Maybe this is just common sense, but I can't find a definition in Reg Z. Are they saying that the cutoff for the billing cycle, the end of the "courtesy period", is the last day before the late charge is imposed? Is that the courtesy period?

The CFPB Small Entity Compliance Guide for servicing says on page 20 that the “courtesy period” is the period in which you do not impose a late fee.

http://files.consumerfinance.gov/f/201306_cfpb_compliance-guide_2013-mortgage-servicing-rules.pdf

It should have been a defined term if it's used in the regulation. However, it's not. The statement in the Guide is about the best you're going to get.

I've been looking into this issue and saw that comment 2 of the OSC to 1026.41(b) refers the reader to comment 1 of the OSC to 1026.7(b)(11)for an explanation of "courtesy period."

"7(b)(11) Due Date; Late Payment Costs

1. Informal periods affecting late payments. Although the terms of the account agreement may provide that a card issuer may assess a late payment fee if a payment is not received by a certain date, the card issuer may have an informal policy or practice that delays the assessment of the late payment fee for payments received a brief period of time after the date upon which a card issuer has the contractual right to impose the fee. A card issuer must disclose the due date according to the legal obligation between the parties, and need not consider the end of an informal “courtesy period” as the due date under §1026.7(b)(11)."

This part of Reg. Z applies to periodic statements for open-end credit that are not secured by real estate.

I think the language in the CFPB's small entity guide is referring to what we normally call the "grace period." Mortgage payment due on the first of the month but late charge will be assessed if payment not received by the fifteenth of the month. The language I highlighted in red does not seem to say that.

The CFPB's sample statement had a billing cycle end date of 3/19/12 and the statement was dated 3/20/12 with a 4/1/12 payment due date. http://www.bankersonline.com/regs/12-1026/h30a.pdf

If the late charge would have been assessed on 3/16/12 in the previous billing cycle, is this why the CFPB's sample statement is dated 3/20/12?

Bump.

The Bureau deliberately made reference to the open-end credit concept of "courtesy period" because it was aware that some servicers won't impose a late fee immediately when the 10 or 15 day closed-end grace period is ended, but instead routinely allow a day or two's "courtesy" before levying the late fee. If your shop does that, the billing date needs to be keyed off the "courtesy" period. Otherwise, use the contractual grace period.

Thanks, John.

What is the timing requirement for the FIRST periodic statement? All I can see in the guide and in the regulation is that a periodic statement must be sent within a reasonably prompt time after the payment due date or the end of any courtesy period provided for the previous billing cycle.

There is no unique timing requirement for the first periodic statement. As you say, it must be provided within a reasonably prompt time after the payment due date or the end of any courtesy period provided for the previous billing cycle. So, once the loan closes, you have to go through a full billing cycle before the first statement is given (I.e. you don't give a statement at closing).

That just seems weird. It skips right over the first payment in the repayment schedule. That by design or by luck gives creditors/assignees/servicers leeway in issuing a bill for that first payment, since it won't have to conform to the strict layout or information requirements in 1026.41.

There is no restriction in Reg. Z to say you couldn't send one our earlier, but the technical requirement of the minimum you must do is as noted above. I've looked through the preamble etc., to the rule and didn't see anything that would contradict that. Let me know if you've come across anything more tangible.

I am confused doesn't this say the opposite? If you have an informal courtesy period (I took to mean, it is not contractual obligated upon the bank or borrower) you need NOT consider it?

"7(b)(11) Due Date; Late Payment Costs

1. Informal periods affecting late payments. Although the terms of the account agreement may provide that a card issuer may assess a late payment fee if a payment is not received by a certain date, the card issuer may have an informal policy or practice that delays the assessment of the late payment fee for payments received a brief period of time after the date upon which a card issuer has the contractual right to impose the fee. A card issuer must disclose the due date according to the legal obligation between the parties, and need not consider the end of an informal “courtesy period” as the due date under §1026.7(b)(11)."

Don't read comment 7(b)-11 for anything other than an illustration of what a courtesy period is. It is in informal "grace" period after the date on which you're legally entitled to impose a late charge, and you have opted to wait for those couple or few days before actually impose that fee. That is the date off which your billing statement is keyed.

I feel really stupid here, but I don't get it and we are being cited for it. Our contracts state- you due date is 10/1, if you don't pay by 10/11 you will be assessed a late fee of X. To me, that is a formal courtesy program. So is the statement date triggered off of 10/1 or 10/11?

That's a formal grace period. If you don't provide any leeway on that contractual late charge provision, you don't have a courtesy period, and you time your periodic billing statement off the late charge date (the 11th).

Courtesy is something you provide that's beyond what the law says you have to. Don't confuse its meaning here with your parents' laying down the law when you failed to show courtesy to someone who was due it.

Ok, thanks.