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#1610012 - 09/28/11 05:55 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." travelgirl
Laketime Offline
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Joined: Aug 2002
Posts: 554
Originally Posted By: travelgirl
On another note, I sent an email to the ABA with some questions and I have been told that the 45-day notice is required whenever there is a change to the index even if the customer's rate is not changing because they are sitting at the floor. In one of the posts I read the notice was only required if the rate changed above the floor. I don't think that is the case. Based on what the ABA says, a notice is required whenever the index changes.


Was this ever resolved? In other words, do we need to send the notice if the index changes, but the rate is still at the floor?

I know there is no such thing as a dumb question.... but, .....must all existing customers (with covered lines, etc.) be notified of the 45-day rate change rules? In other words, is it a true statement that your existing accounts are NOT grandfathered in and changes will likely have to be made and communicated to them?

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Lending Compliance
#1611567 - 10/03/11 01:21 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Laketime
Laketime Offline
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Joined: Aug 2002
Posts: 554
Bump.

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#1612797 - 10/05/11 05:44 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Tesla
Ann Offline
Platinum Poster
Joined: Jul 2001
Posts: 556
South Carolina
Originally Posted By: SkiDoo
In plain English, what product is this section of the commentary referring to:

However, if the account number can also access the line of credit to purchase goods or services (such as an account number that can be used to purchase goods or services on the Internet), the account number is a credit card for purposes of 226.2(a)(15)(i), regardless of whether the creditor treats such transactions as purchases, cash advances, or some other type of transaction.

Are they trying to say if you have a personal LOC that can be accessed with checks it is a credit card for these purposes? On the other hand, if you draw on a PLOC and it dumps the money into your personal checking account it is NOT a credit card- is that what they are trying to get at?


To get back to SkiDoos question, I have also been trying to understand this language. I don't think it means the typical Overdraft LOC that is linked to checking accounts and transfers money when the account is overdrawn due to purchases, etc.,this is excluded in 2(a)(15)(ii)(B); however, what does it mean? Can someone give a better example than the regulation did?

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#1613163 - 10/06/11 01:51 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Ann
travelgirl Offline
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Joined: Mar 2004
Posts: 223
Minnesota
I know I have PLOC's that apply to this rule. I am running into a problem with my core software provider. 1) I am being told they don't have a code to delay a rate change for 45 days after the index changes (some of the current choices include daily, monthly, quarterly). I am told they are looking into it. 2) this is my biggest worry - the code controls both increases and decreases - meaning both have to change on the same scheduled i.e. daily, monthly, in 45 days (once they come up with a code for that). Since the law doesn't require a delay for decreases, my note contract doesn't allow language to delay a decrease either - the forms vendor indicated they are making no changes (I realize if I decide to delay decreases too I will have to tell my current clients and figure out a way to change my contract language going forward). The bottom line is it doesn't appear my system will allow for a rate increase in 45 days and a rate decrease on the same day - the time periods have to match. any sugggestions? I hope I am making sense.

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#1613166 - 10/06/11 01:54 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." travelgirl
Tesla Offline
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Joined: Nov 2003
Posts: 3,689
Travelgirl - our vendor is not providing a solution for this either. They said there just aren't enough banks demanding it, so we had to go to a manual process. When the rate changes we manually create the notice, diary out 45 days to change the rate. It is a pain in the butt, but what can you do?
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#1613254 - 10/06/11 03:28 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Tesla
Laketime Offline
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Joined: Aug 2002
Posts: 554
TravelGirl and SkiDoo,

Who are your core vendors? We are a ITI/Fiserv shop.

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#1613285 - 10/06/11 04:07 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Laketime
travelgirl Offline
100 Club
Joined: Mar 2004
Posts: 223
Minnesota
We are ITI/FiServ - my Loan Ops manager has been in touch with them and they have indicated they do not have a 45-day choice for the "Rate Change Frequency" code. Another peer uses them too and they told her the same thing and that this was "news" to them. YIKES!

Our forms vendor is Wolters Kluwer - we use ARTA Lending

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#1613348 - 10/06/11 05:28 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." travelgirl
Tesla Offline
Power Poster
Joined: Nov 2003
Posts: 3,689
Same as Travelgirl - got the same response from FiServ.
_________________________
It's not that I take life for granted. It's only that the good won't make it. Innocence dies, while Villany Thrives.

