the police, fire, emergency medical service, the army or the highways agency traffic officer service; expiry date means the date that this RAC Business Breakdown agreement expires as shown on the schedule; fee means the charge for any services under Sections A, B or C, payable by you to us in accordance with the pay on use tariff schedule; home means the address in the territory where the driver permanently lives; legal claims handler means the RAC accident helpline, operated by Quindell Legal Services Limited, authorised and regulated by the Solicitors Regulation Authority, or a representative of RAC accident helpline; minibus means any UK registered vehicle which is constructed or adapted to carry more than 8 but no more than 16 passengers in addition to the driver and which is owned, contract hired, leased or fleet managed by you and that has been advised by you to us prior to the effective date (or the date that the minibus is included under this RAC Business Breakdown following any Changes to your details under page 13) and that complies with the following specifications: Max Weight (gross) Max Width Max Height 3.5 tonnes 2.3 metres (7ft 6in) 3 metres 7
7 modified vehicle means any vehicle that has been modified from the manufacturer s specifications; pay on use tariff schedule means the schedule included with these terms and conditions which set out the fees payable for our services; period of service means the period from the effective date to the expiry date (as shown on the schedule); RAC / we / us / our means RAC Motoring Services and each of its authorised agents; RAC Business Breakdown means this RAC Business Breakdown agreement that is subject to the terms and conditions in this booklet and the schedule; RAC contractor means any person appointed by the RAC to provide certain breakdown assistance services on our behalf; RAC patrol means a technician employed by the RAC; road traffic accident means a traffic accident involving a vehicle within the territory; schedule means the document containing important details about your RAC Business Breakdown agreement, which must be read in conjunction with these terms and conditions; services means the services provided by us under this RAC Business Breakdown agreement; specialist equipment means equipment that is not normally carried by RAC patrols or RAC contractors to complete repairs and recoveries in the event of a breakdown including, but not limited to, winching and specialist lifting equipment; territory means the United Kingdom, Jersey, Guernsey and the Isle of Man; United Kingdom means England, Scotland, Wales and Northern Ireland; vehicle means either any UK registered vehicle which is owned, contract hired, leased or fleet managed by you and that has been notified by you to us prior to the effective date (or the date that the vehicle is included under this RAC Business Breakdown following any Changes to your details under page 13) and that complies with the following specifications: Max Weight (gross) Max Width Max Height 3.5 tonnes 2.3 metres (7ft 6in) 3 metres or, a minibus. Motorcycles under 121cc and mobility scooters are not vehicles covered under RAC Business Breakdown. 8
8 YOUR COVER SECTION A: Roadside Service provided If a vehicle or the caravan or trailer attached to it has broken down in the territory during the period of service, we will provide an RAC patrol or an RAC contractor to either: 1. Repair the vehicle, caravan or trailer at the roadside; or 2. If we are unable to permanently repair the vehicle or the caravan or trailer at the roadside (within a reasonable time), we will decide, based upon our technical expertise in breakdown situations, either to provide a temporary repair to the broken down vehicle, caravan or trailer at the roadside or transport the broken down vehicle (and any caravan or trailer attached to it) to a destination chosen by you or the driver within 10 miles of the breakdown as measured by us. We will only transport the caravan or trailer if the vehicle has broken down. In addition, where we require any part/s necessary to complete a repair or temporary repair to the vehicle, as long as the RAC patrol or RAC contractor have the required part/s and this can be done safely at the roadside, we will proceed with the repair and fit parts that cost up to the value of 300 excluding VAT so the vehicle can continue its journey as soon as possible with the minimum disruption to your business. We will invoice you for these parts. You must pay this invoice within 30 days of the invoice date. If we transport the broken down vehicle (and any caravan or trailer attached to it) to a destination of you or the driver s choice, we will: 1. Provide transport for the driver and up to 7 passengers, or up to 16 passengers if the vehicle is a minibus, of the broken down vehicle to that chosen destination. If more than 5 people require transportation, we may need to provide transport in separate vehicles; and 2. Relay urgent messages from the driver to a contact of their choice if the vehicle cannot be driven because of a breakdown. Service not provided 1. Any breakdown within a ¼ of a mile of the driver s home as measured by us; 2. The cost of any parts (including batteries) required by us to repair the vehicle are not covered under this Section A; 3. The fitting of any parts (including a battery) purchased from any third party. This is to ensure that parts are fitted from reputable sources in order to avoid further call outs under RAC Business Breakdown; 4. Any breakdown resulting from a fault where we have previously provided breakdown services for that fault and either: a. we consider, acting reasonably, that the original fault has not been properly repaired by a party other than the RAC; or b. we advised you or a driver that we had only provided a temporary repair to the fault and further repairs were required and the subsequent breakdown resulted, at least in part, from a failure to carry out these other repairs; 5. Any breakdown resulting from a battery related fault where we have previously provided breakdown services for that fault and advised you or a driver to replace the battery but the battery has not been replaced; 6. If we have been called out to a breakdown of a caravan or trailer and we cannot repair it at the roadside, we will not transport the caravan or trailer; 7. Assistance in a medical emergency; or 8. Servicing or assembly of a vehicle. SECTION B: Recovery Service provided If a vehicle has broken down in the territory during the period of service and following an RAC patrol or an RAC contractor attending the breakdown and not being able to repair the vehicle locally within a reasonable time, we decide to recover the vehicle in accordance with the cover under Section A, we will transport the vehicle (and any caravan or trailer attached to it) and the driver and up to 7 passengers, or up to 16 passengers if the vehicle is a minibus, of the broken down vehicle to a destination within the territory chosen by you or the driver. If more than 5 people require transportation, we may need to provide transport in separate vehicles. We may also provide, at our discretion, a recovery service if the driver becomes ill during a journey in the territory and the driver cannot continue the journey as the driver has no one in the party of people travelling with the driver who can drive the vehicle. Service not provided 1. Recovery to more than one destination; 2. Where we can demonstrate that the recovery service as set out in this Section B, is being used by you and/or the driver to avoid the cost of repairing the vehicle; 3. Any recovery required as a result of a breakdown resulting from a fault where we have previously provided breakdown services for that fault and either: a. we consider, acting reasonably, that the original fault has not been properly repaired by a party other than the RAC; or b. we advised you or a driver that we had only provided a temporary repair to the fault and further repairs were required and the subsequent breakdown results, at least in part, from a failure to carry out these further repairs; 9
9 4. Any recovery required as a result of a breakdown resulting from a battery related fault where we have previously provided breakdown services for that fault and advised you or the driver to replace the battery but the battery has not been replaced; 5. Where a recovery is required due to a breakdown as a result of a problem with the tyre of the vehicle, caravan or trailer, we will not provide recovery over 10 miles where no serviceable spare tyre is carried by you or no suitable alternative (as recommended by the manufacturer) is available; 6. Assistance if the driver becomes ill during a journey in the territory, or in any other medical emergency, if the driver is safely able to continue their journey, including where anyone travelling with the driver is able to drive the vehicle; 7. If we have been called out to a breakdown of a caravan or trailer and cannot repair at the roadside, we will not transport the caravan or trailer; or 8. A second recovery where the original recovery destination could not accept the vehicle due to their opening hours or other restrictions. SECTION C: At Home Service provided If a vehicle or the caravan or trailer attached to it has broken down in the territory during the period of cover within a ¼ of a mile of the driver s home as measured by us, we will provide an RAC patrol or an RAC contractor to either: 1. Repair the vehicle, caravan or trailer at the roadside or the home; or 2. If we are unable to permanently repair the vehicle, caravan or trailer at the roadside or at the driver s home, we will decide, based upon our technical expertise in breakdown situations, either to provide a temporary repair to the vehicle, caravan or trailer at the roadside or transport the broken down vehicle (and any caravan or trailer attached to it) to a destination chosen by you or the driver within 10 miles of the breakdown as measured by us. We will only transport the caravan or trailer if the vehicle has broken down. In addition, where we require any part/s necessary to complete a repair or temporary repair to the vehicle, as long as the RAC patrol or RAC contractor have the required part/s and this can be done safely at the roadside, we will proceed with the repair and fit parts that cost up to the value of 300 excluding VAT so the vehicle can continue its journey as soon as possible with the minimum disruption to your business. We will invoice you for these parts. You must pay this invoice within 30 days of the invoice date. Service not provided 1. The cost of any parts (including batteries) required by us to repair the vehicle are not covered under this Section C; 2. The fitting of any parts (including a battery) purchased from any third party. This is to ensure that parts are fitted from reputable sources in order to avoid further call outs under RAC Business Breakdown; 3. Any breakdown resulting from a fault where we have previously provided breakdown services for that fault and either: a. we consider, acting reasonably, that the original fault has not been properly repaired by a party other than the RAC; or b. we advised you or the driver that we had only provided a temporary repair to the fault and further repairs were required and the subsequent breakdown resulted, at least in part, from a failure to carry out these further repairs; 4. Any breakdown resulting from a battery related fault where we have previously provided breakdown services for that fault and advised you or the driver to replace the battery but the battery has not been replaced; 5. Servicing or assembly of a vehicle; 6. Assistance in a medical emergency; or 7. If we have been called out to a breakdown of a caravan or trailer and cannot repair at the roadside, we will not transport the caravan or trailer. General exclusions The following exclusions apply to all Sections of RAC Business Breakdown. RAC Business Breakdown does not cover: 1. Services that are not arranged with us; 2. Any vehicle that is already at a garage or other place of repair; 3. Attendance following a road traffic accident in the territory. If a driver has been involved in a road traffic accident in the territory and would like us to recover the vehicle; 4. Attendance following fire, flood, theft, act of vandalism or any other incident covered by any policy of motor insurance; 5. We will not be liable in any circumstances for any infringement however caused of any manufacturer s or dealer s warranty as a result of services supplied; 6. Vehicles which have broken down on land to which you, a driver or we do not have permission to access; 7. Vehicles which have broken down as a result of: a. taking part in any motorsport event or activity which takes place off the public highway (including, without limitation, rallies or stock car racing) and is not subject to the normal rules of the public highway. Vehicles participating in any event which take place on and complies with the normal rules of the public highway (such as a treasure hunt, touring assembly or navigational road rally), will not be excluded; or 10
10 b. misfuelling. We will not repair the vehicle including but not limited to draining or removing the fuel under RAC Business Breakdown. We will only recover the vehicle to a garage within 10 miles of the breakdown; 8. Vehicles being demonstrated or delivered under trade plates; 9. The recovery of any caravan or trailer in the territory except where the vehicle that was towing the caravan or trailer has broken down; 10. The transportation of any vehicle which the RAC patrol or RAC contractor considers (acting reasonably) is loaded over its legal limit; 11. The cost of specialist equipment for any reason (including safely lifting a modified vehicle); 12. Transportation of any horses or livestock; 13. Any services or benefits relating to a breakdown that was reported under a different RAC agreement to this RAC Business Breakdown. To receive any services or benefits under this RAC Business Breakdown, you must have reported the breakdown against this RAC Business Breakdown; 14. Any costs: a. relating to repairs or replacement to glass in the vehicle. We will arrange the recovery of the vehicle to a nearby garage for assistance but we will not pay for any replacement glass or pay for the fitting of any glass; b. relating to the keys to a vehicle being broken, lost, stolen, or locked in the vehicle. We will only arrange the recovery of the vehicle to a nearby garage for assistance and you or the driver will have to pay for any work carried out on the vehicle; c. for vehicle storage charges; or d. for ferry crossings and/or toll fees of a vehicle to enable a successful recovery of the vehicle under RAC Business Breakdown and the cost of any return ferry crossings and/or toll fees of the recovery vehicle: 15. We will not be liable for any consequential loss or indirect losses. We shall not be liable for losses relating to any business interests you or a driver (and their party) may have including, but not limited to, loss of profit or revenue, loss of opportunity or of business or for business interruption (except that this will not apply in relation to any claim you or the driver may have for death or personal injury); 16. We will not provide any service under RAC Business Breakdown if we are prevented from doing so in circumstances beyond our reasonable control including, without limitation, an act of terrorism, severe weather conditions, the activities of civil or government authorities, third party industrial disputes or internal industrial disputes. In these circumstances we will take steps to prevent or minimise the effects of such circumstances on our services; 17. In the event of involvement of an emergency service, we will not remove the vehicle until all emergency services concerned have provided us with authorisation. If the emergency services insist on the removal of the vehicle by anyone other than us, we will not meet the cost of the removal; or 18. Any call out caused directly or indirectly by the driver being affected by intoxicating liquors or drugs. General conditions The following conditions apply to all Sections of this RAC Business Breakdown. If you or any driver does not comply with these conditions we may not be able to provide service under RAC Business Breakdown and we may cancel this RAC Business Breakdown. 1. You must pay the administration fee and all fees for this RAC Business Breakdown including any applicable taxes by the due date set out in the schedule or the invoice or this RAC Business Breakdown may be cancelled in accordance with the cancellation provisions on page 12 (RAC Business Breakdown cancellation). The administration fee for RAC Business Breakdown will be due in full in advance. We shall be entitled to charge interest on any amount overdue at the rate of 3% over the NatWest Bank base rate until the actual payment is received by us; 2. The driver must prove their identity by producing the valid RAC Business Breakdown card applicable to the vehicle they are driving; 3. A driver that can legally drive the vehicle and is willing to drive the vehicle must be with the vehicle at the time of the breakdown and when the RAC patrol or RAC contractor arrives at the breakdown. If they are not, we will not provide any service related to the breakdown and you may be charged for the call out; 4. If we provide an onward transportation service of passengers of a vehicle, anyone under the age of 16 must be accompanied by someone who is 17 or over; 5. If we provide an onward transportation service for the driver and the passengers of a vehicle, any animals that were in the vehicle can only be transported in the vehicle at your or the driver s own risk. We will not transport animals in the recovery vehicle and we will not be liable for or insure any animal during any onward transportation, however any assistance animals must be transported with their owners; 6. We will attend a breakdown at your request in good faith. By making a request for service under the terms of RAC Business Breakdown you confirm that you and your vehicle comply with all legal requirements; 7. Each driver must be authorised by you to be driving the vehicle and be permanently resident in the territory. If not, we will not be able to provide any service related to the breakdown; 11
