We had a payment error issue with a vendor, and to avoid impact to our customers, we are going to give them the option to skip the current payment, with the next payment due as usual, but this would extend their loan term, where applicable, by one month. We're going to send letters to all of them explaining the options, and if they want to go ahead and make the current payment, that's fine too.

We have a mix of credit cards, auto/unsecured closed-end loans, and 3 HELOCs. For each type of loan, do I need to have them agree to agree/sign a skip a payment form that says interest will continue to accrue and state the next payment due date, or for any of them, do I need to have them complete a more formal agreement that rediscloses loan terms and reflects the extension of their term by one month? Struggling with finding the requirement for each that truly applies here, since these aren't being done as part of a skip a pay credit program.

Thanks.

What do you mean "We had a payment error issue with a vendor"?

You mean you failed to pull the payments? Why did you not just pull them the day you figured that out and backdate them to the date they should have happened.

What you are saying is you screwed up and now you want to further penalize the customer for your error.

If any of the loans are secured by real property and in a flood zone, the extension would require the flood notice.

I guess we don't really know what happened. Did the bank fail to transfer funds or send a billing statement or reject a payment that was made for some reason.

What is the bank's current policy and procedure on extensions - modifications? Are they limited in number, in so many per rolling calendar year, interest must be paid or not, etc? How will this deviate from that or is there a supervisor exception that is allowed? I'd look at that first.

You need to think about flood as Rocky noted, any policy the bank has, and then the longer ramifications such as ensuring a borrower with credit insurance understands the insurance coverage ends at the originally scheduled maturity date (at least ours did) and what about credit reporting? If the bank is accepting fault, don't show the accounts as past due.

Thanks to all for the feedback and the various aspects to take into consideration. We actually didn't have a failure, the vendor did. Essentially they sent the payment file twice, causing double payments for some. We have to send the credits from the 2nd file back to the vendor, but we want to do the right thing for our customers with the least impact. So, in some cases, we want to advance the next payment due date, in effect, giving them a quasi-skip a payment option, unless they want to pay as normal. (some of you may not agree with this approach, but that is what sr mgmt has decided, so we have to deal with it.) We did recognize the flood concern on the HELOCs, so in those cases, we think our only option is to send the payments back and not advance their term to avoid that issue. For all the others, we believe we can do a skip a pay notice to them for them to agree to and advance the terms.

JMHO - I think your senior management is taking a bad error and turning it into a disaster.

And " We actually didn't have a failure, the vendor did." translates directly to the bank making the error.

Choosing either to not to immediately send the extra payments back or apply any payments in a manner other than how your credit contracts currently read, violates your credit contracts and I personally I think it is a huge UDAAP issue. Giving them a skip payment that they did not request could very well send a borrower into a negative amortization period for a number of months (depending on the amount and the age of the loan) and extend the loan term a lot more than one month. It could be seen as a way to increase the bank profits through a bank error at the detriment of the consumers. The bank cannot unilaterally amend a credit contract without the consumer's agreement whether you think you are doing them a favor or not.

I agree with Randy's comments re UDAAP.

Another thing to consider - when your vendor sent the payments file twice, if the double payments processing caused any overdrafts or fees to borrowers, the bank needs to be prepared to make those borrowers whole.

That has to be the end goal of this remediation. If there are questions of what constitutes "whole-ness," then that should be discussed with the bank's attorney. The applicable state law on contracts may lead to a different notion of what constitutes "whole" and your contract law specialist is the bank's general counsel.