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#1613578 - 10/06/11 09:40 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Laketime
EmilyAnn Offline
Gold Star
Joined: Jul 2007
Posts: 273
Quote:
On another note, I sent an email to the ABA with some questions and I have been told that the 45-day notice is required whenever there is a change to the index even if the customer's rate is not changing because they are sitting at the floor. In one of the posts I read the notice was only required if the rate changed above the floor. I don't think that is the case. Based on what the ABA says, a notice is required whenever the index changes.


Bumping this question again - Was this ever resolved? Does anyone know if CIT notices need to be send if the index changes, but the rate is still at the floor?

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#1613600 - 10/06/11 10:20 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." EmilyAnn
travelgirl Offline
100 Club
Joined: Mar 2004
Posts: 223
Minnesota
I asked this question directly to Nessa Feddis at the ABA via email and her response was that it's not a matter of if the floor comes into play when there is a change in the index, it's a matter that the floor exists - so you need to give the CIT notice even if the rate is really not changing because there is a floor.

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#1613606 - 10/06/11 10:42 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." travelgirl
Many Hats Offline
Platinum Poster
Joined: May 2008
Posts: 915
Orlando, FL
But that doesn't make sense....why would you give a CIT if nothing is changing?

FIS Regulatory Services contacted the Fed's and they indicated that it was only req'd if the rate changes above the floor rate.

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#1613815 - 10/07/11 04:25 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Many Hats
EmilyAnn Offline
Gold Star
Joined: Jul 2007
Posts: 273
I agree that it doesn't make any sense. There is no "term" that is changing. The borrower's rate isn't increasing, the index itself hasn't changed, etc. If anything, it teaches the borrower to ignore Change in Terms notices because if it sits on the floor for a long time and nothing ever changes but they get these CIT notices, why pay attention to them?

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#1613816 - 10/07/11 04:26 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Many Hats
travelgirl Offline
100 Club
Joined: Mar 2004
Posts: 223
Minnesota
It doesn't make much sense to me either but I also spoke to our local FDIC examiner and he agreed - CIT is needed.

Any of the moderator's want to weigh in? If there were a way out (short of removing the floors from these loans which we won't do because rates are so low we'd be cutting our interest income too much) I'd do it.

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#1614235 - 10/10/11 06:21 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." travelgirl
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,470
Midwest
Afer reading this post, I am glad we have fixed rate open ends lines of credit.

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#1614456 - 10/11/11 07:10 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." ahkcompliance
Indy Banker Offline
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Joined: Aug 2010
Posts: 528
Our bank has floors on our Prime-based LOC's. We have decided that we're going to remove our floors, but we're going to sit tight and wait until it looks like an increase in Prime is inevitable or at least within the foreseeable future. It may be a little risky, as sometimes rate increases can come unexpectedly, but management feels there is no good reason to take the floors off now and cut our interest income, as most everyone is in agreement that no rate increases are forecast until late 2012 at the earliest.

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#1615067 - 10/13/11 02:28 AM Re: Oct 1 - "Clarifications of Rules for Open-End..." Indy Banker
Bville Offline
Diamond Poster
Bville
Joined: May 2001
Posts: 1,282
Out West
Since we have floors on our variable rate LOCs I realize we have to send 45 day notices prior to rate changes. Do we also need to send a change in terms notice to all current customers saying rates will change 45 days following a change in the index rather than next day?

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#1616618 - 10/17/11 09:39 PM Re: Oct 1 - "Clarifications of Rules for Open-End..." Bville
Laketime Offline
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Joined: Aug 2002
Posts: 554
We are sending the change in terms notice to LOC customers that have an agreement that states changes to the index will be next day. We need to clarify it will now be 45-days after the change to the index rate. Can't wait until WSJP starts changing every couple of weeks. Who can spell c-o-n-f-u-s-i-n-g to the customer? smile
Also, with employees DDA/LOCs we are sending a change in terms since their current LOC agreement indicates their preferred rate will increase as soon as they are no longer employed by the Bank. The change in terms for this group will be that in the event they are no longer employed at the bank, their preferred rate will increase 45-days after they leave the employment of the bank, not the next day.

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