11 8. You (if you are an individual) must be permanently resident in the territory or (if you are an entity) must have your registered office/trading address in the territory. Upon request from us, you must provide us with proof that the vehicle is in a legal and roadworthy condition and allow us to examine the vehicle to confirm whether it is in a legal or roadworthy condition, at any time. If you are unable to provide us with such proof, if you do not allow us to examine the vehicle or we consider (acting reasonably) that a vehicle is not in a legal or roadworthy condition for any other reason, we reserve the right to refuse to provide any service under this RAC Business Breakdown relating to that vehicle. This means we may decline to offer you or the driver service. Any repairs carried out by an RAC patrol or RAC contractor does not guarantee that the vehicle is in a legal and roadworthy condition. You or the driver must also tell us if you or the driver are aware of any mechanical, electrical or other defect or problem with a vehicle which may cause it to break down. If you or the driver do not do so, we reserve the right to refuse to provide any service under RAC Business Breakdown if required as a result of such a breakdown. Misuse of RAC Business Breakdown You and each driver must not: 1. Behave inappropriately towards any representative of the RAC by, including but not limited to, acting in a threatening or abusive manner, whether verbally or physically; or 2. Misuse RAC Business Breakdown by, including but not limited to, any of the following: a. persuading or attempting to persuade any representative of the RAC into a dishonest or illegal act; b. false or fraudulent actions or dishonesty or any act or omission which is wilful misuse or unlawful; c. omitting to tell the RAC important facts about a breakdown in order to obtain a service that would not otherwise be provided under RAC Business Breakdown; d. providing false information in order to obtain a service that would not otherwise be provided under RAC Business Breakdown; e. knowingly allow, or not take reasonable care to prevent, someone not covered by RAC Business Breakdown attempting to obtain a service under RAC Business Breakdown; or f. paying for additional services or goods in the knowledge that the payment has or will fail, with no intention of providing alternative payment. In the event that this condition is not complied with, we will contact you to discuss our concerns and if the concerns are not dealt with within a reasonable time or cannot be dealt with we reserve the right to: 1. Restrict the cover available to you or the applicable driver at the next renewal, if you wish to continue RAC Business Breakdown with us; 2. Restrict the payment methods available to you; 3. Refuse to provide any services to you or the applicable driver under this RAC Business Breakdown with immediate effect; 4. Immediately cancel this RAC Business Breakdown in accordance the cancellation provisions; and 5. Refuse to sell any services to you or the applicable driver in the future. We will notify you in writing in the event that we decide to take any action outlined above. If any call out is found to be fraudulent in any way RAC Business Breakdown will be cancelled immediately and we may also take any of the additional steps as set out above. Renewal of RAC Business Breakdown Prior to the expiry date we will contact you to confirm whether RAC Business Breakdown will be renewed and, if so, any changes to the administration fee, the fees and the terms and conditions applicable to RAC Business Breakdown for the next period of service. We will automatically renew RAC Business Breakdown for another 12 months and issue you with an invoice for the administration fee which is payable within 30 days of the invoice date. If you do not wish us to automatically renew RAC Business Breakdown you will need to contact us before the expiry date. RAC Business Breakdown cancellation Your right to cancel You can cancel RAC Business Breakdown at any time on 30 days written notice to us. We will not refund any administration fee or the fees that have already been paid to us. Where RAC Business Breakdown is cancelled for any reason, we will request settlement of any outstanding administration fees, the fees or charges for services provided. If such sums are not settled following our debt collection process, we may take legal action and we may refuse to accept your custom in the future. 12
12 Our right to cancel 1. If the administration fee or any fees are not paid by the applicable due date for payment as shown on the schedule or invoice, we will notify you in writing. If any payments are not made within 30 days of the original applicable due date, we may cancel RAC Business Breakdown with effect from the missed due date for payment; and 2. We may cancel RAC Business Breakdown in the event of misuse of RAC Business Breakdown as set out in the General conditions. In the event that we decide to cancel RAC Business Breakdown, we will notify you in writing and RAC Business Breakdown will be cancelled with immediate effect. We will not refund any administration fee or fees that have already been paid or that is due to us. Where RAC Business Breakdown is cancelled for any reason, we will request settlement of any outstanding administration fee, fees or charges for services provided. If such sums are not settled following our debt collection process, we may take legal action and we may refuse to accept your custom in the future. If RAC Business Breakdown is cancelled for any reason, we will not provide service to the vehicles under RAC Business Breakdown. Changes to your details You must notify us immediately if you want to amend any details relating to RAC Business Breakdown including any change of address and any change to any vehicle to be covered under RAC Business Breakdown. You can do this by logging onto your RAC Business Club account at Alternatively, you can contact us via , on the phone number or at the address set out under How to contact us. If necessary, we will provide you with a revised schedule reflecting the changes to your details. If you increase the number of vehicles under RAC Business Breakdown during any period of service you must pay the relevant applicable administration fee for the additional vehicle/s. We will invoice you for the additional administration fee and if we do not receive payment by the due date, the vehicle will be removed from inclusion under RAC Business Breakdown immediately. If you remove a vehicle from RAC Business Breakdown, we will not refund the applicable administration fee. If you cancel RAC Business Breakdown for any reason, the vehicles will no longer be provided with service by the RAC under RAC Business Breakdown. All communications from the RAC or our representatives shall be deemed duly sent if sent to your last known address. Changes to RAC Business Breakdown terms and conditions In addition to our right to review the administration fee, the fee/s and other terms and conditions for RAC Business Breakdown at the end of the period of service, we can make changes to RAC Business Breakdown terms and conditions at any time: 1. To respond proportionately to changes in general law in the territory or Europe; 2. That are necessary to meet regulatory requirements; and/or 3. To reflect new industry guidance and codes of practice which increase the standards required for consumer protection or to make RAC Business Breakdown terms and conditions clearer and fairer to you. Any change to RAC Business Breakdown terms and conditions (together with the reasons for such changes) will be notified to you at least 21 days in advance of the date that the change is due to take effect. We recommend you notify any driver that is affected by the change. All communications from the RAC or our representatives shall be deemed duly sent if sent to your last known address. How to contact us General enquiries For general enquiries about RAC Business Breakdown, including changes to the service under RAC Business Breakdown and renewals please contact us as follows: 1. Call us on: Mon to Fri 8.00am to 6.00pm; or 2. Write to us at: RAC Motoring Services Customer Services Department Great Park Road Bradley Stoke Bristol BS32 4QN 3. us at: If you contact us in writing or call us please provide your full trading name, contact telephone number, RAC Business Breakdown number and, where applicable, the vehicle registration number. If you have any problems reading this booklet you can contact our customer services department on for a large font or Braille version. 13
13 Complaints We are committed to providing you with the highest standard of service and customer care. We realise, however, there may be occasions when you feel you did not receive the standard of service you expected. If you would like to complain about any aspect of the service we have provided to you under RAC Business Breakdown please contact us as set out below. Please bring the complaint to our attention as soon as you can as this will assist us and you to resolve the complaint as quickly as possible. If you are dissatisfied with any aspect of our breakdown services under Sections A (Roadside), B (Recovery), C (At Home) or the additional services: 1. Call our customer care number on: ; or 2. Write to us at: Breakdown Customer Care (See general address below); or 3. us at: If you are dissatisfied with any aspect of our services under Accident Care: 1. Call on: ; or 2. Write to us at RAC Legal Customer Care (See general address below); or 3. us at: Please send all written correspondence for the attention of the relevant team to: RAC Great Park Road Bradley Stoke Bristol BS32 4QN If you contact us in writing, by calling us or by please provide your full trading name, contact telephone number, RAC Business Breakdown number and, where applicable, the vehicle registration number. Using this complaints procedure will not affect your legal rights. Your data Data protection statement For the purposes of the Data Protection Act 1998, the data controller in relation to the personal data you supply is RAC Motoring Services (RACMS), (Registered No: ), Registered Office: RAC House, Brockhurst Crescent, Walsall, WS5 4AW. RACMS will share the information you provide, together with other information, with its group companies. RAC group companies (RACGC) will use this for administration, marketing, customer services and to calculate your administration fee. RACGC will disclose your information to our service providers and agents for these purposes. RACGC may keep your information for a reasonable period to contact you about our services. RACGC may transfer your information outside of the European Economic Area, for example to Asia. RACGC will only do this where it is necessary for the conclusion or performance of a contract between you and us, or that RACGC enter into at your request, in your interest, or for administrative, or our own marketing purposes. When you give us information about another person, you confirm that they have authorised you to act for them, to consent to the processing and use of their personal data in the manner described in this notice and to receive on their behalf any data protection notice. You have the right to ask for a copy of your information (for which RACGC will charge a small fee) and to correct any inaccuracies. RACGC may record telephone calls for staff training and evidential purposes. In assessing your application now or at renewal, RACGC or our agents may undertake checks against publicly available information (such as electoral roll, county court judgments, bankruptcy orders or repossessions). Similar checks may be made in assessing any request for services made. RACGC may monitor and record any communications with you including telephone conversations and s for quality assurance and compliance reasons. If you would like a list of all RAC group companies, please write to the Data Protection Officer at RACMS using our registered address. Sensitive data By proceeding with this RAC Business Breakdown, you give us consent to use your sensitive personal data solely for the purposes for which you submit it. Credit searches and use of third party information In assessing your application/renewal, in order to prevent fraud, we may check your identity and to maintain our RAC Business Breakdown records, we may: 1. Search files made available to us by credit reference agencies who may keep a record of that search. We may also pass to credit reference agencies information we hold about you and your payment record. The information will be used by other credit lenders for making credit decisions about you and the people with whom you are financially associated for fraud prevention, money laundering prevention and for tracing debtors. We may ask credit reference agencies to provide a credit scoring computation. Credit scoring uses a number of factors to work out risks involved in any application. A score is given to each factor and a total score obtained. Where automatic credit scoring computations are used by us, acceptance or rejection of your application will not depend only on the results of the credit scoring process. 2. Use information relating to you and a vehicle supplied to us by other third parties. 14
14 Fraud prevention and detection In order to prevent and detect fraud we may at any time: 1. Share information about you with other organisations and public bodies including the police; 2. Check and/or file your details with fraud prevention agencies and databases, and if you give us false or inaccurate information and we suspect fraud, we will record this and where appropriate notify the relevant crime prevention organisations. We and other organisations may also search these agencies and databases to: a. help make decisions about the provision and administration of breakdown/insurance, credit and related services for you; b. trace debtors or beneficiaries, recover debt, prevent fraud and to manage your accounts or breakdown/insurance policies; and/or c. check your identity to prevent money laundering; 3. Undertake credit searches and additional fraud searches. We can supply on request further details of the databases we access or contribute to. Informing you about products and services RACGC offer motoring and travel related products such as breakdown services, hotel bookings and vehicle inspections, sales and leasing. RACGC also offer financial products such as insurance. RACGC may also share your information with our business partners. RACGC, or they, may contact you by mail, telephone, fax, or SMS/MMS to let you know about any goods, services or promotions that may be of interest to you. If you decide you do not wish to receive such information in these ways please inform us but remember this will prevent you from receiving our special offers or promotions. To contact us write to us at: RAC Motoring Services Customer Services Department RAC House Thomas Street Stretford Manchester M32 0HX Breakdown provided by RAC Motoring Services Registered No Registered in England; Registered Offices: RAC House, Brockhurst Crescent, Walsall WS5 4AW. BB.POU
15 Telematics Business Club You know us for one thing. Now know us for many. Businesses have trusted us to provide market leading breakdown cover for many years. But today, we do so much more. RAC Business Services provide a range of innovative solutions to save you money and drive your business forward. 16 Call to find out more or visit rac.co.uk/business
Please read carefully and keep safe Rescue from Aviva Policy Retirement Investments Insurance Health Rescue from Aviva How to get help These are the numbers that you will need: Broken down in the UK 08000
UK and European Breakdown Cover Policy Booklets Please note that this online version of the policy booklet includes your terms and conditions for both UK and European Breakdown Cover Your European terms
RAC Breakdown Cover Policy Booklet Terms and conditions PLEASE READ AND KEEP FOR YOUR RECORDS Who to contact if your vehicle breaks down or you need to make a claim These are all of the numbers a driver
nor a replacement for reading the applicable statute, regulation, official interpretation, commentary, or supplemental information - PDF
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1 Kristen J. Stogniew, Esq, Shareholder Saltmarsh, Cleaveland & Gund The information presented in this slide deck and provided at the workshop, whether by Saltmarsh or by others, is not to be considered legal advice nor a replacement for reading the applicable statute, regulation, official interpretation, commentary, or supplemental information (whether the initial final rule or later one(s) that amends, clarifies or makes technical amendments); the CFPBs or other regulatory authority s or consultant s compliance guide, examination manual or audit program, additional guidance, reference chart, Facebook page, web site blog or Twitter tweet; or viewing any webinar, YouTube video or Podcast, related to the subject matter contained herein. 1
2 3 General scope & some definitions Loan Estimate General Rules (e) Loan Estimate Completing the Form Closing Disclosure General Rules (f) Closing Disclosure Completing the Form Other requirements, liabilities Discussion, Q&A, implementation checklist 4 Effective Date: applications received on or after August 1, provisions of the new Rule are effective on August 1, Two Tier Operations: Cannot use new disclosures for pre 8/1/15 apps. Must use existing disclosures (GFE and HUD) for pre 8/1/15 apps that close anytime thereafter. Covered Loans: all closed end consumer credit transactions secured by real property except reverse mortgages So, HELOC and mobile home only loans are exempt Construction only, vacant land or > 25 acres NO LONGER EXEMPT Consumer purpose loans to trusts for tax & estate planning purposes are no longer exempt (is in substance a consumer purpose transaction) Old Forms Replaced: No Good Faith Estimate, no fed box TILA forms Replaced by LOAN ESTIMATE and CLOSING DISCLOSURE. 2
