We are looking at setting up a new consumer loan product. Can we REQUIRE that the payments be made via automatic transfer? Not necessarily from our bank, but they must be set up as auto-pay each month.

1005.10(e) Compulsory use. (1) Credit. No financial institution or other person may condition an extension of credit to a consumer on the consumer's repayment by preauthorized electronic fund transfers, except for credit extended under an overdraft credit plan or extended to maintain a specified minimum balance in the consumer's account.



Effective April 1, 2018, paragraph (e)(1) is amended to read:
(e) Compulsory use—(1) Credit. No financial institution or other person may condition an extension of credit to a consumer on the consumer’s repayment by preauthorized electronic fund transfers, except for credit extended under an overdraft credit plan or extended to maintain a specified minimum balance in the consumer’s account. This exception does not apply to a covered separate credit feature accessible by a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61.

Thank you very much for pointing that out!

The way you can do it without getting in trouble is offering a discount for those that chose to pay by ACH ect.

Thank you. That is what we do with our current loan products.

RockChucker - is just having a question on your application enough of a choice? For example, our application says, "If you would like a xx% discount on your loan rate and you have an account with XYZ Bank - please check here."

I feel like that is not enough, but it sounds like it might be.

"If you would like a xx% discount on your loan rate and you have an account with XYZ Bank - please check here."

Boy, I hope there is more to setting up automatic payments than that. That just says I need an account. Nothing about needing to have auto payment set up.