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#1509737 - 02/14/11 04:29 PM Discounted rate if payments automatically deducted
jlroberts Offline
Diamond Poster
jlroberts
Joined: Sep 2009
Posts: 1,579
Ohio
Is anyone doing this? If so does it require special disclosures, notes, note addendums, etc..
Also what happens if they cancel the automatic payment. Do you have the right to increase the rate?

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#1509759 - 02/14/11 04:42 PM Re: Discounted rate if payments automatically deducted jlroberts
ItsJustMe Offline
Gold Star
Joined: Dec 2009
Posts: 292
New York
jl...we offer a .20% discount off the APR if payments are automatically deducted. This is an example of what we disclose:

The Annual Percentage Rate (APR) on this Note may be decreased by 0.20%, if the payments are automatically transferred from
my account. This reduction does not affect my monthly payment. If I default or discontinue the automatic transfer, I will no longer be eligible for the 0.20% reduction and my APR will revert to that which is shown on the face of this Note. The decrease/increase of the APR will take the form of fewer or more payments of the same amount.

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#1509772 - 02/14/11 04:57 PM Re: Discounted rate if payments automatically deducted ItsJustMe
jlroberts Offline
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jlroberts
Joined: Sep 2009
Posts: 1,579
Ohio
Do you type that clause on the ARM Note and Disclosure?

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#1509777 - 02/14/11 05:01 PM Re: Discounted rate if payments automatically deducted ItsJustMe
dsaj Offline
Junior Member
Joined: Feb 2008
Posts: 27
Pennsylvania
We offer draft discounts and also have the disclosure about the rate increasing if the draft is stopped.

However, fixed rate home equity loans that opt for the discount and the subsequent increase if it's stopped will now be considered variable rate under the new TIL requirements. Our origination vendor didn't take this situation into consideration and we're still waiting on a fix; you may want to make sure this isn't a problem for you.

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#1509882 - 02/14/11 07:23 PM Re: Discounted rate if payments automatically deducted jlroberts
ItsJustMe Offline
Gold Star
Joined: Dec 2009
Posts: 292
New York
Originally Posted By: jlroberts
Do you type that clause on the ARM Note and Disclosure?


No, jl...we have it pre-printed on our forms. But now I have to look into the previous post's comment re: HEs and increasing the APR if the customer fails to make auto payments... is there a citation you can provide to help speed up my research? Thanks!

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#1509909 - 02/14/11 07:55 PM Re: Discounted rate if payments automatically deducted ItsJustMe
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,954
Bloomington, IN
Quote:
However, fixed rate home equity loans that opt for the discount and the subsequent increase if it's stopped will now be considered variable rate under the new TIL requirements.


These are "preferred rate loans" and they have always been considered variable rate loans under TIL. See the Commentary to 226.19(b)(5).
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1509990 - 02/14/11 09:04 PM Re: Discounted rate if payments automatically deducted Dan Persfull
ItsJustMe Offline
Gold Star
Joined: Dec 2009
Posts: 292
New York
Yikes, Dan! We never looked at it that way and neither did our attorneys or examiners. I'll get right on this so that we can fix it. Thanks again :-)

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