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#2252262 - 04/12/21 09:45 PM Late Fee
Anonymous
Unregistered

I understand pyramiding from the federal regulation perspective, but I cannot wrap my head around the state laws that state: "No such delinquency charge may be collected on an installment or other regular payment that is paid in full within ten days after its scheduled due date even though an earlier maturing installment, other payment, or delinquency charge on an earlier installment or other payment may not have been paid in full. For purposes of determining delinquency, payments are deemed to be applied first to current installments or other payments due and then to delinquent installments or other payments and then to delinquent and other charges."

Can someone break this down for me?

If the payment goes over 30 days past due, is it considered to be current for the next months payments? Example (assume 30 day months):
#1

Due date is 10/25/2020
Late fee on 11/05/2020

Payment on 11/30/2020

Due date is now 11/25/2020
Late fee on 12/05/2020

Payment on 12/11/2020

Due date is now 12/25/2020
Late fee on 1/5/2021

#2

Due date is 10/25/2020
Late fee on 11/05/2020

Payment on 11/24/2020

Due date is now 11/25/2020
Late fee on 12/05/2020

Payment on 12/24/2020

Due date is now 12/25/2020
Late fee on 1/24/2021

#3
Due date is 10/25/2020
Late fee on 11/05/2020

Payment on 11/15/2020

Due date is now 11/25/2020
Late fee on 12/05/2020

Payment on 12/15/2020

Due date is now 12/25/2020
Late fee on 1/15/2021

#4

Due date is 10/25/2020
Late fee on 11/05/2020

Payment on 11/30/2020

Due date is now 11/25/2020

Payment on 12/5/2020

Due date is now 12/25/2020
Late fee on 1/15/2021

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#2252271 - 04/13/21 12:13 PM Re: Late Fee Anonymous
Anonymous
Unregistered

The state law is saying the same thing. You can't pyramid late fees.

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#2252283 - 04/13/21 02:58 PM Re: Late Fee Anonymous
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,232
Bloomington, IN
Keep in mind my comments are based on IN law.

Payment due 1/1/21 and as of 1/11/21 no payment received and a late charge is assessed.

Payment due 2/1/21 and as of 2/11/21 no payment received and a late charge is assessed.

Payment due 3/1/21 and a payment is received on 3/10/21. The 3/1/21 payment is paid within 10 days of the due date therefore it is not past due and a late charge cannot be assessed for the 3/1/21 payment. The 1/1/21 & 2/1/21 payments are still past due but late charges have already been assessed for those past due payments.
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#2252290 - 04/13/21 03:49 PM Re: Late Fee Anonymous
Anonymous
Unregistered

Thanks Dan.

What if the payment was on 2/27 instead of 3/10?

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#2252294 - 04/13/21 03:56 PM Re: Late Fee Anonymous
Dan Persfull Offline
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Dan Persfull
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Posts: 46,232
Bloomington, IN
that is paid in full within ten days after its scheduled due date

I would say that payment would be applied to the 2/1/21 payment and if a another payment was not received within 10 days after the 3/1/21 payment became due then a late charge could be assessed for the 3/1/21 payment.
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#2252304 - 04/13/21 05:06 PM Re: Late Fee Anonymous
rainman Offline
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rainman
Joined: Nov 2004
Posts: 2,984
But that ignores this part of the statute quoted above: "For purposes of determining delinquency, payments are deemed to be applied first to current installments or other payments due and then to delinquent installments or other payments and then to delinquent and other charges."

The statute creates a situation where the data processing system has to track the payments in two different ways:

1) for purposes of the statute, a payment received within 10 days after the 3/1/21 due date would prevent a late fee from being imposed on the 3/1/21 payment even if payments for January and February remain unpaid(!).

2) for purposes of the contractual default, credit reporting, etc. if payments for 1/21 and 2/21 are still unpaid at the time a payment is made in 3/21, the payment amount is applied to the 1/21 payment, and the loan is now due for 2/21 and 3/21. A late fee was imposed for 1/21 and 2/21 but not for 3/21 (due to the statutory requirement).

Also, note that we are only working with the language quoted above - the statute (or a regulation or court cases) may add other context to help interpret it.
Last edited by rainman; 04/13/21 05:08 PM.
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#2252309 - 04/13/21 05:26 PM Re: Late Fee Anonymous
Rocky P Online
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Joined: Jun 2003
Posts: 7,099
Florida
I thought the pyramiding referred to taking the late charges out, creating a full payment default, even if the amount was complete. For example a $100 payment comes in late. Following month, customer sends in $100., but the bank takes out the $5 late charge, and credits the customer $95. Since it’s not a full payment, the bank claims late, and tacks on another $5 late fee, even though the full amount was paid, and within the grace period. Systems would need different buckets to reflect unpaid late charges, payable

It’s been a long time but that’s what my impression was.
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#2252313 - 04/13/21 06:07 PM Re: Late Fee Anonymous
rainman Offline
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That is correct for the federal anti-pyramiding rules. This goes further than that.
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#2252326 - 04/13/21 08:47 PM Re: Late Fee Anonymous
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,232
Bloomington, IN
But that ignores this part of the statute quoted above: "For purposes of determining delinquency, payments are deemed to be applied first to current installments or other payments due and then to delinquent installments or other payments and then to delinquent and other charges."

How is my comment ignoring that. The 3/1/ payment is not due yet, unless you are saying I should have referred to the Jan payment instead of the Feb payment.
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#2252332 - 04/13/21 10:11 PM Re: Late Fee Anonymous
rainman Offline
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rainman
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Let me first say that I have no idea what state Anonymous was referring to. If it's Indiana law, then I'm sure you have a better understanding of how it is interpreted and applied than I do. I am responding solely to the language quoted in the original post (and like a lot of laws, it could certainly be drafted better): "For purposes of determining delinquency, payments are deemed to be applied first to current installments or other payments due and then to delinquent installments or other payments and then to delinquent and other charges."

There's no definition of what is a "current installment" but when I read the paragraph as a whole it seems to be saying that once the February payment is more than ten days past due, it is delinquent and a late fee can be assessed. If the borrower makes a payment after that (i.e. February 27) it has to be applied to the "current installment" which is now the one due in March; thus no late fee can be imposed for March.

I think the "within 10 days after its scheduled due date" language refers to the deadline for the payment to avoid a late fee, rather than saying a payment is only applied to the current installment if it is made after the due date, but if paid before the due date can be applied to prior delinquent installments and another late fee can then be applied to the current installment.

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#2252339 - 04/14/21 12:31 PM Re: Late Fee Anonymous
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,232
Bloomington, IN
current installments or other payments due

I guess it is a matter of interpretation. The current installment due is the 2/1 installment. How can the 3/1 installment be the current installment or other payment due if it's only 2/27? The 3/1 installment is not yet due.
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#2252352 - 04/14/21 03:07 PM Re: Late Fee Anonymous
rainman Offline
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Posts: 2,984
I agree that's a plausible interpretation. It's just that it creates an odd rule in which the borrower in this situation who has the money to make the payment on 2/27 avoids another late fee only by waiting a few days before making the payment.
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