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#283639 - 12/02/04 11:04 PM Negative notice to charged off loan customers
Anonymous
Unregistered

Our computer system generates the negative notice the first time a customer's account is reported on our credit reporting file. My question is, do we have to send to all our pre 12/1 charge off customers that the system generated? I thought I read somewhere that customers with charge off loans were not considered customers for this requirement and for the life of me I cannot find the citation or FAQ. Does anyone know where that is addressed?

Thanks for the help!!!

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#283640 - 12/02/04 11:21 PM Re: Negative notice to charged off loan customers
JJohns Offline
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JJohns
Joined: Jun 2003
Posts: 682
IL
I'm laboring under the same understanding as you - we're not giving the notice to customers charged-off prior to 12/1/04.
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#283641 - 12/03/04 06:11 PM Re: Negative notice to charged off loan customers
Anonymous
Unregistered

Bump -- what is everyone else doing with charged off loan customers and notices?

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#283642 - 12/03/04 06:20 PM Re: Negative notice to charged off loan customers
Anonymous
Unregistered

Wait...I thought that this thing went into efect 12/1. If so, then you would not have to give those prior to 12/1 a notice.

For all of those as of 12/1...they should have received a notice the first time they were in default....that was prior to charge off....

Wouldn't that cover it...or did I miss the question....

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#283643 - 12/03/04 06:47 PM Re: Negative notice to charged off loan customers
Anonymous
Unregistered

Original Anon Here:

Paraphrasing the Act: it says, if financial institution furnishes negative information to a CRA regarding credit extended to a customer, the financial institution shall provide a notice of such furnishing of negative information, in writing, to the customer. The next section states, once a notice is provided to a customer no more are required even if additional negative information is reported to a CRA. At the bottom of the negative information section it states the definition of customer is the same as 509 Public Law 106-102. I think I read where charged off customers do not meet this definition, but I cannot find it to verify.

On another related matter, some competitor banks in my area have taken the stand previously past due customers that are past due on 12/1/04 do not warrant a notice because they have been past due before. I think this is totally wrong and we are sending the notice to each customer that we report negative information on after 12/1/04. Does anyone know of any exemption I am missing or do you all agree and are sending notices like me?

Thanks for all the input and isn't this stuff fun?

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#283644 - 12/06/04 01:56 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,951
Bloomington, IN
The 217 notice requirement has no grandfather clause - if you report negative information on an account to a CRA - the notice must be provided.

Why would a charge-off account not be your customer - they still have an outstanding obligation/account with you. I have never heard that a charge off account is not a customer - if they file any disputes you still have to process that dispute under any applicable regulation just as you would for a "performing" customer.
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#283645 - 12/06/04 04:02 PM Re: Negative notice to charged off loan customers
Anonymous
Unregistered

We are a small community bank and over the past four years we have charged off hundreds of small consumer loans. Some have been due to bankruptcy. Our computer system still has the account history on it. We create a file every month to report to the credit bureau. If a loan is charged off it is included in this file being reported. Now comes FACTA and our system has generated hundreds of notices for these charged off customers (some from years ago). I am sure large banks have thousands and perhaps tens of thousands of small consumer charge offs that get reported (and possibly updated on the rare occasion money is recovered) monthly. These account holders are not considered bank customers and I am certain many of them do not consider us their bank anymore.

I do not want to waste the time or money sending notices to prior customers simply because we report their unpaid charged off balance to the credit bureau, and as for bankrupts we would have to manually identify their attorney's address and send to them.

Am I missing something?

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#283646 - 12/06/04 04:20 PM Re: Negative notice to charged off loan customers
waldensouth Offline
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waldensouth
Joined: Nov 2001
Posts: 7,981
FINALLY ABOVE the gnat line
I don't have time to look it up right now, but didn't FACTA state that you didn't have to notify if you were prevented by law from mailing a notice?
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#283647 - 12/06/04 05:06 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
You are correct - if you are prevented by law from contacting the borrower, i.e. bankruptcy stay, then you do not have to send the notice.

Anon, if you are still reporting your charge off accounts to the CBA on your customer file, explain to me how they are not still your customer. If they are no longer your customer, why are you reporting them to the CBA?

We do not report a charge off after the initial reporting except to update any recovery payments. Loans charged off before 12/01/04 that have no activity will not receive the notice. However, for "active" charge offs, we will provide the notice.
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#283648 - 12/06/04 06:10 PM Re: Negative notice to charged off loan customers
Anonymous
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Can you give me a cite for not required to report on bankruptcy accounts.