3 5 Deliver within 3 business days of receipt of Application Application = Submission of Name Income Social security number (to obtain credit report) Property address Property value estimate Mortgage loan amount sought * No longer includes catchall: any other information deemed necessary * Can be written or electronic record of an oral app * Some flexibility in collection sequencing/strategic collection of information to get additional information from borrower * Still cannot require verification of information 6 For most purposes, TRID rule uses the rescission or more precise definition = every day, except Sundays and these Federal holidays: New Years Jan 1 Independence Day July 4 Veterans Day November 11 Christmas Dec 25 Columbus Day Martin Luther King Jr s B day Washington s B day Memorial Day Labor Day Thanksgiving Day EXCEPT... For delivery, revisions of, and expiration of LOAN ESTIMATE... Use the days open or general definition = Day on which creditors offices are open to the public for carrying on substantially all business functions Example from commentary: do you make loan disbursements, open new accounts and handle credit transaction inquiries? For most institutions, can exclude Saturday as a business day 3
4 (e)(1)(iii) 2 tests must be met: Deliver or place in mail 3 business days after receipt of application ( days open definition); unless creditor denies or app is withdrawn AND Deliver or place in mail not later than 7 business days before consummation (AHA... rescission definition) FYI: Re disclosure (see later slides) does not trigger an additional waiting period Waiting periods can be waived by handwritten, dated written statement signed by all, if bona fide personal financial emergency SUN i.e. foreclosure MON sale Ex: App Rec d X Not BD TUES 1 st BD WED 2 nd BD THUR 3 rd BD LE mailed FRI 1 st BD 3 rd BD 4 th BD 5 th BD 6 th BD 7 th BD Can Close SAT 2 nd BD (e) Creditor responsible to deliver Person to whom the obligation is initially payable on its face (only 1 shall provide if there are >1) Mortgage broker may deliver BUT creditor responsible for any errors or defects Expects communication between creditor and mortgage broker FYI Broker MUST retain for 3 year retention period (d)(2) Must be provided (at least) to the applicant with primary liability; UNLESS rescindable, then must provide to all consumers (borrowers) with the right to rescind commentary makes clear that, although the closing disclosure will need to be provided with non borrowers who have the right to rescind, the LE does not 4
5 9 3 pages instead of 7 under current rules No more separate appraisal copy or mortgage servicing transfer disclosure 3/31/15 CFPB updated the Special Information Booklet. Is now Your home loan toolkit A step by step guide home loan toolkitweb.pdf Interactive, can be saved; CFPB encourages lenders to keep this level of accessibility when delivering the PDF to consumers Spanish language version is coming Broker must provide, and creditor does not have to Not required for non purchase loans, junior liens, reverse mortgages, refis. Still need to provide Consumer s Handbook on Adjustable Rate Mortgages; ARM Program disclosures; Homeownership Counseling notice, Initial Escrow Statement, and (if applicable) Affiliated Business Disclosure 10 See page 17 of forms doc handout Separate disclosure must accompany initial Loan Estimate revised LE does not require (but, recommend you provide if revision includes a new service that can shop for) Must identify settlement services for which consumer may shop ; at least one provider for each service; with contact info Not just toll free phone # or website, demonstrate it is sufficient for contact Cannot identify vendor management company Must provide services in the area where property is located An actual $ is not a required disclosure Hazard insurance is Not required here and the Statement May choose another provider May add The appearance on this list does not constitute an endorsement of the provider or similar IMPORTANT Shop = pick their OWN provider (vs. select a provider from the list i.e., cannot shop ) Must correspond to Settlement Services can shop for on Loan Estimate Affiliated Business Disclosure under RESPA is still required if affiliate is on the list 5
6 (e)(2)(ii) If written information is provided before a Loan Estimate: a clear notice (>= 12 point font) must appear at top of first page: Appendix H 26: Your actual rate, payment and costs could be higher. Get an official Loan Estimate before choosing a loan. May not have substantially similar headings, content and format as the LE (e)(2)(i) Effective ON 8/1/15 No fees allowed until consumer receives Loan Estimate and indicates intent to proceed Presumption of receipt 3 business days (rescission) after placing in the mail or sending by , unless earlier evidence of receipt is documented (mailbox rule) Can be provided in any manner, unless you require a particular manner Reg requires you document the intent to proceed, with 3 year record retention requirement Exception: Creditor or broker can impose bona fide and reasonable credit report fee before receipt of Loan Estimate Fee is NOT one of the 6 items for Loan Application Cannot take method for payment in advance No obtaining credit card number No holding of check 6
7 13 Standard = (e) and = Must be provided in good faith (see next slide); if any information is unknown, you must make the disclosure based on the best information reasonably available ( BIRA ) at the time the disclosure is provided. Reasonably available implies exercise of due diligence in obtaining information. ok to rely on 3 rd parties like realtors, insurance agents, etc (e)(3) General Rule: Disclosure was made in GF if charge imposed at closing does not exceed that disclosed in the Loan Estimate. Good Faith 10% Tolerance Allowed for Aggregate of: (1) Recording fees (paid to government agency), and (2) 3 rd party charges (not affiliate) from the list of providers allowed to be shopped (off list) by the consumer, and consumer either (a) does not pick anyone, or (b) picks a provider on the list. Variations Permitted If fees disclosed on LE were based on best info reas available: Prepaid interest Property insurance Amounts in escrow Charges for 3 rd party service providers shopped by the consumer (i.e., that were not on the list provided by the creditor) Charges for 3 rd party or affiliate services that are not required by creditor. Zero Tolerance: (General rule) Fees to creditor, broker, affiliate; lender credit Unaffiliated 3rd party not allowed to shop; Transfer taxes. (Lender credit see slide 33) 7
8 (e)(3)(iv) Revised Loan Estimate allowed for GF determination, within 3 business days ( days open ) of: 1. REQUIRED when Floating rate is locked new LE with revised rate, points lender credits and other interest rate dependent charges 2. ALLOWED for Revisions requested by consumer 3. ALLOWED if Original LE Expired intent to proceed not received after 10 business days ( days open ) 4. ALLOWED for Construction loans If settlement will occur more than 60 days after LE and if LE reserves the right to send revision (place in Other Considerations section of the LE) 5. ALLOWED IF CHANGE(s) EXCEEDS TOLERANCES for Changed Circumstances affecting eligibility change impacts creditworthiness or value of security which increases fee (one becomes unemployed) 6. ALLOWED IF CHANGE(s) EXCEEDS TOLERANCES Changed Circumstances re: settlement charges extraordinary event beyond control, information inaccurate or changed, or new information not relied on For Good Faith comparison, can only use an LE provided due to tolerance increase 16 Timing of Revised Loan Estimate, when CC (e)(4) Not allowed after delivery of Closing Disclosure Must be received no later than 4 business days ( rescission ) prior to consummation Because of mailbox rule, if not provided in person, must deliver 7 business days before consummation If Changed Circumstances later than 4 business days before closing: if between 4 th & 3 rd business day before, show revised charges on Closing Disclosure if after first Closing Disclosure (within waiting period), put revised charges on Closing Disclosure given at consummation, and compare to prior Closing Disclosure 8
10 19 Creditor name and address if not known based on BIRA, leave blank; logo allowed if it fits Date Issued is date mailed or delivered, not date prepared Applicants list all names and US postal addresses; may use additional paper if needed Property must include zip code Sale Price for transactions with no seller, use appraised value or estimated property value ( Est. Prop. Value ) Can use information from the applicant or own estimate If creditor has an appraisal, value to be used in underwriting is disclosed Loan Term if years and months, use 15 yr., 5 mo. If less than 24 months, just use months; 16 mo. for example If unknown, state possible range, including the maximum Purpose Purchase, Refinance, Construction, or Home Equity (catch all) Loan ID From creditor, if available (BIRA), not broker s 20 Product =any feature that can change the payment and how interest rate applied to balance is determined Payment Change Features: (in priority order) Negative Amortization Interest Only Step Payment Balloon Payment Seasonal Payment Payment change feature precedes disclosure of product Precede feature with its duration: i.e. 5 Year Interest Only For balloon payment, state year due, i.e. Year 7 Balloon Payment If more than one apply, only the first applicable feature is disclosed Products: Fixed Rate Adjustable Rate Step Rate For ARM and Step Rate, precede Product name with introductory rate duration and frequency of first adjustment period Example: 5/3 Adjustable Rate, 0/Daily Adjustable Rate, Year 7 Balloon, Fixed Rate: If no introductory rate: 0/3 Adjustable Rate ; if unknown, the shortest potential Uneven Periods: If >24 months, use decimals (# months 12), (i.e., 2.5/1 Adjustable Rate If <24 months, use months, i.e., 18 mo. 10
11 21 Loan Type Conventional FHA VA Other for state guaranteed loans and other federal programs; Need short description: i.e. USDA Rural Housing Service = RHS Loan Identification Number Determined by creditor; must be unique to the specific loan Rate Lock If locked, disclose the time that lock expires with time zone (i.e. 10:00 a.m. EST ) Expiration of Loan Estimate disclose, whether or not rate has been locked Note that italicized sentences are re: lock AND expiration of all closing costs 22 Loan Amount If may increase: Disclose maximum principal balance, and due date of last payment that causes loan amount to increase, and whether potential or scheduled (will or may occur): [Can] go as high as $ Can increase until year Interest Rate at consummation For ARM s, if interest rate at consummation not known at time of Loan Estimate, use fully indexed rate in effect at time of disclosures. If may increase, disclose: Frequency and first adjust date: Adjusts every starting in Maximum rate and date reached: Can go as high as in year If loan term increase because of rate: Can increase loan term to Reference to AP table 11
12 23 Principal & Interest Frequency inserted before i.e. Monthly Bi Weekly If initial rate unknown, current fully indexed rate determines payment If may increase; disclose: Frequency and first adjust date: Adjusts every starting in Maximum payment and date reached: Can go as high as in year If interest only period: Includes interest only and no principal until Reference to AP table 24 Prepayment Penalty if yes, disclose maximum amount and date no longer imposed: As high as $ if you pay off the loan during the first 2 years. Includes: monthly interest accrual amortization calculation method if full month of interest is assessed upon prepayment fee that is waived on condition that consumer does not prepay (but see below) minimum finance charge in simple interest deal refund of unearned interest by method less favorable than actuarial method portion of unearned pre computed FC will not be rebated Does not include: pay off fees uniformly charged Loan guarantee fees Imposing waived bona fide third party fees if loan prepaid sooner than 36 mo 12
13 25 Balloon Payment : more than 2 times regular payment; Loans with only 1 or 2 payments are balloons If yes, disclose maximum amount and due date: You will have to pay $ at the end of year. 26 Column for each separate periodic payment or range First column initial payment, and additional columns for: P&I changes (including end of only interest period disclosed as such) Scheduled balloon payment (balloon should be range if ARM) Automatic termination of MI or functional equivalent If multiple P&I changes in a single year, use anniversary date for column Max number columns = 4 Final Balloon Payment is always last column, and that may compress other columns (Heading is Final Payment ) MI termination only disclosed as separate column if column available Range of P&I use for ARMs; multiple events in single column 13
14 27 ROW 1 Principal & interest only interest language for interest only initial payment period ARM s use range of payment from maximum possible increases and minimum increase ROW 2 Mortgage Insurance Whether or not escrowed If not required 0 ; if terminated ROW 3 Estimated Escrow If not required, 0 Year Subheadings mid year event assumed next year For fixed rate 10 years 4 months use Years Estimated Taxes, Insurance & Assessments* Scope: Property taxes, property insurance, credit life, debt cancellation, condo/homeowners assessments, flood insurance (flood and liability insurance are included in homeowners insurance ) Sum of monthly cost Listing of Other costs if more than one in other, identify one and add and additional costs Paid from escrow if more than one in other and only some will be paid be creditor from escrow, for In escrow can disclose some. * Do not follow RESPA Escrow limitations; use the figures from the ATR calculations (replacement cost, value of property plus improvements). Will be different for Closing Disclosure. 14
15 29 Estimated Closing Costs derived from page 2 subtotals for Loan Costs, Other Costs minus Lender Credits Estimated Cash to Close derived from page 2 schedule For transactions without a seller, can add checkbox indicating from or to borrower (page 5 & 6 of forms doc handout) 30 Origination Charges Dollar amounts rounded to nearest dollar; % to 2 or 3 decimals. Indirect compensation of loan originator by creditor NOT shown Origination: includes, for example, application fee, origination fee, underwriting fee, processing fee, rate lock fee, verification fee, mortgage broker fee, charge for LLPA that is not part of the rate Must include % of Loan Amount (Points) ; leave blank if 0 Points are ONLY those that reduce the interest rate; otherwise, call it some other type of origination charge Cannot exceed 13 itemized charges; Additional Charges aggregated and totaled on line 13. Points must be listed first, all others listed in alphabetical order Clear and conspicuous standard applies 15
16 31 CANNOT SHOP: Fees creditor requires for services by specified third parties. Examples: appraisal, flood determination, lender s attorney fee, subordination fee, title closing protection, title lender s policy, up front MI Cannot exceed 13 itemized items CAN SHOP: Consumer can select their OWN, not on the list. Examples: Pest inspection, survey, title. Cannot exceed 14 itemized items Optional to have an addendum with the additional services itemized; line 14 would refer to the addendum 32 Recording fees any other government fees not transfer taxes are aggregated with recording fees. Transfer taxes only portion imposed on consumer; portion imposed on seller not for Loan Estimate (both are on Closing Disclosure) Taxes and Other Governmental Fees cannot delete categories; cannot add more subheadings. 16
17 33 Prepaids Use precise language of model form; if no charge for a category, leave blank. Prepaid interest: rate disclosed same as interest rate page 1 Cannot delete subcategories; if not charged leave blank Maximum 3 additional subcategories can be added with time period and total. Examples: Real estate property taxes due within 60 days after consummation of the transaction; Past due real estate property taxes; Mortgage insurance premiums; Flood insurance premiums; and Homeowner's insurance premiums. 34 Use precise language of model form; if no charge for a category, leave blank. Need monthly amount and number of months collected. Aggregate account adjustment not included in Loan Estimate If different time frames for 2 property taxes, i.e. general and school, can add another category. Maximum of 5 additional items permitted. 17
18 35 Amounts consumer likely to pay not required by creditor Example: Title Owner s Title Policy (optional) More examples: credit life, appliance warranties, real estate agent/broker commissions, inspection fee not required by creditor. Indicate (optional) for separate insurance or warranty products. 36 Special rule for disclosing simultaneously issued Lender s and Owner s title insurance Lender s premium is disclosed as full premium Owner s is the incremental difference Lender s Full Prem $ (How Reg describes) Less, L s Simult Prem Full Owners $ Difference $ Plus, L s Simult Prem Owner s Policy $ Total $ Less, Difference Less, L s Full Prem Title Owners Title Policy (optional) $ Title Owners Title Policy (optional) $
19 37 List as a negative number or leave blank Defined: Sum of payments from creditor to consumer for both non specific overall credit and for specific fees If creditor represents that all or part of fees will not be paid, the lender credit must be sufficient to cover that sum. No cost loans: cost of all fees shown as a lender credit Good Faith : if Closing Disclosure Lender Credit is less than that disclosed in the Loan Estimate, that is increased charge: An increased lender credit to cover an increased cost complies A decreased lender credit to cover decreased cost violates good faith 38 Funds for Borrower only for loans not for purchase Formula: Satisfied debt minus principal loan amount: if answer is positive, disclose in Funds from Borrower if answer is negative, disclose in Funds For Borrower Adjustments and Other Credits disclosed as a negative number Gifts from family members; Home builder or developer providing a credit Proceeds of subordinate funding Estimated Cash to Close all lines show negative number except first and Down Payment 19
