We have a situation where a borrower was charged a finance charge by mistake, which will be refunded. The loan was not rescindable as it was the same lender and the borrower contributed funds towards closing costs. The amount of the refund is more than they contributed towards costs, which makes it rescindable. The loan has already disbursed. Do we give the borrower the right to rescind now? Should we revise the final TIL? Anything else?

Thanks for your help.

"The amount of the refund is more than they contributed towards costs"

Why would that make it rescindable. What was the finance charge that was charged in error?

It was a loan level price adjustment. Wouldn't it be rescindable because the loan amount is more than just payoff of the previous loan plus closing costs?

If you charged it, wouldn't a loan level price adjustment just be part of the closing costs?

Did you include it correctly on the orignal TIL?

We charged one that we shouldn't have, and yes, it was part of the closing costs. So, when we refund the fee, they will get back more than they paid in closing costs, so now it's rescindable, I think. In other words, if we wouldn't have charged the fee originally, they would have gotten cash back at closing.

I disagree. You charged the fee at closing and you haven't said, but I assume that the fee was properly disclosed as a finance charge and calculated correctly into the TIL disclosures, i.e., finance charge and APR. When the loan closed, the material disclosures were correct.

The fact that after the fact, you had a change of heart and say: Gee we should have not charged this fee to the customer and we would like to refund the fee, has nothing to do with the orignal transaction nor does it nullify the original disclosures.

The fee was properly disclosed as a finance charge at closing and the final TIL was correct at that time. So, it sounds like we should just send the refund and explanation letter.

Thank you very much for responding.