What is the solution if you exceed the tolerance on apr?

Thanks

You'll have to be a bit more specific:
- open-end or closed-end?
- overstated or understated?
- advertising quote?
- early estimates?
- other pre-closing quotation?
- disclosures at consummation?
- post-closing (closed-end only)?
- periodic statements (open-end only)?

CLOSED-END, CONSUMER AUTO LOAN OVERSTATED.

If you discovered the error before the loan closed, you can (and should) always give a revised disclosure at or before closing.

After the loan closes, errors become violations and you are exposed to civil liability (Section 130(a) of the TIL Act.) Section 130(b) provides a "cure" procedure which will eliminate the civil liability. When the violation involves understatement of the FC or APR, the "cure" necessitates reimbursement. Since yours is an overstatement, you would simply send a letter explaining that there was an inadvertent error and providing the correct (lower) APR. Keep a copy of the letter in case your regulator picks this loan for review.

After you get right with this customer, turn your attention to correcting the cause for the error.

What if the loan was refinanced and this is when we noticed the APR was overstated. The overstated loan was put into a new loan with new money. So the overstated loan is now paid off.

Thanks

If you treated the new loan as a "refinancing" and provided all new disclosures (and they were accurate), I wouldn't do anything else. Even if you handled the new transaction in a manner that didn't require new disclosures, there's a one-year statute of limitations for consumer-initiated lawsuits.