20 39 Refi/Home Equity Alternative (see pages 5/6 of handout) Optional, simpler format. If use, also use optional format at bottom of page 1 Estimated Cash to Close. Estimated Total Payoffs and Payments payoffs of existing liens, judgments, outstanding debts required to be paid. 40 Only appears if payment can change not based on rate, such as an interest only feature; seasonal payment, optional payment (biweekly) or step payment. Principal and Interest Payments: First change date and amount/range; subsequent change dates; and maximum payment amount and date. 20
21 41 Use only when rate may increase either based on an index or scheduled changes. Index and margin, initial interest rate, min/max, first change date and subsequent, limits on rate changes Can abbreviate index: LIBOR 1 Year CMT If no contractual maximum, state usury rate. 42 Lender/Broker contact info and NMLS numbers if known Comparisons 5 year total (or loan term, if less than 5 years) Loan costs are from Page 2 of LE/CD APR no change to calculation Total Interest Percentage (TIP) The amount of interest paid over loan term as a percent of the loan amount. How will consumers respond to this? 21
22 43 Appraisal takes the place of Reg B appraisal disclosure Reg B right to prompt copy only covers 1 st lien loans Homeowner s Insurance optional disclosure, but satisfies requirement for excluding premiums from finance charge Late Payment Include both dollar/percentage and number of days (grace period) Construction Loan Re disclosure Notice new construction, expectation loan will close after 60 days: You may receive a revised Loan Estimate at any time prior to 60 days before consummation. Liability after Foreclosure Only for refinance transactions; not permitted for other transactions And, on the LE, disclose this only if it applies (it does not in FL, GA and AL): Warning that state law may remove protection against deficiency 44 Loan Acceptance Include acknowledgment of receipt/signature with you do not have to accept this... OR No signature: Loan Acceptance disclosure added to Other Considerations Servicing what is creditor s intent on servicing the loan, at the time of disclosure? 22
23 45 Accuracy is ensured by Creditor. TIMING Must be received (by primary borrower and all with rescission rights) no later than 3 business days before consummation : HUGE CHANGE If delivered other than in person, presumed received 3 business days after sent. Evidence of earlier receipt can change that. If sent by e mail, need E SIGN Act compliance and evidence of delivery. Can be waived if bona fide financial emergency (e.g. foreclosure imminent) Rescission definition for all purposes here. Example: SUN MON TUES WED THUR FRI CD mailed overnight deliv 1 st BD 2 nd BD 3 rd BD Can close SAT Consumer signs 46 BEFORE CONSUMMATION (f)(2)(i) and (ii): Required re disclosure and 3 business day waiting period (clock starts over) if: APR becomes inaccurate (so, includes overdisclosed APRs unless the overdisclosure was due to an overdisclosed finance charge that would otherwise be considered accurate) Loan product changes, or A prepayment penalty is added For other changes, re disclose at or before consummation (no new waiting period) allow inspection 1 business day prior if requested Only changed circumstances will allow GF analysis for 0% or 10% variations 23
24 47 CHANGES AFTER CONSUMMATION (f)(2)(iii): If during 30 day period post consummation: (i) an event connected to settlement causes a Closing Disclosure inaccuracy, and (ii) inaccuracy causes amount actually paid by consumer to change; then mail corrected disclosure within 30 days of receiving information about change. Recording fee change = Yes re disclose; Property tax increase after consummation = no, because not in connection with the settlement Change that impacts what seller pays does not trigger disclosure to borrower; settlement agent must send revised disclosure to seller (e.g., nuisance abatement) Changes due to non numerical clerical errors 60 days to re disclose (e.g. third party payee name). Narrow set of errors Coincides with cure provisions, including ones that become out of tolerance due to post closing events (i.e. transfer taxes different) (f)(2)(v) GOOD FAITH ANALYSIS REFUNDS w/in 60 DAYS If amount paid exceeds either the 10% threshold; or amount paid exceeds applicable prohibition on any change, safe harbor from liability arises if excess is refunded (received) within 60 days after consummation accompanied by corrected Closing Disclosure (f)(3) ACTUAL CHARGE/AVERAGE CHARGE Rule: Amount imposed on consumer not to exceed amount actually received by settlement service provider, except: Average Charge: May impose for a defined class of transactions uniformly to all, but not for insurance or any charge based on loan amount or property value. 24
25 (f)(4) Settlement agent to provide disclosures that relate to the seller s transaction no later than consummation. May provide copy of Closing Disclosure or separate short form: Appendix H 25(I) Amount imposed on seller not to exceed amount actually received by settlement service provider except for the average cost option. Settlement agent to provide creditor a copy of seller disclosure if separate from consumer s. If event occurs in 30 days post consummation that changes the amount actually paid by the seller, settlement agent must provide corrected copy within 30 days after receiving that information. 50 Cannot use N/A or not applicable, just leave blank Adjustable payment and rate tables excluded if inapplicable Clear and conspicuous, segregated, form can keep Federally related mortgages use H 25; others, H 25 is a model Can print or fill out manually See Appendix H 28 for Spanish language 25
26 51 See Model Forms from CFPB s Guide to Forms See forms docs from today s presentation starting at page 7 52 Date Issued is date delivered to consumer Settlement agent employer, not person conducting closing File # Settlement agent s; no rules govern Sale Price becomes Appraised Prop. Value w/o seller or Estimated Prop. Value if no appraisal & no seller Borrower and Seller All must be listed; additional pages allowed. Loan ID # must identify same transaction as Loan Estimate MIC # mortgage insurance case number Loan Terms same as Loan Estimate, except ESCROW will be following RESPA requirements. Projected Payments same as Loan Estimate except that Estimated Taxes, Insurance & Assessments, if in escrow and subject to RESPA, must follow RESPA prohibitions. Amount of estimated escrow payments accurate if any difference from Loan Estimate arises from RESPA escrow account analysis Costs at Closing alternative for transactions without a seller required if alternative used on Loan Estimate 26
27 53 Paid by others Can insert L in front of number for lender Example compensation payments by creditor to a loan originator; fee specific lender credits. Services Borrower Did NOT Shop For itemization of required settlement services. If provider on written list, list here. Services Borrower DID Shop For If consumer selected a provider but NOT from written list of providers, list here. The above are NOT limited to the # of lines on standard form, can have addendum page; Page 2a (loan costs) and 2b (other costs) see model forms. Loan Costs only borrower paid costs are sub totaled Initial Escrow Payment at Closing aggregate adjustment required by RESPA disclosed on last line Other reminder that owner s title shown as (optional) ; only borrower paid costs subtotaled. 54 Lender Credit generalized credit appears here; credits particular to a cost list in paid by others Lender Credit show excess charges above fee limits: (includes $200 credit for increase in Closing Costs above legal limit) (see pages 12 and 15 in handout from today s session) 27
28 55 Total Closing Cost tell if changed and see details Bold face required for YES NO and other words in sample form Loan Estimate dollar amount is rounded, Final is shown to 2 decimals; but no increase solely due to rounding See details bold words; cross reference other sections Total Closing Costs if change, only cross reference Total Loan Costs or Total Other Costs or both as applicable Exceeding limits on increases in closing costs Must calculate aggregate among various categories Sample: Increase exceeds legal limits by $200. See Lender Credits on page 2 for credit of excess amount. (page 15 of forms docs handout). 56 Closing Costs Financed if changes, show as a negative number, and state consumer included closing costs in the loan amount which increased the loan amount Down Payment If purchase price increases, down payment might increase. You increased this payment. See details in Section K. 28
29 57 Alternative Closing Estimate table required if used Loan Estimate optional alternative table. Completely different Closing Statement with Payoffs and Payments See pages 12 & 13 of forms docs 58 Due From Borrower: Adjustments amounts owed such as rent collected after closing for periods before; tenant security deposit. Due From Borrower: Additional items paid by seller (due from borrower): Flood/hazard premiums PUD or condo assessments paid in advance Fuel or other supplies purchased by seller that consumer will use 29
30 59 Paid By Borrower: Seller credit (L 05) (builder) is general credit Particular credits are disclosed in seller paid column Issues identified at walk through prior to closing listed here Paid by Borrower: Other Credits real estate agent rebate Paid By Borrower: (L 04) Subordinate financing proceeds Second Loan (Principal Balance $100,00) $96,500 Paid By Borrower: Pay off of subordinate liens by consumer (L 04) Satisfaction of Junior Lien $5,000 P.O.C. Borrower POC not included in calculations Paid By Borrower: Gift funds show as credit (L 07?) 60 Other Seller Obligations: list tax liens, judgments, other seller obligations to be paid from closing Funds to be held by closing agent for post closing invoices for repairs, utilities, or other costs that cannot be prorated because amounts unknown 30
31 61 Partial Payments per Will creditor accept and/or put in suspense, or not accept Security interest property address; zip code required; can add personal property description Escrow must disclose annual cost of nonescrowed taxes, insurance and assessments. Adjustable Payment Table/Adjustable Interest Rate Table disclosed here ONLY if applicable; same as Loan Estimate (page 14 of loan docs handout) 62 CONTACT INFO: Column left blank if no such party to the transaction; unless multiple other parties and room is needed SIGNATURE: Optional; same guidance as Loan Estimate 31
32 63 Post Consummation Escrow Cancellation Notice Model form (e) If 1 st lien on real property or dwelling, must ensure consumer receives 3 business days ( rescission ) before escrow account is cancelled at their request, or 30 business days if creditor cancels it (so, mailbox rule means must mail 3 business days prior to that) Warns them they have to pay; and allows them to change their mind. NA for repayment, refinancing, rescission or foreclosure. Post Consummation Partial Payment Policy Creditors who purchase all or part of a mortgage or dwelling secured loan through assignment or other transfer including affiliates. Integrated in existing notice that is already required (FYI is also required for primary home LOCs) By the 30 th calendar day following day of transfer 64 5 years Creditor must retain each completed Closing Disclosure (including seller disclosure from Closing agent) Transfer of servicing creditor provides to new owner or servicer a copy of the Closing Disclosures, and both the selling creditor and the new owner or servicer retain for balance of the 5 years. 2 years Creditor, or servicer, must retain Post Consummation Escrow Cancellation Notice (Escrow Closing Notice) and Post Consummation Partial Payment Policy disclosure and other TILA disclosures not specifically stated. 3 years For all other evidence of compliance with the Loan Estimate and Closing Disclosure process Runs from the later of consummation, date disclosure is required, or date action is required to be taken. Mortgage broker must retain the LE as well 32
33 TILA Private Right of Action & Rescission Issues for entire rule?? RESPA currently does not provide a private right of action These changes are codified in TILA (Regulation Z, which, at (e), specifically acknowledges liability for failure to comply with TILA, Reg Z and RESPA). Admin Enforcement CFPB and others CFPB expects perfection AG s and States Buyback Risk Creditor is responsible for compliance Imposing fees before LE and intent to proceed (.19(e)(2)(i)) Must include written statement if you provide marketing disclosures of terms or costs (.19(e)(2)(ii)) May not require verification documents before LE (.19(e)(2)(iii)) 33
1 Linear Programming and Network Optimization Jonathan Turner March 1, 1 Many of the problem we have been studying can be viewed as special cases of the more general linear programming problem (LP). In the linear programming problem, we seek to optimize some linear function of a set of non-negative real variables x 1,..., x n, subject to a set of linear constraints on those variables. A typical instance of linear programming takes the form. maximize c j x j subject to a i,j x j b i for all i j Here, the c j, a i,j and b i are numerical values defined by the specific problem instance. The objective of the problem is to assign values to the x j s that maximize the summation at left, which is known as the cost function. Linear programs can be stated more concisely in matrix format. maximize C T X subject to AX B Here, C denotes a column vector of cost coefficients, X a column vector of variables, A = [a i,j ] is a coefficient matrix, B is a column vector representing the bounds in the inequalities and the multiplication operation is matrix multiplication. Linear programs arise in a wide range of applications and can be solved efficiently. The classical simplex algorithm has been very successful in practice, although its worst-case running time is exponential in the size of the problem instance. So-called interior point methods can be used to solve linear programs in polynomial time, although they are often slower than the simplex algorithm, in practice. It s importat to note that the variables x j are defined as real-valued. If some or all of the variables are required to be integers we get an Integer Linear Program and in general, these problems are NP -hard. j 1
2 While most of the network optimization algorithms we have studied can be formulated as linear programs, it is usually more efficient to solve them using more specialized algorithms. Still, it can be useful to view them from the perspective of linear programming, as this perspective can sometimes be used to discover algorithms that we might otherwise fail to notice. We will see an example of this when we consider the extension of Edmond s algorithm to the problem of maximum weight matching in general graphs. Let s start by considering the maximum flow problem, as a linear program. In this case, the variables are the flows on the edges. We seek to maximize the total flow leaving the source, subject to the capacity constraints and the flow conservation condition. This can be written as follows: maximize f e subject to f e cap e and f e = f e e e=(w,u) e=(u,v) where the inequalities are defined for all edges e and the equations are defined all vertices u, except the source and sink. Figure 1 shows an example of this formulation of the max flow problem. s 9 b a 8 c t maximize f sa + f sb subject to f sa f sb 9 f ba f bc f at 8 f ca f ct f sb =f ba +f bc f bc =f ca +f ct f sa + f ba +f ca =f at Figure 1: Example of a flow problem as a linear program To put this in matrix form, let F be a column vector with an entry f e for every edge e and let S be a column vector with a 1 for every edge leaving the source and a for every other edge. With this definition, S T F denotes the total flow leaving the source. For the example in Figure 1, F T = [ f sa f sb f at f ba f bc f ca f ct ] S T = [ 1 1 ] The A matrix used to represent the coefficients in the linear constraints is constructed from two building blocks. The first is just an m m identity matrix, where m is the number of edges in the flow graph. The second is an (n ) m edge incidence matrix G = [g u,e ] where for all u except the source and sink, g u,e = 1 if u is the tail of e, 1 if u is the head of e and
3 otherwise. For the example flow graph, G = We construct the complete A matrix stacking the identity matrix above a copy of G and a copy of G. To complete the matrix formulation, we define the column vector B representing the bounds in the inequalites, to be a column vector, with m + (n ) rows. The first m entries are the edge capacities, and the remaining entries are zero. For the example flow graph, the inequalities can be expressed as f sa f sb f at f ba f bc f ca f ct Note that the reason that we include both G and G in the A matrix is so that we can represent the flow conservation equalities with the equivalent pair of inequalities. This allows us to maintain the standard matrix form, which will become important when we discuss duality and the concept of complementary slackness. With these definitions, the max flow problem becomes maximize S T F subject to AF B The min cost max flow problem can also be expressed as a linear program. Here the natural formulation is minimize c e f e subject to e e=(s,u) f e = f 9 8
