I have a few loans I am reviewing during my audit where the prepaid finance charges were added to the balance instead of subtracted. I recalculated and no reimbursement is due. Do we need to re-disclose? I don't think we do but I am just checking. Is there anything we need to do or should do?

You may find what you are looking for in Z, Section 108, Administrative Enforcement. (e) (6) may fit your situation. You may want to review your recalculation of the FC. If you added the prepaid to the AF, and the disclosed FC remained the same, the disclose APR my be understated.

You did not mention what the security was for these loans. If they are rescindable, this could affect the material disclosures and extend the right of rescission.

They are home equity loans and yes they are rescindable.

I would recommend redisclosing and providing the ROR again. This would only give the borrowers and extra 3 days. We have gone both ways. In some cases you may prefer to hold your breath for 3 years rather than bring this to the borrowers attention. We usually consult with management before deciding on the course of action when there is no reimbursement due.

I don't agree that redisclosing and providing a new ROR will solve the problem. Remember that 226.15 and .23 require a delay in performance during the rescission period. Because you have already disbursed the funds, there cannot be an effective rescission for these loans.

The only certain way to eliminate the proble is to refinance the credits and disclose them properly. This eliminates the ineffective rescissions and replaces them with effective ones.

We previously discussed with our regulator. The rescission period does not begin until the last of 3 events: consummation, delivery of all material disclosures, delivery of the rescission notice. In this case consummation has occured, but correct material disclosures were not provided so the 3 day period has not started. Once correct disclosures are provided, the 3 day period will begin.

If your regulator says it is acceptable to them, then I would consider that. Did you get that in writing? Did they writeit up in an exam report with that recommendation. If not, then you might want to reconsider how much value that approval or assurance has.

I don't think it would save you in a litigation situation. I can make a pretty strong argument that my right to cancel is worthless once I receive the money, whether you have provided accurate material disclosures and a new rescission notice or not. It's pretty hard to argue that I can cancel the transaction when I have been making payments on it.

What if the loans are re-imbursable? Obviously we want to re-imburse but should we also redisclose?

If you reimburse, you are essentially making the original disclosure accurate. In that case, I don't think you gain anything by redisclosing.