We found an understated Finance Charge and APR within 30 days of closing a closed-end consumer loan. What's the best way to cure the violation?

You didn't say how much we are talking about. If it is out of tolerance, you need to provide restitution to ensure they haven't paid more than was disclosed. You are in luck however, as the right of rescission (if applicable in this case) expired when the loan was paid off.

At the very least, redisclose. After that, I guess it would depend on what caused the error. Was there a fee that was collected but not disclosed? Or was it simply a calculation error? Was the customer harmed monetarily?

I'm sorry, I should have been a little more specific. The finance charge was out of tolerance. I found the error within 30 days of the loan open date and it is not subject to recission. So, if we lower the rate to match the disclosed APR and adjust the monthly payment accordingly, we would be okay?

I can't find the cite right away, (maybe someone else will have it for us) but I remember from a previous examination that if you catch the error before the customer has made a payment, you may correct the disclosure with no other action required. If it's within 30 days - hopefully you're in that window.

If you discover an understated APR or FC during processing, you can keep giving disclosures until you get it right. After consummation, however, there's no way to effect a correction without reimbursement.

You have a period of time, 30 or 60 days from discovery to correct it. That means getting the finances to the disclosed TIL without being subject to a lawsuit from the borrower(s). So the cure period isn't to say "we over charged you, by this much, everything is OK now". It is to say, "we overcharged you based on the disclosures, you get this much back to get to the lower costs and you can't sue me for the error".

Sherry will find the period allowed and the guidelines in the Fed's Reg Z handbook in the back of the handbook under the Fed's restitution guidelines. Sherry, to have the Fed and agencies on your side, your audit system should find the error within 60 days, and make the adjustment to the finance charges with the allowed tolerances.

I couldn't recall if you had 30 or 60 days. It is 60. Look at the Policy Guide, page 6.

Required Corrective Action
Under provisions of the Act, a financial institution will generally have no civil liability (Section 130(b)) or regulatory liability (Section 108(e)(6)) if it takes two affirmative corrective actions. Within 60 days of “discovering” an error (but before institution of a civil action or receipt of a written notice of error from a consumer), the financial institution must both:
· Notify the consumer of the error, and
· Reimburse the consumer for overcharges