4 f e cap e for all e f e = e=(w,u) e=(u,v) f e for all u but the source and sink Here f denotes the maximum flow. We can put this into the standard matrix form by first converting it to a maximization problem by negating all the cost coefficients, then extending the coefficient matrix and bounds vector from the max flow problem to express the additional constraint on the total flow. We ve noted earlier that for the max flow problem, whenever the capacities are all integers, there is a maximum flow in which all flows are integers. This actually follows from a general property of the coefficient matrix. We say that a matrix is totally unimodular if every square submatrix has a determinant that is equal to, 1 or 1. In a linear program with an integer coefficient matrix and bounds, if the coefficient matrix is totally unimodular, there is an optimal solution in which all the variables have integer values. While it s tedious to verify the total unimodularity property, it s easy to see for our example flow problem that every non-singular submatrix of the coefficient matrix has a determinant that is either +1 or 1. So why does this matter? Suppose we are trying to solve a linear program, in which some variables are required to be integers. For example, we might require that certain variables take on only values or 1. Suppose we replace these integrality constraints with bounds on the values of the variables (so the -1 variables are now just real-valued variables in the interval [,1]). This ordinary linear program is called the LP relaxation of the ILP. If the coefficient matrix for the LP relaxation is totally unimodular, then it has optimal solutions in which all variables are integers (so those variables that we wanted to be or 1, will automatically be integral in the solution to the LP relaxation). This property can be used to solve some integer linear programs, using their LP relaxation. We ll see an example of this when we study the weighted matching problem in general graphs. The usual max flow and min cost flow problems model situations in which we have one type of commodity that we want to move from a source to a sink. In some applications, we re interested in moving multiple types of commodities among multiple sources and sinks. These applications can be modeled as a multicommodity flow problem. One formulation of the multicommodity flow problem includes a source/sink pair for each commodity we want to move. Edges have total capacities as before, but also have separate capacities for individual commodities. We seek a flow function for each commodity that respects the per-commodity constraints and for which the total
5 flow on each edge (from all commodities) respects the total capacity. The multicommodity flow problem can also be formulated as a linear program, but unlike the normal max flow and min cost flow problems, there are no known algorithms for this problem that are substantially more efficient than solving the linear program directly. The LP formulation also allows for the introduction of per-commodity costs and more complex capacity constraints (for example, limiting the flow involving a given pair of commodities). Next, let s look at how we can formulate the shortest path problem in graphs as a linear program. To keep things simple, we ll focus on the singlepair version of the problem, where we want a shortest path from a vertex s to a vertex t. We ll also assume strictly positive costs. One way to solve this problem is to turn it into a min cost flow problem, but we ll take a more direct approach. Let s define an ILP using a -1 selection variable for each edge e. In the optimal solution, the non-zero variables will define a shortest path from s to t. Our objective is to minimize the sum of the edge costs for those edges e with x e = 1. So, if C is a vector of edge lengths and X is a vector of variables, we seek to minimize C T X. To ensure that the non-zero variables define a path, we introduce a constraint that requires that the sum of the edges incident to t be at least 1. This ensures that there will be at least one selected edge entering t. Of course we only want one such edge, but since the edge costs are positive, we can be sure that an optimal solution will not contain any edges not needed to define a path. We also include a constraint for every other vertex u except the source. These constraints require that the sum of the variables for the edges entering u be at least as large as the sum of the variables for the edges leaving u. This means that if one of u s outgoing edges is selected, then at least one of its incoming edges is also. Notice that any shortest path from s to t satisfies these conditions, and no other set of edges can satisfy the conditions at a lower cost. An example of this formulation is shown in Figure. Notice that the coefficient matrix A is the edge incidence matrix minimize CX= x sa +x sb +x ab +7x at +x bt subject to AX B s a 7 b t x sa x sb x ab x at x bt 1 Figure : Shortest path problem as a linear program 5
6 for the graph, with the row for the source vertex omitted. Also, notice that we have not included the -1 constraints on the variables. It turns out that these can be replaced with simple inequalities requiring that each x e be no larger than 1. Indeed, even these can be omitted, since the minimization in the objective function will prevent the assignment of larger values in an optimal solution. There is actually an alternate way to formulate the shortest path problem as a linear program. The easiest way to understand this version is to imagine the graph as a collection of balls connected by strings of different lengths. If we pull the balls for s and t as far apart as we can, then the distance between them will be the shortest path distance, since the strings for the edges on the shortest path won t allow us to pull them any further apart than this. Using this idea, we define a variable d u for each vertex u, that represents a possible distance between s and u. If we require that every edge e = (u, v) satisfy the constraint d v d u + c e (where c e is the length of e), then d u can be no larger than the shortest path distance from s (in the ball and string analogy, the ball for u can be pulled no further from the ball for s than the lengths of the strings allow). So now, we can define an LP maximization problem where we seek to maximize d t subject to the constraints defined by the above inequalities. Since d s = we don t need to include it as an explicit variable. For the previous example, this formulation of the problem is given in Figure. maximize d t subject to s a 7 b t d a d b d t 7 Figure : Alternate formulation of shortest path problem These two versions of the shortest path problem are actually closely related to one another. Specifically, they are duals. Dual problems have a number of useful properties (for example the values of the optimal objective functions are equal). Sometimes, the dual problem is easier to solve than the primal problem. In other cases, we can arrive at a solution most efficiently
7 by solving the primal and dual versions of the problem in tandem. Indeed, the usual labeling method for the shortest path problem can be viewed as such primal-dual algorithm. To define the dual problem in general, suppose we start with a maximization problem in standard matrix form: maximize C T X subject to AX B. The dual problem is then to minimize B T Z subject to A T Z C, where Z is a vector of dual variables. Observe how the role of vectors B and C are interchanged. Note that if we are given an LP that is not in standard form we can always convert it to standard form. Specifically, a minimization problem can be converted to a maximization problem by negating the cost vector. Also, any lower-bound constraint can be converted to an upper-bound constraint by multiplying both sides by 1. When constructing the dual for a problem, it is helpful to go through this process in a methodical way, even though the standard form may not be the most natural way to express the problem. One of the useful properties of the dual problem is the complementary slackness property. For the problem maximize C T X subject to AX B, the slackness vector for a given value of X is just B AX. In an optimal solution, some of the constraints become equalities (that is, the slackness of those constraints is zero), so the general notion of slackness tells us something about how close a given solution is to an optimal one. Consider the dual of the above problem: minimize B T Z subject to A T Z C. In the dual problem, the slackness vector is A T Z C. The complementary slackness property states that X and Z are both optimal solutions to the primal and dual problems if and only if the following two conditions are satisfied. (B AX ) = [s i ] s i z i = for all i (A T Z C) = [t j ] t j x j = for all j In other words, for each slackness value s i in the primal, either s i or the corresponding dual variable z i must be zero. Similarly, for each slackness value t j in the dual, either t j or the corresponding primal variable x j must be zero. These conditions can be written as a pair of equations (B AX ) Z = [] and (A T Z C) X = [] where the symbol denotes the vector formed from pairwise products of the vectors elements. This is known as the Hadamard product of the vectors. So-called primal-dual algorithms adjust values of the primal and dual variables with the objective of making the complementary slackness conditions true, thus arriving at an optimal solution. 7
1 Alvernia University Service and Civic Engagement Strategic Plan Statement of Purpose: The values of service, humility, peacemaking, contemplation, and collegiality have driven the mission of Alvernia from its inception. They constitute the foundation for Alvernia s commitment to both service and civic engagement. This detailed vision supports both the university s mission to nurture broadly educated, life-long learners; reflective professionals and engaged citizens; and ethical leaders with moral courage and its ambition to employ the university s human, intellectual, economic and spiritual resources, to promote civic dialogue and improve the well-being of the broader community. Service Long before the idea of community engagement became fashionable in private colleges and universities, Alvernia instituted a service requirement for all undergraduate students. Since 1991 every freshman entering Alvernia was required to complete forty hours of service in order to graduate. An early Community Service Handbook reminded students that: Alvernia College, as a Catholic, Franciscan institution is part of an enduring tradition of service to the needy and action for peace and justice. As members of this community, you participate in that tradition. It is the community s hope that the service you render during your college career will become a point of light for yourself and others. That ambition continues to have resonance. In 2008, Alvernia was recognized for its commitment to service by the Carnegie Foundation for the Advancement of Teaching by being classified as a Community Engagement institution. In , Alvernia students completed over 22,000 hours of service. In 2012, Alvernia was invited to be a lead institution in the Civic Learning and Democratic Engagement (CLDE) initiative of NASPA Student Affairs Administrators in Higher Education. Alvernia was invited to make a presentation at the inaugural CLDE Conference, with a related article in NASPA s Leadership Exchange magazine, in summer, At Alvernia, service takes many forms and involves the entire community, from undergraduate and graduate and adult students to faculty and staff. Students take part in four organized university-wide Days of Service (Orientation, St. Francis, Martin Luther King and Earth Day), and a service activity is scheduled monthly for students to provide assistance to local community partners. Athletic teams and student organizations regularly volunteer with community groups. In 2012, the university sponsored seven alternative break programs in Reading, Washington, D.C., New Jersey, Florida, West Virginia and
2 Tennessee. A number of students, faculty and staff have worked with the Bernardine Sisters in developing a multi-faceted program of learning and service called Vaya Con Dios in the Dominican Republic. And community service is a key element of Alvernia s Leadership Berks program. This commitment to service also penetrates Alvernia s classrooms in the form of service learning classes, in which service experiences are incorporated into course requirements. Engaging in these acts of service enriches Alvernia s students, faculty and staff as individuals, as well as the community as a whole. Studies link student volunteerism to higher graduation rates, skill acquisition and self-esteem. Participating in voluntary service enables Alvernians to grow as individuals in many ways, and leads them to live fuller, more positive lives. The value of service comes from the fact that it is inescapably spiritual and personal, generating benefits both for the individual contributing the service and for our society. We volunteer to feed the hungry, heal the sick and act as environmental stewards because we have a spiritual calling to love our neighbor and serve those that need our help. But service is not just good in its own right; it is a way for the university to engage with civil society. Creating a culture of service among our undergraduates establishes a pattern for life. It is a foundation of modern Catholic social teaching that people have a right and a duty to participate in society, seeking together the common good and well-being of all. Service is thus a key element in Alvernia s vision for civic engagement. Civic Engagement Civic engagement means working to make a difference in the civic life of our communities and developing the combination of knowledge, skills, values, and motivation to make that difference. It means promoting the quality of life in a community, through both political and nonpolitical processes. A Crucible Moment: College Learning & Democracy s Future, The National Task Force on Civic Learning and Democratic Engagement, American Association of Colleges and Universities. Alvernia was founded by the Bernardine Franciscan sisters, whose values and actions have guided the growth of an institution committed to academic excellence and to being and fostering broadly educated, life-long learners; reflective professionals and engaged citizens; and ethical leaders with moral courage. This mission is further supported by Catholic Social Teaching. Caritas in Veritate talks about the need for Christians to pursue the common good: The more we strive to secure a common good corresponding to the real needs of our neighbors, the more effectively we love them. Every Christian is called to practice this charity, in a manner corresponding to his vocation and according to the degree of influence he wields in the pólis. John Dewey was among the first to articulate civic engagement as one of the core objectives of a liberal arts education. Dewey made the argument that the purpose of education was not only to provide knowledge in certain subjects and to prepare for a career, but schools also served as a place to
3 learn how to live in society. For Dewey, the purpose of education did not revolve around the acquisition of a set of knowledge or skills, but rather the realization of one's full potential and the ability to use those skills for the greater good. What Dewey expressed in the context of modern American higher education is echoed in the motto of Alvernia: To learn, to love, to serve. And in turn, that phrase embodies a long tradition of Franciscan Catholic education, predicated on the balancing of respect for the individual and justice for the community. While a significant number of colleges and universities voice a commitment to civic engagement, much of what they have actually put into place is an emphasis on community service and service learning for undergraduate students. Alvernia shares this dedication to service. But, in addition, as an institution, Alvernia appreciates that true dedication to civic engagement extends beyond community service and service learning and is not limited to undergraduate education. Some institutions define civic engagement as a set or range of specific activities, such as registering to vote, serving at a soup kitchen or participating in a campus organization. Understanding the true value of acts of service, however, requires an intellectual framework that is often missing. Speaking to the 2003 Annual Meeting of the American Association of Colleges and Universities, Ellen Condliffe Lagemann noted: The word vocation implies more than earning a living or having a career. The word vocation implies having a calling: knowing who one is, what one believes, what one values, and where one stands in the world... Vocation is not simply about an individual calling. It is also about one s calling within one s society and, increasingly, across different societies around the world. Ellen Condliffe Lagemann, Charles Warren Professor of the History of American Education, Harvard University. Alvernia s comprehensive vision for civic engagement creates an intellectual framework which articulates the spiritual, individual and societal value of civic acts consistent with our mission and identity as a Franciscan Institution. Through this strategy, the University affirms that Alvernians are called to serve and to be ethical leaders with moral courage. Ultimately, civic engagement is grounded in our shared faith in democracy. David Mathews, President of the Kettering Foundation, describes democracy as depending on an ecosystem, not only of legislative bodies and executive agencies, but also of civic alliances, social norms, and deliberative practices that empower people to work together. The goal then of civic engagement is to promote a culture that values and encourages participation in democratic society. As a Catholic Institution, the social teachings of the church provide the foundation for this mission. Our commitment to civic engagement was further explicated by the United States Conference of Catholic Bishops in their 2007 statement Forming Consciences for Faithful Citizenship : In the Catholic Tradition, responsible citizenship is a virtue, and participation in political life is a moral obligation. This obligation is rooted in our baptismal commitment to follow Jesus Christ and to bear Christian witness in all we do. As the Catechism of the Catholic Church reminds us, It is necessary that all participate, each according to his position and role, in promoting the