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#283649 - 12/06/04 06:43 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,951
Bloomington, IN
Section 217, Subsection F.
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#283650 - 12/06/04 08:02 PM Re: Negative notice to charged off loan customers
Anonymous
Unregistered

Thank you Dan - I guess I have read that section so many times I missed that. I am still not sure what to do about charge offs though. I verified that the file we submit monthly contains all charge off account information and unlike your bank it is provided automatically at the end of each month not just once after we charge it off. Therefore, all umpteen hundred charge off loans on our computer shows the facta disclosure was generated 12/1/04. It just seems silly to have to send this notice to all these people even if it were charged off in 1997 and we have had no contact since than.

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#283651 - 12/06/04 10:15 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
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Posts: 46,951
Bloomington, IN
When in doubt - talk to your Regulator .

Don't get me wrong - I don't disagree with your logic - but as we all know logic and regulations don't mix - I just don't see an exemption.

We're a small shop and it really does not affect us that much.
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#283652 - 12/08/04 01:37 PM Re: Negative notice to charged off loan customers
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
Quote:

Anon, if you are still reporting your charge off accounts to the CBA on your customer file, explain to me how they are not still your customer. If they are no longer your customer, why are you reporting them to the CBA?

We do not report a charge off after the initial reporting except to update any recovery payments. Loans charged off before 12/01/04 that have no activity will not receive the notice. However, for "active" charge offs, we will provide the notice.




We also do not report subsequent information on charged-off accounts to the bureaus unless there is a recovery. Would a recovery on a charged off loan trigger the notice? It would seem to me the the Notice of Negative information would have already been provided in the normal course of business leading up to the charge off. A recovery is not a negative occurrence is it?

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#283653 - 12/08/04 01:53 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
My thought is when you report the recovery, you then are re-reporting the charge-off account - the recovery would not be negative information, but re-reporting the charge-off account (after 12/01/04) would be.

1. Full recovery - then you are reporting "positive" information and in that case the notice probably would not be necessary.

2. Partial/monthly recovery - you are still reporting you have a charge-off, negative information, with the account holder. In this case I don't see how the notice (which must be given only once) would not be required.

If someone can show be positive proof within the regulation this is not the case, then I will be more than happy to rescind my opinion.
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#283654 - 12/08/04 08:37 PM Re: Negative notice to charged off loan customers
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
Quote:

If someone can show be positive proof within the regulation this is not case, then I will be more than happy to rescind my opinion.



Just got back to this. Positive Proof? You think I'm nuts? I really don't know what the right way is to go on this one. Maybe the dust will settle in due time. This is making me totally crazy.

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#283655 - 12/08/04 10:22 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
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Posts: 46,951
Bloomington, IN
I think we're all nuts for being in compliance, or maybe just a little deranged.
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#283656 - 12/09/04 02:49 PM Re: Negative notice to charged off loan customers
Great River Offline
Member
Joined: Feb 2004
Posts: 64
Iowa
Let me ask this about those charged-off, supposedly non-customers. If they walk into your bank today and say they won the lottery or they have suffered guilt attacks and want to pay you in full, would you tell them you don't want their money, because they are not your customers?

If they are not your customers, why are you reporting them to the credit bureaus?

I agree with the underlying question of "Why would I have to notify someone that defaulted prior to 12/1/2004?" I don't believe you do. But I'm not your regulator, either.

I'm just saying I don't think your regulator is going to buy the "They aren't my customer anymore." We need a better argument. For me, that is: "The default and resulting report to a CRA occurred prior to 12/1/2004."

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#283657 - 12/09/04 05:10 PM Re: Negative notice to charged off loan customers
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,951
Bloomington, IN
Quote:

"The default and resulting report to a CRA occurred prior to 12/1/2004."




OK, I'm not sure if your advocating not giving the notice, or giving the notice.

If the default was reported before 12/01/04, and no further reporting is done, then I agree no notice is required. However, what about subsequent reports after 12/01/04? Subsequent reports on charged off accounts would be no different, IMO, than a subsequent report on a active account that is constantly 30 to 45 days late. So, is anyone saying that since an active account is 30 - 45 days past due and their account has already been reported to the CBA as such before 12/01/04, that when the account is reported as still being 30-45 days past due on 1/01/05, that the 217 notice does not apply?

If you have recovery activity on charge off accounts, and you report your activity to the CBA, what's the big deal in providing them this notice? If they are in active recovery, then you are having some "customer" contact with them anyways, or I assume you would be since you are collecting on the account.
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