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#2086488 - 07/01/16 08:04 PM Re: Collecting Late Charges terpsfan
terpsfan Offline
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Our contract does not address partial payments but I would still think that if it is considered UDAP you cannot contract for it. So if the contract said that partial payments would be applied to late charges first without effecting the monthly amount due and not effect the due date it would not be a UDAP issue?

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#2086511 - 07/02/16 12:14 PM Re: Collecting Late Charges terpsfan
rlcarey Online
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rlcarey
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Galveston, TX
If it was, Fannie and Freddy would have had issues years go.
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#2086523 - 07/05/16 12:25 PM Re: Collecting Late Charges terpsfan
terpsfan Offline
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I guess I have been looking at it too conservative. I thought that since two partial payment could equal a full payment and if all some of it was used for late charges it could cause more late charges and be a UDAP issue. I am glad that is not the case.

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#2290718 - 11/14/23 08:01 PM Re: Collecting Late Charges terpsfan
mbl4250 Offline
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Joined: Dec 2020
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I have a scenario I would like to run by someone. Our loan note states the following: If a payment is more than 10 days late, you will be charged 10% of the late amount with a minimum of $15.00

If a customer were to use the loan payment portal system that we have, it states that payments made after 5:00pm Eastern Standard Time or on a non-business day will be posted the next business day.

Based on the wording between the Note and what is located on our loan payment portal do we have a UDAAP issue and need to correct the wording on either the note or the cutoff time?

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#2290733 - 11/15/23 08:48 AM Re: Collecting Late Charges terpsfan
rlcarey Online
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rlcarey
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Galveston, TX
What type of loan. Read 1026.36(c) for mortgages. Do you otherwise define a conforming payment?
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#2290740 - 11/15/23 02:20 PM Re: Collecting Late Charges terpsfan
mbl4250 Offline
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sorry i should have stated that, its actually consumer loans (car, RV, Boats)

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#2290743 - 11/15/23 02:56 PM Re: Collecting Late Charges terpsfan
rlcarey Online
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rlcarey
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Galveston, TX
Then I think if your payment platform clearly disclosed those facts, it would be hard to see a UDAAP.
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#2290746 - 11/15/23 03:22 PM Re: Collecting Late Charges terpsfan
Inherent_Risk Offline
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Ye of little faith. Watch out for the CFPBs new guidance that incorporates Reg Z mortgage servicing requirements into UDAAP.

In all seriousness though, I would be pretty unhappy if I made my payment after work on day 10 and you charged me a late fee. You could say it was avoidable, but if you don't get the disclosure that "payments made after 5:00pm" don't count until the next day until after 5 pm on the last day, and your legal obligation doesn't mention it, then I could definitely see a zealous regulator calling that unfair or deceptive. If someone complains to your regulator, at the least you have an annoying complaint that's going to go through the UDAAP dance. If there are system limitations that would make it expensive or manual to not charge the fee, then the risk isn't that high, but payment processor should have a solution for this on the mortgage side, and I would rather just not charge that late fee, then deal with an unhappy customer or regulator.

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#2290748 - 11/15/23 03:45 PM Re: Collecting Late Charges Inherent_Risk
InFairness, CRCM Offline
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InFairness, CRCM
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USA
Originally Posted by Inherent_Risk
Ye of little faith. Watch out for the CFPBs new guidance that incorporates Reg Z mortgage servicing requirements into UDAAP.

In all seriousness though, I would be pretty unhappy if I made my payment after work on day 10 and you charged me a late fee. You could say it was avoidable, but if you don't get the disclosure that "payments made after 5:00pm" don't count until the next day until after 5 pm on the last day, and your legal obligation doesn't mention it, then I could definitely see a zealous regulator calling that unfair or deceptive. If someone complains to your regulator, at the least you have an annoying complaint that's going to go through the UDAAP dance. If there are system limitations that would make it expensive or manual to not charge the fee, then the risk isn't that high, but payment processor should have a solution for this on the mortgage side, and I would rather just not charge that late fee, then deal with an unhappy customer or regulator.


I'm with Inherent_Risk on this one and can easily see a UDAAP allegation.
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#2290755 - 11/15/23 05:19 PM Re: Collecting Late Charges terpsfan
John_Burnett Offline
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John_Burnett
Joined: Feb 2013
Posts: 283
Cape Cod
I'm sorry folks, but sometimes we can see the UDAAP bogeyman behind every tree. These aren't mortgage loans and the loan agreement clearly explains that a payment made more than 10 days past due will result in a late fee. And the payment portal in the discussion does say that payments made after 5 p.m. ET will be credited on the next business day.

The bank might consider extending the 5 p.m. cutoff to a little later if it can accommodate payments coming in at 6 or 7 in the evening, but I don't see 5 p.m. as unreasonable in most cases.
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#2290794 - 11/16/23 02:54 PM Re: Collecting Late Charges terpsfan
Inherent_Risk Offline
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Posts: 570
My understanding from examiners is that the UDAAP bogeyman is in fact behind every tree right now. I would agree this isn't UDAAP, but how sure can you be your examiner will do so if a customer complains to them, and this is the sort of thing a customer would complain about. I wouldn't move mountains to fix this, but if you can flip a switch with your payment processor to not charge late fees in this situation, I don't know why you wouldn't.

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#2290806 - 11/16/23 04:18 PM Re: Collecting Late Charges terpsfan
rainman Offline
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rainman
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If you waive the late fee, are you going to change the notice on the website to say "credited on the next business day. However, if the calendar day on which the payment is received is the last day to pay without a late charge, the late charge will be waived if the payment is made before midnight <<time zone reference>>." ?

Otherwise your website is telling borrowers something different than what you're actually doing, which has been the subject of exam findings.
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