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#1246343 - 09/08/09 05:16 PM Prompt credit of payments
bls Offline
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Alabama
I am curious about anyone's thoughts on this. When I checked with our senior lender, I was told that several years ago, our bank changed in our system the number of days that trigger a late charge from ten to eleven days. All of our loan documents state that it is still ten days. However, if a payment is received after our cutoff time on the tenth day, so that it is processed on the eleventh day, a late charge is not assessed. The customer is not told this, and it only benefits the customer, at the expense of fee income to the bank. Does anyone see a problem with this for complying with the regulation (other than the loss of fee income)?

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#1246865 - 09/09/09 12:06 AM Re: Prompt credit of payments bls
rlcarey Offline
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No, but it does not eliminate the needs for same day crediting, especially on simple interest transactions.
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#1249354 - 09/12/09 05:36 PM Re: Prompt credit of payments rlcarey
bls Offline
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One further question. This prompt crediting of payments is section 226.10. Is this only for open-ended credits?

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#1249358 - 09/12/09 06:54 PM Re: Prompt credit of payments bls
Rocky P Offline
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Sections 226.5 through 226.16 are for open ended credit. Yes.

If there is a corresponding regulation for closed-end it would be from 226.17 through 226.24
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#1249426 - 09/14/09 01:03 PM Re: Prompt credit of payments Rocky P
bls Offline
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So my question now becomes, is the prompt crediting of payments only for open ended credits, or is there a corresponding section in the closed-end credits for the prompt crediting of payments? If there is a section for closed-end credits, could someone point it out to me?

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#1249693 - 09/14/09 05:01 PM Re: Prompt credit of payments bls
bls Offline
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Please disregard my idiotic last post. Section 226.36 does cover this. However, can we use cut off times? Under the commentary for section 226.10 (b), it appears to allow "reasonable" cut off times. Do you think this would be allowed on closed end credits as well?

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#1249735 - 09/14/09 05:56 PM Re: Prompt credit of payments bls
ahanna Offline
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The commentary to 226.36(c)(2) indicates "...it would be resonable to require a cut-off time of 5 p.m. for receipt of a mailed check."

Last month, Metavante Regulatory Services published an article that quoted the Fed as saying a reasonable cut-off time for any payment would not be earlier than 4 pm.

Our processing day still ends at 2 pm so we are struggling to decide the best way to handle this.
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#1249749 - 09/14/09 06:22 PM Re: Prompt credit of payments ahanna
bls Offline
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Do you have a copy of the Metavante article that you would share? I obviously have a short period of time to discuss this with management, and need all the information I can get my hands on. The problem with the term reasonable is that it is so subjective.

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#1249903 - 09/14/09 07:54 PM Re: Prompt credit of payments bls
ahanna Offline
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I do have it, but I was hesitant to "publish" it because you have to be a subscriber to receive their correspondence. You may want to check out their website under Premium Member services.
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#1249944 - 09/14/09 08:24 PM Re: Prompt credit of payments ahanna
dottiec Offline
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I just spoke with a gentlemean in Supervision at the Philadelphia Federal Reserve. He feels that a reasonable cut-off time for over-the-counter payments is 2:00 or later because Reg CC has already stated that is a reasonable time.

He felt as long as we gave written notice to our customers about the cut-off times we were fine with our current Reg CC practices. He did suggest mentioning in the notice that payments made after the cut-off time would accrue additional interest.

My OCC regulator still has not received an answer to my questions from her compliance experts.
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#1249967 - 09/14/09 08:49 PM Re: Prompt credit of payments dottiec
The OG Zaibatsu Offline
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Boy, I don't agree with that supervisor at the Philadelphia Federal Reserve. Cutoff times are used on the deposit side of the bank but not on the lending side of the bank. So in the deposit contracts, the bank contracts for the cutoff time for the receipt of deposits. In a note, I have never seen it contracted for that a payment must be received before 3 PM or at any specified time, but rather payments are to be made as of a specified day, which would mean "business day," unless otherwise specified.
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#1249988 - 09/14/09 09:09 PM Re: Prompt credit of payments The OG Zaibatsu
The OG Zaibatsu Offline
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226.36(c) Servicing practices . (1) In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall—
(i) Fail to credit a payment to the consumer's loan account as of the date of receipt
, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, or except as provided in paragraph (c)(2) of this section;
(ii) Impose on the consumer any late fee or delinquency charge in connection with a payment, when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period; or
(iii) Fail to provide, within a reasonable time after receiving a request from the consumer or any person acting on behalf of the consumer, an accurate statement of the total outstanding balance that would be required to satisfy the consumer's obligation in full as of a specified date.
(2) If a servicer specifies in writing requirements for the consumer to follow in making payments, but accepts a payment that does not conform to the requirements, the servicer shall credit the payment as of 5 days after receipt.
(3) For purposes of this paragraph (c), the terms “servicer” and “servicing” have the same meanings as provided in 24 CFR 3500.2(b), as amended.


