For loans subject to the right of rescission, when should we start collecting interest-- the day of closing or the day after the rescission is up?

You are allowed to do either. We accrue interest for the three day period.

That's interesting. Can you tell me where in Reg Z it says that? I would like to show it to management.

I believe the correct answer is, Reg. Z doesn't prohibit it, but check to see that your State's law allows it.

As usual, Andy is correct. Comment 226.23(c)-4:

"Section 226.23(c) does not prevent the creditor from taking other steps during the delay, short of beginning actual performance. Unless otherwise prohibited, such as by state law, the creditor may, for example:

Prepare the loan check;
Perfect the security interest;
Prepate to discount or assign the contract to a third party;
Accrue finance charges during the delay period."

Correct. I have seen it done either way during my career but I think most do accrue interest during the 3 day period (if their state laws allow of course)

Appreciate the comments. I will be looking into this further.