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#2091697 - 08/04/16 08:28 PM Skip Pay Loan
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,470
It was brought up today about allowing borrowers to skip a payment in November or December on their consumer (non RE secured) loan. Mgmt wants to charge a fee to do so. I am in the Code today but can't seem if the Code allows such fee or limits the fee to certain dollar amount.

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#2091700 - 08/04/16 08:42 PM Re: Skip Pay Loan ahkcompliance
MScarn6942 Offline
Platinum Poster
Joined: Aug 2015
Posts: 756
Land Lacking in Lakes, IL
We're in Illinois and we charge a $20 fee per loan that they want to skip payments. We make sure that they pay the interest up to date when we do these extensions as well.
"Pressure is something you feel when you don't know what you're doing" - Peyton Manning

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#2091701 - 08/04/16 08:42 PM Re: Skip Pay Loan ahkcompliance
rlcarey Offline
10K Club
Joined: Jul 2001
Posts: 79,633
Galveston, TX
Check with your attorney, but I see nothing that authorizes a deferral fee unless it is a precomputed loan in paragraph a of this section and in 237.2503.

537.2502 Delinquency charges.

b. For an interest-bearing transaction, an amount not exceeding five percent of the unpaid
amount of the installment, or a maximum of fifteen dollars.
2. A delinquency charge under subsection 1 may be collected only once on an installment
however long it remains in default. No delinquency charge may be collected with respect
to a deferred installment unless the installment is not paid in full within ten days after its
deferred due date. A delinquency charge may be collected at the time it accrues or at any
time afterward.
The opinions expressed here should not be construed to be those of my employer:

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#2091716 - 08/04/16 09:16 PM Re: Skip Pay Loan ahkcompliance
ForceFull1 Offline
100 Club
Joined: Nov 2003
Posts: 245
smalltown Iowa
Ditto what Randy said. This is from the IBA's Iowa Banking Guide:
However, a “deferral or extension fee” it is not a permissible fee under the Iowa Consumer Credit Code, §537.2501 and thus should not be charged.

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#2091853 - 08/05/16 03:07 PM Re: Skip Pay Loan ahkcompliance
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,470
Thanks! I just looked found that guide and section this morning. I didn't think it was permissible but need to show where it states it.

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#2096420 - 08/31/16 07:53 PM Re: Skip Pay Loan ahkcompliance
Matt_B Offline
Diamond Poster
Joined: Sep 2011
Posts: 1,648
A CU, Where Regs Don't Apply
Take a look at 537.2503 for information on deferral fees.

We offer a similar program, similar time of year, with great success in generating fee income. This has been reviewed by examiners more than once, as well as external legal counsel. Don't add the fee to the loan, don't charge more than you're allowed to, get signatures with verbiage acknowledging that you're essentially modifying the loan, and be careful if you also allow extensions on your closed-end loans as too many skips could be considered "hiding delinquency", or that was the vague guidance we were given by our State exam team.
Someone's about to get horned!

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