Skip to content
BOL Conferences
Thread Options
#1771886 - 01/03/13 02:37 PM Reg Z - When does interest begin?
COMPLIcated Offline
Diamond Poster
Joined: Mar 2003
Posts: 1,035
OK
For a Reg Z loan subject to Right of Rescission, when does interest begin - at consummation or at funding? Where can I find this answer in the regulation?

Return to Top
Lending Compliance
#1771898 - 01/03/13 02:47 PM Re: Reg Z - When does interest begin? COMPLIcated
Jerod Moyer Offline
Platinum Poster
Jerod Moyer
Joined: Oct 2005
Posts: 667
Sioux Falls, SD
It's your choice. The Commentary to ยง1026.23(c) #3 does not prevent the creditor from taking other steps during the delay, short of beginning actual performance. The creditor may:

1. Prepare the loan check.
2. Perfect the security interest.
3. Prepare to discount or assign the contract to a third party.
4. Accrue finance charges during the delay period.
Last edited by Jerod Moyer; 01/03/13 02:47 PM.
_________________________
Jerod Moyer
www.bankerscompliance.com

Return to Top
#1771905 - 01/03/13 02:59 PM Re: Reg Z - When does interest begin? COMPLIcated
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
4. Accrue finance charges during the delay period.

Before you begin accruing interest during the rescission period check your state law. IN does not allow interest accrual during the rescission period.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1771915 - 01/03/13 03:07 PM Re: Reg Z - When does interest begin? COMPLIcated
swiggles Offline
Power Poster
swiggles
Joined: Aug 2001
Posts: 7,351
I'm assuming Texas doesn't allow it either....'cause our legal counsel said not to do it.
_________________________
The more you sweat in training, the less you bleed in battle.......

Return to Top
#1771936 - 01/03/13 03:20 PM Re: Reg Z - When does interest begin? COMPLIcated
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Most definitely a state law issue. FWIW, last time I checked, GA didn't care...acrue on old loan, new loan or both during rescission period.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1771947 - 01/03/13 03:31 PM Re: Reg Z - When does interest begin? COMPLIcated
COMPLIcated Offline
Diamond Poster
Joined: Mar 2003
Posts: 1,035
OK
I'm checking on OK state law to see.

Return to Top
#1772363 - 01/04/13 01:23 AM Re: Reg Z - When does interest begin? COMPLIcated
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
And don't forget UDAAP and your ethics policy. For banks in states that don't prohibit the practice, the question is not "can I?" but rather "should I?".
_________________________
...gone fishing.

Return to Top
#1772380 - 01/04/13 01:45 PM Re: Reg Z - When does interest begin? COMPLIcated
waldensouth Offline
Power Poster
waldensouth
Joined: Nov 2001
Posts: 7,983
FINALLY ABOVE the gnat line
Your loan system may prevent it as well. We converted to a different loan origination system because Rembrandt went away 12-31-12. New system won't calculate during the rescission period. Won't let us do interest only -floating daily with prime construction loans. Love these little surprises - NOT!
_________________________
"Once you learn to read, you will be forever free."

- Frederick Douglass




My Opinion Only.

Return to Top
#1772393 - 01/04/13 02:00 PM Re: Reg Z - When does interest begin? COMPLIcated
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
My preferred method is to calculate on old loan through rescission then start new loan (FWIW). I've seen it done both ways...I've not heard of anyone around here doing both (agree on the ethics issue).
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1800666 - 04/02/13 08:21 PM Re: Reg Z - When does interest begin? COMPLIcated
Rdy2Retire Offline
100 Club
Joined: Dec 2004
Posts: 117
GA Mountains
For those of you whose state won't allow you to charge interest during the rescission period, and you have the borrower sign the ROR that they have not rescinded, which date do you use to book the loan by? The next business date after the rescission period ends (which is the date listed in the note and the date used to calculate the APR) or the date that the borrower signs that they have not rescinded if it is a date later than the 4th business day?

Return to Top
#1800790 - 04/03/13 01:20 PM Re: Reg Z - When does interest begin? COMPLIcated
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
What does your state law allow? Ours allow us to begin accruing interest the first calendar day immediately after the right to rescind expires. As a matter of policy we do not begin the accrual until the first business day after the right to rescind expires.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1800896 - 04/03/13 03:51 PM Re: Reg Z - When does interest begin? COMPLIcated
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
I never understood these games. Why not just start charging the borrower when you disburse the funds, like on any other loan?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1800949 - 04/03/13 04:56 PM Re: Reg Z - When does interest begin? COMPLIcated
Rdy2Retire Offline
100 Club
Joined: Dec 2004
Posts: 117
GA Mountains
We are located in 3 states and while GA does allow and we do charge interest during the rescission period, NC and TN do not.

Dan, do you require the borrower to sign stating they have not rescinded?

Randy, honestly, we are not playing games. We are just trying to be fair to both the borrower and the bank. For instance, if a borrower fails to come in to sign that they have not rescinded until day 8, that's not the bank's fault and don't think that we should be penalized in not being able to charge interest when our contract states we can.

What do you see in your consulting? Do most banks have the borrower sign that they have not rescinded? If we forego this requirement there would be no issue with which date to begin charging interest. We rarely have anyone rescind.

Thanks to both of you for responding! Sometimes I think my questions must be really dumb because no one responds right away.

Return to Top
#1800953 - 04/03/13 05:03 PM Re: Reg Z - When does interest begin? COMPLIcated
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Dan, do you require the borrower to sign stating they have not rescinded?

We haven't required that for years.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#1801006 - 04/03/13 06:05 PM Re: Reg Z - When does interest begin? COMPLIcated
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
Do most banks have the borrower sign that they have not rescinded?

No. That creates all sorts of problems, like loan officers getting the form pre-signed so the customer doesn't have to come back in.

Whether state law addresses this or not, charging a customer interest on a loan unless your loan agreement is very-very clear that interest is going to begin on a certain date whether funds are disbursed or not, is going to be fodder for a UDAAP citation from the regulators.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top

Moderator:  Andy_Z