Skip to content

APR Errors and Restitution

We all know what happens when the APR or finance charge is under-disclosed: restitution. What happens when the APR or finance charge is over-disclosed? Basically, nothing.

When an APR or finance charge is over-stated, there are no restitution consequences. Moreover, these particular errors are no longer violations of TILA. There was a time when over-statement of a finance charge was a strict liability violation of TILA. That, fortunately, has been changed. There is no liability for over-stating the APR and no restitution is triggered.However, errors such as over-stating the finance charge do raise other questions about compliance. When you find an example of over-statement, you should take steps to determine whether the error is part of a pattern. Find out what is behind the error. Sometimes it is the result of guessing that an unusual fee is a finance charge and the compliance expert later determines that it isn't a finance charge. The result would be an over-statement of the finance charge. When such charges occur on an occasional basis, the most prudent approach to take - other than contacting the compliance manager - is to assume that the fee is a finance charge. Including a fee that is not a finance charge has virtually no consequences. Excluding a fee that is a finance charge hits right in the pocket.If you find such an error, review the training, procedures, and tools available to lending staff. It may be time to update the information they have. You might also consider putting into place a tool or procedure to follow when this type of situation arises. Then, no matter what happens, you can assure your examiner that you have a means for dealing with the situation.Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 16, 12/02

First published on 12/01/2002

Filed under: 
Filed under compliance as: 
Filed under lending as: 

Search Topics