The over advance is not reportable as it is essentially an internal policy of convenience. Rather it is an unspoken guidance line of credit, and those are not reportable unless a draw has been underwritten and an agreement drafted in the form of a promissory note. In order for an origination to occur there needs to be a legally binding change of agreement in terms. As such an amended promissory note, or a change in terms agreement would be a legal agreement between the two parties stating that the RLOC would have an extension of date or an increase in the approved overall draw limit of the loan. As such, your bank allows for over advances as a standard of operations for the purpose of customer service. Unless in the promissory note it states that such a convenience is allotted to the customer then it would be reported as a retail service.
Schedule RC–C, Part I. §ll.42(a)—5: Should institutions collect and report data about small business and small farm loans that are refinanced or renewed?
A5. An institution should collect information about small business and small farm loans that it refinances or renews as loan originations. (A refinancing generally occurs when the existing loan obligation or note is satisfied and a new note is written, while a renewal refers to an extension of the term of a loan. However, for purposes of small business and small farm CRA data collection and reporting, it is not necessary to distinguish between the two.) When reporting small business and small farm data, however, an institution may only report one origination (including a renewal or refinancing treated as an origination) per loan per year, unless an increase in the loan amount is granted. However, a demand loan that is merely reviewed annually is not reported as a renewal because the term of the loan has not been extended.
If an institution increases the amount of a small business or small farm loan when it extends the term of the loan, it should always report the amount of the increase as a small business or small farm loan origination. The institution should report only the amount of the increase if the original or remaining amount of the loan has already been reported one time that year. For example, a financial institution makes a term loan for $25,000; principal payments have resulted in a present outstanding balance of $15,000. In the next year, the customer requests an additional $5,000, which is approved, and a new note is written for $20,000. In this example, the institution should report both the $5,000 increase and the renewal or refinancing of the $15,000 as originations for that year. These two originations may be reported together as a single origination of $20,000.
Previous Thread
Index