4 common good. This obligation is inherent in the dignity of the human person.... As far as possible citizens should take an active part in public life. Much, but not all, of the focus of collegiate civic engagement has been on the undergraduate experience. But some institutions have extended the concept of civic engagement to include faculty and graduate community-based research. Others have extended the concept of civic engagement to include the institution itself, articulating the concept that colleges and universities have a social responsibility to engage in the communities in which they are located. Finally, as suggested in and paraphrased from Stepping Forward as Stewards of Place, a strategy for civic engagement should be intentional, integrated, interactive and mutually beneficial. Intentional: Fostering civic engagement and encouraging the university and the university community to accept and exert its role in the broader community is an expressed ambition of the institution. Integrated: Engagement permeates the institution, and is integrated into its policies, programs and priorities. Interactive: Civic engagement implies action in concert with the broader community. For students, faculty and staff, this means actively participating in the life of the university and the community. For the university, it means occupying the role of learner as well as teacher. And for community partners it means looking to the university as a resource, not necessarily as the answer. Mutually Beneficial: Engagement should benefit all of the parties involved. An engaged institution should be responsive to community needs in ways that are appropriate to the institution s mission and academic strengths, while building greater public understanding of the role of the campus as a community resource. Alvernia already has established a strong foundation of support for a civic engagement strategy. It has established two strategic centers which at their core focus on community and civic engagement: The Holleran Center for Community Engagement and the O Pake Institute for Ethics, Leadership and Public Service. These two centers form the cornerstone of Alvernia s Strategic Plan for Service and Civic Engagement, and help the institution guide its many efforts that impact the community. Other segments of the university have also been actively involved in establishing a foundation for this strategy. For example, the University hosts a very successful community leadership development program, Leadership Berks, which in turn has helped to launch a leadership development program for diverse members of the community, Blueprint for Leadership. Operating in partnership with the O Pake Institute, Leadership Berks, boasting over 750 graduates and serves as the premier source for nonprofit leadership and board education in the Greater Reading area Each Leadership Berks cohort participates in a service learning project with a community-based organization and graduates go on to serve on the governing boards of area organizations. In addition to the focus on service as described above, Alvernia has made substantial commitments in the areas of ethics and leadership which influence this strategy for civic engagement. Alvernia requires every student to take a course in ethics as a part of their degree program. The university has also implemented both academic and co-curricular programs on leadership, making the case that moral
5 leadership can both be taught and be learned. In addition, Alvernia has implemented a progressive leadership model in both athletics and student affairs, which encourages the development of engaged students with strong leadership skills. Every incoming freshman at Alvernia begins his or her university experience in First Year Seminar, which utilizes a common reading and a service project to link service, civic engagement and social justice to their learning experience. In its Vision Statement, the university emphasizes four types of learning, each of which supports the principles of civic engagement: Integrated Learning combining liberal arts and professional education and blending rigorous inquiry, practical experience, and personal reflection in the classroom, on campus, and in society; Community-Based Learning engaging the local, regional and global communities as partners in education and service; Inclusive Learning welcoming people of diverse beliefs and backgrounds; responsive to the educational needs of recent high school graduates, working adults, established professionals, and senior citizens; respectful and self-critical in our dialogue about differences in values and perspectives; and Ethical Learning challenging individuals to be values-based leaders by developing habits of the mind, habits of the heart, and habits of the soul. It is in this context that Alvernia seeks to develop and implement a Strategic Plan for Service and Civic Engagement. The plan that follows focuses on six aspects of service and civic engagement: service to others, citizenship, social responsibility, moral leadership, dialogue and community development. These pillars obviously have a symbiotic relationship with each other, creating the fabric that informs a culture of service and civic engagement at the university. The various divisions of the university will incorporate these concepts into their strategic planning and will identify initiatives and programs that will support this vision. Pillars of Service and Civic Engagement Service to Others Service is already a core value at Alvernia. As a Franciscan institution, Alvernia University puts special emphasis on the relational aspect of service through a calling to serve others, particularly those in need. Alvernia enhances the experience of service by having students participate in activities and discussions to reflect on the ethical and spiritual value of service. This reflection contextualizes the service experience for students and helps them understand the moral and social dimensions of serving others. The role of the university is to not only promote the value of service, but to assist students and indeed the broader community, to learn from service to others. Thus, students have the opportunity to participate in a wide variety of service opportunities on campus, in the community and throughout the world, often joined by faculty and staff. As an institution, the university recognizes its responsibility to
6 serve others, particularly those less fortunate and communities in need. This culture of service is a defining characteristic of Alvernia. Over the next two years Alvernia will: Expand Service-Learning opportunities and attempt to offer Service-Learning courses in every discipline; Holleran Center(HCCE) Expand South Reading Youth Initiative and Alvernia READS programming to serve more children; HCCE and Education Department Amend the service requirement for student graduation to better reflect the University s commitment to community service; HCCE and Arts and Sciences Expand the array of community service opportunities for students nationally and internationally. University Life and Art and Sciences Citizenship Participation in civil society requires an educated and informed citizenry. Alvernia educates students about the roles, rights and responsibilities of citizenship and offer opportunities for students to participate in government, politics and civil institutions. For example, during the 2012 election cycle, Alvernia actively encouraged students to register to vote and participate in the electoral process, and hosted a candidate debate for state legislative offices. It has sponsored students to attend national political conventions and the Presidential Inauguration. Each year, students from a wide array of academic disciplines enroll in programs with The Washington Center, which offers both academic programming and internship opportunities in the nation s capital. Citizenship indicates that one belongs to a community. Today s students will be working in a global economy will be living in increasingly diverse places and will be part of a global workforce. Electronic communications and the ease of travel have broken down traditional barriers that isolated groups from each other, and give new meaning to the concept of citizenship and belonging to a community. Alvernia must prepare its students to thrive in that new world. In addition to developing our undergraduate students as engaged citizens, the university recognizes that our faculty, staff and adult students should also be encouraged to be active members not only of the Alvernia community, but the broader community as well. Over the next two years, Alvernia will: Sponsor an annual O Pake Lecture which will focus on issues related to ethics, leadership and public service, such as citizenship, civility and compromise: O Pake Institute Explore the creation of an academic minor in Humanitarian Aid, Community Service or Public Service; Arts and Sciences, HCCE and O Pake Institute Support the Leaders, Legends and Visionaries Series : Leadership Berks
7 Identify and create incentives to encourage every undergraduate student to participate in an internship, research project or study abroad opportunity. University led by Academic Affairs and University Life Establish a repository of state polling data on issues related to ethics, leadership and public service. O Pake Institute Social Responsibility Catholic Social Teaching holds that We have to move from our devotion to independence, through an understanding of interdependence, to a commitment to human solidarity. That challenge must find its realization in the kind of community we build among us. ( Economic Justice for All, Pastoral Letter of the United States Conference of Catholic Bishops, 1986.) In some cases, we define community by the places where we live. At other times, community is defined by our associations and affiliations, say to a religion, a team or a professional society. In some cases our communities can be virtual. Regardless of the form that they take, healthy communities are bound together by certain shared beliefs and values, such as tolerance and respect for others. Living in a community brings with it the responsibility to participate in that community, to abide by its principles, to steward its resources and to reflect its values. Alvernia as an institution must thus itself act to promote healthier communities and work for social justice. Over the next two years, Alvernia will: Foster the concepts of environmental stewardship and sustainability in the operations of the university and into University curricular activities, and more broadly in the community; Facilities, HCCE and Arts and Sciences supported by the University Leadership Launch the Interfaith Alternative Break program; Campus Ministry/University Life Under the auspices of a NetVUE grant, offer faculty workshops to help incorporate the concept of vocation and calling into the curriculum; Mission Pursue additional funding to support the incorporation of the concepts of vocation and calling into the curriculum; Mission Create a repository of syllabi on ethics in the undergraduate curriculum and hold an annual symposium/faculty workshop for Franciscan University faculty on teaching ethics to undergraduates. O Pake Institute Moral Leadership Requiring every student to take at least one course in ethics emphasizes the importance of ethics and moral character development. By offering degree programs in leadership, Alvernia demonstrates its belief that leadership can, in fact, be taught, and that developing leadership skills can be an intentional part of higher education. Through its commitment to service and leadership, Alvernia develops moral leaders who can use their talents and skills to promote social justice through engagement with the broader community.
8 Over the next two years Alvernia will: Conduct an inventory of academic and university life programming related to leadership education and development and sponsor a campus workshop on leadership: O Pake Institute in conjunction with Leadership PhD program and GECCCO. Implement academic programming to support the proposed General Education focus area that would allow students to take six credit hours related to Ethical Leaders and Followers to fulfill a general education requirement: GECCO Launch a Master s Degree program in Organizational Leadership. Provost Establish a Leadership Academy linking all of the leadership development courses, certificates and degrees into a single interdisciplinary entity collaborating with the O Pake Institute; O Pake Institute, University Life, Enrollment Management and Provost Ensure the future success of the Blueprint for Leadership program by increasing support for the program and strengthening the linkages to Leadership Berks and the University: Leadership Berks and O Pake Institute Dialogue The purpose of a liberal arts education is not just to train students for a career, but also to inspire students with a sense of civic responsibility and to help them develop innovative tools and strategies for addressing contemporary problems. The university itself is the perfect agent for fostering dialogue on community issues. The basic purpose of dialogue is to bring people together to discuss important issues and provide an opportunity to air their differences. Dialogue implies discernment of the differences between individuals, groups and communities. It requires reflection on important issues and the nature of controversy. Dialogue encourages an appreciation of diversity and social justice. It implies a level of civility and an interest in listening that that allows for meaningful discussion. And it suggests a willingness to share not only ideas but power. Dialogue requires that participants and listeners work together to find mutually acceptable solutions to areas of concern. Over the next two years Alvernia will: Create a Community Dialogue Program focused on important local and regional issues; O Pake Institute Expand our curricular and co curricular programs on Cross Cultural Education and Training. Arts and Sciences, Professional Programs and University Life Implement an Interfaith Dialogue Initiative including student activities, coursework and community events. Campus Ministry and HCCE Create a Mediation Training program that leads to a certificate. Graduate and Continuing Education, Professional Programs, O Pake Institute Implement a Conflict Resolution Training Program for students, faculty and staff; University led by Academic Affairs and University Life
9 Explore the possibility of establishing a mediation center. Graduate and Continuing Education, Professional Programs and O Pake Institute Community Development A growing number of universities are dedicating their resources to support their surrounding communities, applying their economic power and their human and intellectual resources to benefit the community in which it resides. Alvernia plays a significant role in fostering community development in several different ways. It facilitates public deliberation on important policy issues. It brings stakeholders together to identify and act on problems in the community. It sponsors research-based community development activities and replicates best practices from other communities. It develops the metrics for evaluating the success of a program or initiative. It engages other academic institutions both within and outside the region on significant social issues. It use its resources, including its purchasing power, to strengthen the community. It creates capacity within the non-profit and government sectors to address social issues. It helps train emerging leaders. It promotes small business development and social entrepreneurship. Alvernia offers these services not only to those communities where its campuses are located, but regionally and globally as well. Over the next two years, Alvernia will: Establish a Reading Collegiate Scholars Program; HCCE, O Pake Institute and Admissions Host a series of symposia for community leaders on community development, focusing on successes in other Pennsylvania cities, anchor institutions and strategic partnerships; O Pake Institute Complete initial Berks County Vital Signs report for the Berks County Community Foundation, conduct follow-up educational programs and supplemental reports: O Pake Institute and Leadership PhD program Explore the development of a program that would use the resources of the university to address gaps in the delivery of health care services in the Oakbrook Housing Project; O Pake Institute and Professional Programs Implement a Leadership Berks style program for Alvernia faculty and staff to expand their involvement with non-profit community based organizations. Leadership Berks Explore opportunities for the university to use its strategic assets and explore partnerships and other collaborative opportunities with other community institutions to support community revitalization and redevelopment efforts; O Pake Institute, Leadership PhD program Explore the feasibility of and begin to plan the development of a Family Center in a Public Housing Development in Reading. O Pake, Professional Programs and Graduate and Continuing Education. Expand the capacity of the university to support community based research. O Pake Institute, Leadership PhD program, HCCE and Academic Affairs
10 Conclusion Continuing to develop an intentional and integrated focus on these pillars of service and civic engagement will enable Alvernia to not only prepare students for careers, but also to be engaged civic leaders and citizens. The commitment to this strategy will brand Alvernia as a leader in service and civic engagement regionally and nationally. It is not enough to be wise stewards of these values; a commitment to service and civic engagement requires participation and action. This commitment will help Alvernia realize its mission as a rigorous, caring, and inclusive learning community committed to academic excellence and to being and fostering broadly educated, life-long learners; reflective professionals and engaged citizens; and ethical leaders with moral courage. The Divisions of the University will incorporate these concepts into their strategic plans and their work objectives, developing strategies, initiatives and programs to support this vision. Notes on sources: Over the past two decades, there have been many reports focusing on higher education and civic engagement which provide both background and initiatives on civic engagement in the university. These include: Returning to Our Roots: The Engaged University (Kellogg Commission on the Future of State Universities and Land Grant Colleges, 2001); Stepping Forward as Stewards of Place (American Association of State Colleges and Universities, 2002) and A Crucible Moment: College Learning and Democracy s Future (The National Task Force on Civic Learning and Democratic Engagement, U.S. Department of Education, 2012).
