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#2263302 - 12/07/21 10:22 PM non-refundable processing fee
dutchbltz Offline
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Posts: 207
Are there any issues/concerns around charging a 'processing fee' upfront on a consumer auto loan request? More particularly if that fee is not refundable; but I'm interested in any concerns surrounding that that I should perhaps consider.

This fee is listed on our rate sheet; but does not specify if it's refundable or not; nor when it will be paid.

Thoughts?

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Lending Compliance
#2263306 - 12/08/21 11:50 AM Re: non-refundable processing fee dutchbltz
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
If by rate sheet you mean something that ends up in the hands of a consumer - get ready for a lookback and refund of any fees collected that were not refunded if the loan did not close.
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#2263315 - 12/08/21 02:11 PM Re: non-refundable processing fee rlcarey
dutchbltz Offline
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Posts: 207
Are there any citations to support this? This doesn't sit right with me but I can't lay my finger on where it says we can't.

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#2263317 - 12/08/21 02:25 PM Re: non-refundable processing fee dutchbltz
rlcarey Online
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rlcarey
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Posts: 83,227
Galveston, TX
Try UDAAP - false and unclear advertising.
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#2263324 - 12/08/21 03:03 PM Re: non-refundable processing fee dutchbltz
dutchbltz Offline
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Joined: Oct 2015
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What if the rate sheet did not end up in the customers' hands? (I don't know if it did or didn't.)

One of my concerns is that the fee is not applied consistently. It feels like a Fair Lending concern to me. But I also feel like there are probably other concerns - for example, if it's charged up front, shouldn't it be an application fee not a processing fee?

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#2263325 - 12/08/21 03:23 PM Re: non-refundable processing fee dutchbltz
Skittles Online
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Skittles
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Posts: 13,965
TN
If it's not applied consistently then you definitely have fair lending concerns.
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#2263364 - 12/08/21 07:41 PM Re: non-refundable processing fee dutchbltz
Rocky P Offline
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Joined: Jun 2003
Posts: 7,650
Florida
Besides Fair Lending, think reputational. "The bank charged me $25. and never made me the loan." Expect regulatory complaints
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#2263393 - 12/09/21 03:53 PM Re: non-refundable processing fee dutchbltz
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
What loan fees you can contract for is regulated by state law. Does your state law allow contracting for non-refundable fees?

IN non-refundable fees are tiered based on loan amount and they must be contracted for as being non-refundable.
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