Consumer Loan Billing
by Richard Insley, BOL Gurus Guru BIOS
Question: On a consumer loan, can the bank forecast interest on a statement to a customer. For example, on a consumer line of credit loan that has interest only payments, let's say a payment is due on the 15th of the month and the bank sends a notice on the 5th of the month. Can the bank forecast the interest from the 5th to the 15th when a payment is due?
Answer: Sure. It's best to include your procedure in your credit agreement so there can be no dispute about what should be billed and when a payment is insufficient or delinquent.
John- This inquiry is a textbook example of jargon-itis. When someone tells me s/he has a "line of credit loan," I don't know whether it's open-end or closed-end. We've seen more posts than I can count where jargon or imprecise language caused confusion and hampered productive discussion.
Using precise terminology is certainly in the best interest of all BOLers and I'd like to propose that we standardize the useage of key terms like "line" and "loan." The worst Reg Z reimbursement case I've ever seen stemmed from imprecise description of an ARM index as "the T-bill rate" rather than the correct index--which happened to be higher!
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