Request for Proposals A Larger Vision for Student Learning: Education for Civic and Moral Responsibility
Introduction Request for Proposals A Larger Vision for Student Learning: Education for Civic and Moral Responsibility A college should not be a haven from worldly contention, but a place where young people
Alverno College Partners in Learning. Staff Collaboration in Promoting Student Learning Across the College
Alverno College Partners in Learning Staff Collaboration in Promoting Student Learning Across the College Preface This document, a collaborative effort by a variety of departments, was developed, reflected
1 C H A P T E R 3 A Design Technique: Integration ing This chapter focuses on a new design technique for the analysis and design of data integration processes. This technique uses a graphical process modeling view of data integration similar to the graphical view an entity-relationship diagram provides for data models. The Business Case for a New Design Process There is a hypothesis to the issue of massive duplication of data integration processes, which is as follows: If you do not see a process, you will replicate that process. One of the main reasons why there is massive replication of data integration processes in many organizations is the fact that there is no visual method of seeing what data integration processes currently exist and what is needed. This is similar to the problem that once plagued the data modeling discipline. In the early 1980s, many organizations had massive duplication of customer and transactional data. These organizations could not see the full picture of their data environment and the massive duplication. Once organizations began to document and leverage entity-relationship diagrams (visual representations of a data model), they were able to see the massive duplication and the degree of reuse of existing tables increased as unnecessary duplication decreased. The development of data integration processes is similar to those in database development. In developing a database, a blueprint, or model of the business requirements, is necessary to ensure that there is a clear understanding between parties of what is needed. In the case of data integration, the data integration designer and the data integration developer need that blueprint or project artifact to ensure that the business requirements in terms of sources, transformations, and 45
2 46 Chapter 3 A Design Technique: Integration ing targets that are needed to move data have been clearly communicated via a common, consistent approach. The use of a process model specifically designed for data integration will accomplish that requirement. Figure 3.1 depicts the types of data models needed in a project and how they are similar to those that could be developed for data integration. Type Integration Conceptual s Conceptual Conceptual Integration Detail Less Logical s Physical s Logical Physical Logical Integration Physical Integration Implementation Technology base Stage Jobs Development Technology Erwin IIS Stage More Figure 3.1 ing paradigm: data and data integration
3 Improving the Development Process 47 The usual approach for analyzing, designing, and building ETL or data integration processes on most projects involves a data analyst documenting the requirements for source-totarget mapping in Microsoft Excel spreadsheets. These spreadsheets are given to an ETL developer for the design and development of maps, graphs, and/or source code. Documenting integration requirements from source systems and targets manually into a tool like Excel and then mapping them again into an ETL or data integration package has been proven to be time-consuming and prone to error. For example: Lost time It takes a considerable amount of time to copy source metadata from source systems into an Excel spreadsheet. The same source information must then be rekeyed into an ETL tool. This source and target metadata captured in Excel is largely nonreusable unless a highly manual review and maintenance process is instituted. Nonvalue add analysis Capturing source-to-target mappings with transformation requirements contains valuable navigational metadata that can be used for data lineage analysis. Capturing this information in an Excel spreadsheet does not provide a clean automated method of capturing this valuable information. Mapping errors Despite our best efforts, manual data entry often results in incorrect entries, for example, incorrectly documenting an INT data type as a VARCHAR in an Excel spreadsheet will require a data integration designer time to analyze and correct. Lack of standardization: inconsistent levels of detail The data analysts who perform the source-to-target mappings have a tendency to capture source/transform/target requirements at different levels of completeness depending on the skill and experience of the analyst. When there are inconsistencies in the level of detail in the requirements and design of the data integration processes, there can be misinterpretations by the development staff in the source-to-target mapping documents (usually Excel), which often results in coding errors and lost time. Lack of standardization: inconsistent file formats Most environments have multiple extracts in different file formats. The focus and direction must be toward the concept of read once, write many, with consistency in extract, data quality, transformation, and load formats. The lack of a standardized set of extracts is both a lack of technique and often a result of a lack of visualization of what is in the environment. To improve the design and development efficiencies of data integration processes, in terms of time, consistency, quality, and reusability, a graphical process modeling design technique for data integration with the same rigor that is used in developing data models is needed. Improving the Development Process Process modeling is a tried and proven approach that works well with Information Technology applications such as data integration. By applying a process modeling technique to data integration, both the visualization and standardization issues will be addressed. First, let s review the types of process modeling.
4 48 Chapter 3 A Design Technique: Integration ing Leveraging Process ing for Integration Process modeling is a means of representing the interrelated processes of a system at any level of detail, using specific types of diagrams that show the flow of data through a series of processes. Process modeling techniques are used to represent specific processes graphically for clearer understanding, communication, and refinement between the stakeholders that design and develop system processes. Process modeling unlike data modeling has several different types of process models based on the different types of process interactions. These different model types include process dependency diagrams, structure hierarchy charts, and data flow diagrams. flow diagramming, which is one of the best known of these process model types, is further refined into several different types of data flow diagrams, such as context diagrams, Level 0 and Level 1 diagrams and leaf-level diagrams that represent different levels and types of process and data flow. By leveraging the concepts of different levels and types of process modeling, we have developed a processing modeling approach for data integration processes, which is as follows: integration modeling is a process modeling technique that is focused on engineering data integration processes into a common data integration architecture. Overview of Integration ing integration modeling is a technique that takes into account the types of models needed based on the types of architectural requirements for data integration and the types of models needed based on the Systems Development Life Cycle (SDLC). ing to the Integration Architecture The types of process models or data integration models are dependent on the types of processing needed in the data integration reference architecture. By using the reference architecture as a framework, we are able to create specific process model types for the discrete data integration processes and landing zones, as demonstrated in Figure 3.2.
5 Overview of Integration ing 49 Extract/Publish Initial Staging Quality Clean Staging Transformation Load-Ready Publish Load Retail Logical Extract Involved Party Logical Load Commercial Logical Extract Tech DQ Checks Bus DQ Check Error Handling Conform Loan Conform Deposit Event Logical Load Demand Deposit Logical Extract Bad Transactions Figure 3.2 Designing models to the architecture Together, these discrete data integration layers become process model types that form a complete data integration process. The objective is to develop a technique that will lead the designer to model data integration processes based on a common set of process types. Integration s within the SDLC integration models follow the same level of requirement and design abstraction refinement that occurs within data models during the SDLC. Just as there are conceptual, logical, and physical data models, there are conceptual, logical, and physical data integration requirements that need to be captured at different points in the SDLC, which could be represented in a process model. The following are brief descriptions of each of the model types. A more thorough definition along with roles, steps, and model examples is reviewed later in the chapter. Conceptual data integration model definition Produces an implementation-free representation of the data integration requirements for the proposed system that will serve as a basis for determining how they are to be satisfied. Logical data integration model definition Produces a detailed representation of the data integration requirements at the data set (entity/table)level, which details the transformation rules and target logical data sets (entity/tables). These models are still considered to be technology-independent. The focus at the logical level is on the capture of actual source tables and proposed target stores. Physical data integration model definition Produces a detailed representation of the data integration specifications at the component level. They should be represented in terms of the component-based approach and be able to represent how the data will optimally flow through the data integration environment in the selected development technology.
6 50 Chapter 3 A Design Technique: Integration ing Structuring s on the Reference Architecture Structuring data models to a Systems Development Life Cycle is a relatively easy process. There is usually only one logical model for a conceptual data model and there is only one physical data model for a logical data model. Even though entities may be decomposed or normalized within a model, there is rarely a need to break a data model into separate models. Process models have traditionally been decomposed further down into separate discrete functions. For example, in Figure 3.3, the data flow diagram s top process is the context diagram, which is further decomposed into separate functional models. Context Diagram Process 1 Process 2 Process 3 Figure 3.3 A traditional process model: data flow diagram integration models are decomposed into functional models as well, based on the data integration reference architecture and the phase of the Systems Development Life Cycle. Figure 3.4 portrays how conceptual, logical, and physical data integration models are broken down. Conceptual Integration ing Conceptual Integration Logical Integration ing High-Level Logical Integration Logical Extraction Logical Quality Logical Transform Logical Load Physical Integration ing Physical Source Physical System Source Extraction System s s Extract Physical Common Components (s) Physical Subject Physical Area Extraction Load s s Figure 3.4 integration models by the Systems Development Life Cycle
7 Logical Integration s 51 Conceptual Integration s A conceptual data integration model is an implementation-free representation of the data integration requirements for the proposed system that will serve as a basis for scoping how they are to be satisfied and for project planning purposes in terms of source systems analysis, tasks and duration, and resources. At this stage, it is only necessary to identify the major conceptual processes to fully understand the users requirements for data integration and plan the next phase. Figure 3.5 provides an example of a conceptual data integration model. Name: CIA Integration Life Cycle Type: Conceptual DI Architecture Layer: N/A Retail Loan Application Commercial Loan Application Loan and Transaction Quality Transform Conforming Bank Warehouse Demand Deposit Application Figure 3.5 Conceptual data integration model example Logical Integration s A logical data integration model produces a set of detailed representations of the data integration requirements that captures the first-cut source mappings, business rules, and target data sets (table/file). These models portray the logical extract, data quality, transform, and load requirements for the intended data integration application. These models are still considered to be technology-independent. The following sections discuss the various logical data integration models.
8 52 Chapter 3 A Design Technique: Integration ing High-Level Logical Integration A high-level logical data integration model defines the scope and the boundaries for the project and the system, usually derived and augmented from the conceptual data integration model. A high-level data integration diagram provides the same guidelines as a context diagram does for a data flow diagram. The high-level logical data integration model in Figure 3.6 provides the structure for what will be needed for the data integration system, as well as provides the outline for the logical models, such as extract, data quality, transform, and load components. Name: CIA Integration Life Cycle Type: Logical, High-Level DI Architecture Layer: N/A Retail Loan Application Retail Logical Extract Involved Party Logical Load Commercial Loan Application Commercial Logical Extract Tech DQ Checks Bus DQ Check Error Handling Bad Transactions Conform Loan Conform Deposit Event Logical Load Bank Warehouse Demand Deposit Application Demand Deposit Logical Extract Figure 3.6 Logical high-level data integration model example Logical Extraction Integration s The logical extraction data integration model determines what subject areas will need to be extracted from sources, such as what applications, databases, flat files, and unstructured sources. Source file formats should be mapped to the attribute/column/field level. Once extracted, source data files should be loaded by default to the initial staging area. Figure 3.7 depicts a logical extraction model.
9 Logical Integration s 53 Name: Commercial Loan Integration Life Cycle Type: Logical DI Architecture Layer: Extract Commercial Loan Application Extract Loan and Customer Files from the VSAM File Verify the Extract with the Control File Format into Subject Area Files Figure 3.7 Logical extraction data integration model example Extract data integration models consist of two discrete sub processes or components: Getting the data out of the source system Whether the data is actually extracted from the source system or captured from a message queue or flat file, the network connectivity to the source must be determined, the number of tables\files must be reviewed, and the files to extract and in what order to extract them in must be determined. Formatting the data to a subject area file As discussed in Chapter 2, An Architecture for Integration, subject area files provide a layer of encapsulation from the source to the final target area. The second major component of an extract data integration model is to rationalize the data from the source format to a common subject area file format, for example mapping a set of Siebel Customer Relationship Management Software tables to a customer subject area file. Logical Quality Integration s The logical data quality data integration model contains the business and technical data quality checkpoints for the intended data integration process, as demonstrated in Figure 3.8. Regardless of the technical or business data quality requirements, each data quality data integration model should contain the ability to produce a clean file, reject file, and reject report that would be instantiated in a selected data integration technology. Also the error handling for the entire data integration process should be designed as a reusable component.
10 54 Chapter 3 A Design Technique: Integration ing Name: CIA Integration Life Cycle Type: Logical DI Architecture Layer: Quality Error Handling Retail Commercial Technical DQ Checks 1. Check Retail 2. Check Commercial 3. Check Demand Deposit Business DQ Checks 1. Check Retail 2. Check Commercial 3. Check Demand Deposit Format Clean File Demand Deposit Format Reject File Format Reject Report Bad Transactions Figure 3.8 Logical data quality data integration model example As discussed in the data quality architectural process in Chapter 2, a clear data quality process will produce a clean file, reject file, and reject report. Based on an organization s data governance procedures, the reject file can be leveraged for manual or automatic reprocessing. Logical Transform Integration s The logical transform data integration model identifies at a logical level what transformations (in terms of calculations, splits, processing, and enrichment) are needed to be performed on the extracted data to meet the business intelligence requirements in terms of aggregation, calculation, and structure, which is demonstrated in Figure 3.9. Transform types as defined in the transformation processes are determined on the business requirements for conforming, calculating, and aggregating data into enterprise information, as discussed in the transformation architectural process in Chapter 2.
