We are going to begin to charge a small fee to customers that access their ready reserve line of credit(LOC) by overdrawing their DDA account. We've disclosed the fee to them via a fee schedule brochure, however I've just discovered that the fee will be added to the principle balance of their LOC. I'm concerned about APR and other possible REG Z implications, should I be?? Any BOL help, input and/or advice will be appreciated. Thanks

The transaction fee should be used in computingthe APR in the month in which it occurs. After that, it's like any other advance - everything goes to principal anyway.

It seems that I read somewhere that charges imposed for paying items that overdraw an account are excluded from finance chrarge, would that mean that they don't affect the APR?

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It seems that I read somewhere that charges imposed for paying items that overdraw an account are excluded from finance chrarge

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Under certain circumstances, but not as described above.

So it seems like it would be very difficult to disclose an accurate APR in the intial Ready Reserve aggreement. You would have the interest rate, but how would you have any idea how many time the person would be accessing the account and therefore being charged the fee. So therefore, would you just disclose the base APR with a statment that includes information about the factors you use to determine APR when providing that intial disclosure/agreement.

APR disclosures for open-end credit have different rules than closed end credit. You will want to review 226.14 and its commentary.

The "access fee" you are referring to is a transaction fee under Reg. Z. For each billing period any transaction fee will be calculated into the APR. So one billing period you could have an APR of 18% and the next billing period you could have an APR of 23.5%.

On each statement, you would have the APR which includes all finance charges for the cycle and you would have the "Corresponding Annual Percentage Rate" that is tied to the interest rate applied to the account.

Thanks all!!