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#2124335 - 03/30/17 02:00 PM Payoff Funds
opsbanker1 Offline
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Joined: Mar 2017
Posts: 1
Not sure if this is the right spot for this topic. At several different institutions I have worked at, we have always had a "payoff threshold". That is if the payoff funds were short by $9.99 or less we would payoff the loan and discharge. On the other hand, if the funds were over by $9.99 or less, we wouldn't refund the surplus.

In the past (20 years ago) we had a threshold of $5. The logic behind that number was the cost of producing a check was $5.

Is there any regulation out there regarding this? Does this fall under best practices or bank policy?

Thanks for your help. Does anyone else have a threshold on payoff funds?

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#2124447 - 03/30/17 06:41 PM Re: Payoff Funds opsbanker1
Skittles Offline
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Skittles
Joined: Sep 2002
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TN
Since no one has responded I will; however without citing any regulatory references. I would be very concerned about keeping up to $9.99 from a customer that isn't owed due to UDAAP issues. In a prior life our limit was $1 - and even in this day and age that could be an iffy practice. The cost of producing a check does not come into play here - it's a cost of doing business. This reminds me of the bank that was fined for keeping up to $25.00 of funds deposited if the depositor didn't complete the deposit slip correctly.

Just my 2 cents.
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#2124525 - 03/31/17 03:09 AM Re: Payoff Funds opsbanker1
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Welcome to BOL Forums, opsbanker1.

I suggest you read section 1026.21 of Regulation Z, found here: https://www.bankersonline.com/regulations/12-1026-021

It's only a few short paragraphs, and it applies to closed-end credit, including mortgage loans. There is a parallel requirement for open-end credit at 1026.11: https://www.bankersonline.com/regulations/12-1026-011

You may have gotten away with things for a long time -- The rules are clear, and $1 is the limit for overpayments.
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