12 56 Chapter 3 A Design Technique: Integration ing Physical Integration s The purpose of a physical data integration model is to produce a detailed representation of the data integration specifications at the component level within the targeted data integration technology. A major concept in physical data integration modeling is determining how to best take the logical design and apply design techniques that will optimize performance. Converting Logical Integration s to Physical Integration s As in data modeling where there is a transition from logical to physical data models, the same transition occurs in data integration modeling. Logical data integration modeling determines what extracts, data quality, transformations, and loads. Physical data integration leverages a target-based design technique, which provides guidelines on how to design the hows in the physical data integration models to ensure that the various components will perform optimally in a data integration environment. Target-Based Integration Design Technique Overview The target-based data integration design technique is an approach that creates physical data integration components based on the subject area loads and the source systems that populate those subject areas. It groups logical functionality into reusable components based on the data movement patterns of local versus enterprise usage within each data integration model type. For example, in most data integration processes, there are source system-level and enterprise-level data quality checks. The target-based technique places that functionality either close to the process that will use it (in this case, the extract process) or groups enterprise capabilities in common component models. For example, for source system-specific data quality checks, the target-based technique simply moves that logic to the extract processes while local transformations are moved to load processes and while grouping enterprise-level data quality and transformations are grouped at the common component level. This is displayed in Figure 3.11.
13 Commercial Loan Application Name: Commercial Loan Integration Life Cycle Type: Logical DI Architecture Layer: Extract Extract Loan and Customer files from the VSAM file Verify the extract with the Control File Format into Subject Area files Retail Comm ercial Demand Deposit Name: CIA Integration Life Cycle Type: Logical DI Architecture Layer: Quality Technical DQ Checks 1.Check Retail 2. Check Comm ercial 3. Check Dem and Deposit Error Handling Business DQ Checks 1.Check Retail 2. Check Comm ercial 3. Check Dem and Deposit Format Clean File Format Reject File Format Reject Report Bad Transactions Msi sni g Fei dl s Referential Integrity Missing Fields Referential Integrity Name: CIA Integration Life Cycle Type: Logical DI Architecture Layer: Transformation Conform Loan 1. Conform Retail Loan to the Target Loan Subject Area 2. Conform Commercial Loan to the Target Loan Subject Area Conform Demand Deposit 1. Conform Demand Deposit to the Target Account Subject Area 2. Calculate Account Totals Name: Involved Party Integration Life Cycle Type: Logical DI Architecture Layer: Load Perform Change Capture 1. Update Customer Table 2. Update Address Table Load Customer Table Load Address Table Copyright 2011 by International Business Machines Corp. Physical Integration s 57 Logical Integration ing Logical Extraction Integration Logical Quality Integration Logical Transforms Integration Logical Load Integration Physical Integration ing Physical Source System Integration Physical Common Components Integration Physical Subject Area Component Physical Target Component Functionality Extraction Initial Staging Source Quality Business Quality Technical Quality Common Quality Business Quality Technical Quality Common Transformations Calculations Splits Enrichments Target Filtering Subject Area Transformations Calculations Splits Enrichment Target Filtering Subject Area Targeting Table-Base Targeting Load Figure 3.11 Distributing logical functionality between the whats and hows The target-based data integration design technique is not a new concept: Coupling and cohesion, modularity, objects, and components are all techniques used to group stuff into understandable and highly functional units of work. The target-based technique is simply a method of modularizing core functionality within the data integration models. Physical Source System Integration s A source system extract data integration model extracts the data from a source system, performs source system data quality checks, and then conforms that data into the specific subject area file formats, as shown in Figure The major difference in a logical extract model from a physical source system data integration model is a focus on the final design considerations needed to extract data from the specified source system. Designing an Extract Verification Process The data from the source system files is extracted and verified with a control file. A control file is a data quality check that verifies the number of rows of data and a control total (such as loan amounts that are totaled for verification for a specific source extract as an example). It is here where data quality rules that are source system-specific are applied. The rationale for applying source system-specific data quality rules at the particular source system rather than in one overall data quality job is to facilitate maintenance and performance. One giant data quality job becomes a maintenance nightmare. It also requires an unnecessary amount of system memory to load all data quality processes and variables that will slow the time for overall job processing.
14 58 Chapter 3 A Design Technique: Integration ing Cross-system dependencies should be processed in this model. For example, associative relationships for connecting agreements together should be processed here. Name: Commercial Loan Integration Life Cycle Type: Physical DI Architecture Layer: Source System Extract Commercial Loan Application Extract Loan and Customer Files from the VSAM File Verify the Extract with the Control File Error Handling Source DQ Checks Check Commercial Format into Subject Area Files Format Clean File Format Reject File Format Reject Report Bad Transactions Figure 3.12 Physical source system extract data integration model example Physical Common Component Integration s The physical common component data integration model contains the enterprise-level business data quality rules and common transformations that will be leveraged by multiple data integration applications. This layer of the architecture is a critical focal point for reusability in the overall data integration process flow, with particular emphasis on leveraging existing transformation components. Any new components must meet the criteria for reusability. Finally, in designing common component data integration models, the process flow is examined on where parallelism can be built in to the design based on expected data volumes and within the constraints of the current data integration technology. Common Component Quality Integration s Common component data quality data integration models are generally very thin (less functionality) process models, with enterprise-level data quality rules. Generally, source system-specific data quality rules are technical in nature, whereas business data quality rules tend to be applied at the enterprise level.
15 Physical Integration s 59 For example, gender or postal codes are considered business rules that can be applied as data quality rules against all data being processed. Figure 3.13 illustrates an example of a common data quality data integration model. Note that the source-specific data quality rules have been moved to the physical source system extract data integration model and a thinner data quality process is at the common component level. Less data ensures that the data flow is not unnecessarily constrained and overall processing performance will be improved. Name: CIA Integration Project: Life Cycle Type: Physical DI Architecture Layer: Common Component: Quality Retail Commercial Error Handling Common DQ Checks 1. Check Postal Code Ranges 2. Check State Code Ranges Demand Deposit Format Clean File Format Reject File Format Reject Report Bad Transactions Figure 3.13 Common components data quality data integration model example Common Component Transformation Integration s Most common transforms are those that conform data to an enterprise data model. Transformations needed for specific aggregations and calculations are moved to the subject area loads, or where they are needed, which is in the subject areas that the data is being transformed. In terms of enterprise-level aggregations and calculations, there are usually very few; most transformations are subject-area-specific. An example of a common component-transformation data integration subject area model is depicted in Figure 3.14.
16 60 Chapter 3 A Design Technique: Integration ing Name: CIA Integration Life Cycle Type: Physical DI Architecture Layer: Common Component: Transformation Conform Loan 1. Conform Retail Loan to the Target Loan Subject Area 2. Conform Commercial Loan to the Target Loan Subject Area Conform Demand Deposit Conform Demand Deposit to the Target Account Subject Area Figure 3.14 Common components transform data integration model example Please note that the aggregations for the demand deposit layer have been removed from the common component model and have been moved to the subject area load in line with the concept of moving functionality to where it is needed. Physical Subject Area Load Integration s A subject area load data integration model logically groups target tables together based on subject area (grouping of targets) dependencies and serves as a simplification for source system processing (layer of indirection). A subject area load data integration model performs the following functions: Loads data Refreshes snapshot loads Performs Change Capture It is in the subject area load data integration models where primary and foreign keys will be generated, referential integrity is confirmed, and Change Capture is processed. In addition to the simplicity of grouping data by subject area for understandability and maintenance, grouping data by subject area logically limits the amount of data carried per process because it is important to carry as little data as possible through these processes to minimize performance issues. An example of a physical data integration subject area model is shown in Figure 3.15.
17 Tools for Developing Integration s 61 Name: Involved Party Integration Life Cycle Type: Physical DI Architecture Layer: Subject Areas Load Calculate Account Totals. Perform Referential Integrity Checks Perform Change Capture 1. Update Customer Table 2. Update Address Table Load Customer Table Load Address Table Figure 3.15 Physical subject data area load data integration model example Logical Versus Physical Integration s One question that always arises in these efforts is, Is there a need to have one set of logical data integration models and another set of physical data integration models? The answer for data integration models is the same as for data models, It depends. It depends on the maturity of the data management organization that will create, manage, and own the models in terms of their management of metadata, and it depends on other data management artifacts (such as logical and physical data models). Tools for Developing Integration s One of the first questions about data integration modeling is, What do you build them in? Although diagramming tools such as Microsoft Visio and even Microsoft PowerPoint can be used (as displayed throughout the book), we advocate the use of one of the commercial data integration packages to design and build data integration models. Diagramming tools such as Visio require manual creation and maintenance to ensure that they are kept in sync with source code and Excel spreadsheets. The overhead of the maintenance often outweighs the benefit of the manually created models. By using a data integration package, existing data integration designs (e.g., an extract data integration model) can be reviewed for potential reuse in other data integration models, and when leveraged, the maintenance to the actual data integration job is performed when the model is updated. Also by using a data integration
18 62 Chapter 3 A Design Technique: Integration ing package such as Ab Initio, IBM Stage, or Informatica to create data integration models, an organization will further leverage the investment in technology it has. Figure 3.16 provides examples of high-level logical data integration models built in Ab Initio, IBM Stage, and Informatica. Ab Initio IBM Stage Informatica Figure 3.16 integration models by technology Experience in using data integration packages for data integration modeling has shown that data integration projects and Centers of Excellence have seen the benefits of increased extract, transform and load code standardization, and quality. Key benefits from leveraging a data integration package include the following: End-to-end communications Using a data integration package facilitates faster transfer of requirements from a data integration designer to a data integration developer by using the same common data integration metadata. Moving from a logical design to a physical design using the same metadata in the same package speeds up the transfer process and cuts down on transfer issues and errors. For example, source-to-target data definitions and mapping rules do not have to be transferred between technologies,
19 Industry-Based Integration s 63 thereby reducing mapping errors. This same benefit has been found in data modeling tools that transition from logical data models to physical data models. Development of leveragable enterprise models Capturing data integration requirements as logical and physical data integration models provides an organization an opportunity to combine these data integration models into enterprise data integration models, which further matures the Information Management environment and increases overall reuse. It also provides the ability to reuse source extracts, target data loads, and common transformations that are in the data integration software package s metadata engine. These physical data integration jobs are stored in the same metadata engine and can be linked to each other. They can also be linked to other existing metadata objects such as logical data models and business functions. Capture of navigational metadata earlier in the process By storing logical and physical data integration model metadata in a data integration software package, an organization is provided with the ability to perform a more thorough impact analysis of a single source or target job. The capture of source-to-target mapping metadata with transformation requirements earlier in the process also increases the probability of catching mapping errors in unit and systems testing. In addition, because metadata capture is automated, it is more likely to be captured and managed. Industry-Based Integration s To reduce risk and expedite design efforts in data warehousing projects, prebuilt data models for data warehousing have been developed by IBM, Oracle, Microsoft, and Teradata. As the concept of data integration modeling has matured, prebuilt data integration models are being developed in support of those industry data warehouse data models. Prebuilt data integration models use the industry data warehouse models as the targets and known commercial source systems for extracts. Having industry-based source systems and targets, it is easy to develop data integration models with prebuilt source-to-target mappings. For example, in banking, there are common source systems, such as the following: Commercial and retail loan systems Demand deposit systems Enterprise resource systems such as SAP and Oracle These known applications can be premapped to the industry-based data warehouse data models. Based on actual project experience, the use of industry-based data integration models can significantly cut the time and cost of a data integration project. An example of an industrybased data integration model is illustrated in Figure 3.17.
20 64 Chapter 3 A Design Technique: Integration ing Prebuilt Customer Source System Prebuilt Retail Loan Source System Prebuilt Quality Tech DQ Checks Bus DQ Check Prebuilt Transform Conform Loan Loan Subject Area Load Error Handling Loan Subject Area Load Prebuilt Commercial Loan Source System Bad Transactions Figure 3.17 Industry-based data integration model example In the preceding example, the industry data integration model provides the following: Prebuilt extract processes from the customer, retail loan, and commercial loan systems Prebuilt data quality processes based on known data quality requirements in the target data model Prebuilt load processes based on the target data model subject areas Starting with existing designs based on a known data integration architecture, source systems, and target data models, provides a framework for accelerating the development of a data integration application. Summary modeling is a graphical design technique for data. In data integration, data integration modeling is a technique for designing data integration processes using a graphical process modeling technique against the data integration reference architecture. This chapter detailed the types of data integration models conceptual, logical, and physical and the approach for subdividing the models based on the process layers of the data integration reference architecture. This chapter also provided examples of each of the different logical and physical data integration model types. It covered the transition from logical data integration models to physical data integration models, which might be better stated as how to move from the whats to the hows. Finally, the chapter discussed how this maturing technique can be used to create prebuilt, industry-based data integration models. The next chapter is a case study for a bank that is building a set of data integration processes and uses data integration modeling to design the planned data integration jobs.
21 End-of-Chapter Questions 65 End-of-Chapter Questions Question 1. integration modeling is based on what other modeling paradigm? Question 2. List and describe the types of logical data integration models. Question 3. List and describe the types of physical data integration models. Question 4. Using the target-based design technique, document where the logical data quality logic is moved to and why in the physical data integration model layers. Question 5. Using the target-based design technique, document where the logical transformation logic is moved to and why in the physical data integration model layers.
Data Governance Data & Metadata Standards Antonio Amorin Abstract This data governance presentation focuses on data and metadata standards. The intention of the presentation is to identify new standards
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