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#2273675 - 08/02/22 03:57 PM Credit Card APR approaching Penalty Rate
Reg Warrior Online
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Joined: Jan 2017
Posts: 214
As prime rate has increase significantly this year, and will continue to increase, our highest rate credit cards are less than 1% from our penalty rate, and will probably exceed our penalty rate before the end of the year. If our normal rates exceed the penalty rate and a borrower defaults, are we required to provide the borrower penalty rate which would be lower than borrowers normal rate? Thanks

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Lending Compliance
#2273676 - 08/02/22 04:06 PM Re: Credit Card APR approaching Penalty Rate Reg Warrior
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
How would we know without reading your credit agreement?
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2273678 - 08/02/22 05:39 PM Re: Credit Card APR approaching Penalty Rate Reg Warrior
Reg Warrior Online
100 Club
Joined: Jan 2017
Posts: 214
There is nothing in our account agreement that covers this scenario:
Penalty Annual Percentage Rate (APR): If you default on your Account for any of the following reasons, we may increase the APR on the entire balance to the Penalty APR of XX.XX% with a 45-day notice if:
• Your Account is 60 days or more past due
• You make a payment that is returned

The Penalty APR may terminate if you make six consecutive minimum payments on time starting with your first payment due after the effective date of the Penalty APR. If you do not make these six consecutive minimum monthly payments on time, we may keep the Penalty APR on your Account indefinitely.

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#2273681 - 08/02/22 05:52 PM Re: Credit Card APR approaching Penalty Rate Reg Warrior
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
You have a static Penalty APR when your normal APRs are variable rates, and it is less than you State's usury cap rate?

That is sort of poor planning.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2273732 - 08/03/22 05:32 PM Re: Credit Card APR approaching Penalty Rate Reg Warrior
Reg Warrior Online
100 Club
Joined: Jan 2017
Posts: 214
I agree it is poor planning. For years, the compliance department has been urging the credit card department to change the Penalty Rate to prime + a margin. . Well, maybe this current predicament will finally cause the issue to be fixed. Our state usury cap does not pertain to federally/state-chartered financial institutions.

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