Effective Date(s): October 1, 2009
22. In Supplement I to Part 226, a new Section 226.36—Prohibited Acts or Practices in Connection with Credit Secured by a Consumer's Principal Dwelling is added to read as follows:
Section 226.36—Prohibited Acts or Practices in Connection With Credit Secured by a Consumer's Principal Dwelling
1. Crediting of payments. Under §226.36(c)(1)(i), a mortgage servicer must credit a payment to a consumer's loan account as of the date of receipt. This does not require that a mortgage servicer post the payment to the consumer's loan account on a particular date; the servicer is only required to credit the payment as of the date of receipt. Accordingly, a servicer that receives a payment on or before its due date (or within any grace period), and does not enter the payment on its books or in its system until after the payment's due date (or expiration of any grace period), does not violate this rule as long as the entry does not result in the imposition of a late charge, additional interest, or similar penalty to the consumer, or in the reporting of negative information to a consumer reporting agency.
2. Payments to be credited. Payments should be credited based on the legal obligation between the creditor and consumer. The legal obligation is determined by applicable state or other law.
3. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor's check or other transfer medium, such as an electronic fund transfer.
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#1250137 - 09/15/09 01:12 PM Re: Prompt credit of payments The OG Zaibatsu
M Cockrell Offline
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Originally Posted By: _Zaibatsu_
226.36(c) Servicing practices . (1) In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall—
(i) Fail to credit a payment to the consumer's loan account as of the date of receipt
, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, or except as provided in paragraph (c)(2) of this section;...
(2) If a servicer specifies in writing requirements for the consumer to follow in making payments, but accepts a payment that does not conform to the requirements, the servicer shall credit the payment as of 5 days after receipt....

Effective Date(s): October 1, 2009
22. In Supplement I to Part 226, a new Section 226.36—Prohibited Acts or Practices in Connection with Credit Secured by a Consumer's Principal Dwelling is added to read as follows:
Section 226.36—Prohibited Acts or Practices in Connection With Credit Secured by a Consumer's Principal Dwelling
1. Crediting of payments. Under §226.36(c)(1)(i), a mortgage servicer must credit a payment to a consumer's loan account as of the date of receipt. This does not require that a mortgage servicer post the payment to the consumer's loan account on a particular date; the servicer is only required to credit the payment as of the date of receipt. Accordingly, a servicer that receives a payment on or before its due date (or within any grace period), and does not enter the payment on its books or in its system until after the payment's due date (or expiration of any grace period), does not violate this rule as long as the entry does not result in the imposition of a late charge, additional interest, or similar penalty to the consumer, or in the reporting of negative information to a consumer reporting agency.
2. Payments to be credited. Payments should be credited based on the legal obligation between the creditor and consumer. The legal obligation is determined by applicable state or other law.
3. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor's check or other transfer medium, such as an electronic fund transfer.

I'm so confused.

Is this basically saying:

Credit payments the day you receive them (regardless of "cut-off time"), unless you've stipulated in writing (via contract) how payments are to be made? And, even then, you can credit the payment "late" provided you don't charge interest, fees or report negative info to the CRA's??
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#1250147 - 09/15/09 01:35 PM Re: Prompt credit of payments M Cockrell
bls Offline
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Alabama
But if you continue with the Commentary, look at the commentary for Paragraph 36(c)(2):
1. Payment requirements. The servicer may specify reasonable requirements for making payments in writing, such as requiring that payments be accompanyied by the account number or payment coupon; setting a cut-off hour for payment to be received, or setting different hours for payment by mail and payments made in person; specifying that only checks or money orders should be sent by mail; specifying that payment is to be made in U.S. dollars; or specifying one particular address for receiving payments. So the commentary does discuss "setting a cut-off hour" for payment to be received.

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#1250151 - 09/15/09 01:38 PM Re: Prompt credit of payments bls
M Cockrell Offline
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Dallas, TX
So, unless "otherwise prohibited," it CAN be contracted for?







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#1250231 - 09/15/09 03:24 PM Re: Prompt credit of payments M Cockrell
ahanna Offline
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Texas
Based on the Regulation and Commentary, that is correct. But again, you come back to "...specify(ing) reasonable requirements."

When asked what a "reasonable" cutoff hour would be, the Fed has indicated to some sources that anything earlier than 4:00 is not reasonable.
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