Having won one debate with my boss, I am looking to win another. . . .

We send out monthly statements on our HELOCs as required, with the due date 25 days after the statement is generated. We also offer our customers the option of setting up an automatic funds transfer to pay the amount owed if they so desire. It is not mandatory that they set up an AFT and we offer no incentive for them to do so.

If they want to transfer a set amount ($50/wk, $300/mo, etc), we can do that with no problem. However, if they just want to pay the amount billed, our system will only let us set up the AFT so the payment will come out the day after the bill (statement) is generated. In other words, we generate the statement the last day of the month and the payment is taken the first day of the new month.

My boss is concerned that we are violating Reg E or Reg Z because of the variable amount of the payment and taking the payment so soon (1 day) after the statement was generated. I don't feel it is a violation of Reg. E because we are getting an AFT agreement signed by the customer that specifies that we are to take the amount of the payment on the first day of the month. (Besides which, it falls under the definition of internal transfer.) I have been through Reg Z a couple of times now and I can't find anything that would prohibit what we are doing, but I will be the first to admit, I am not as up on the lending regs as I am the deposit regs. And it seems to me that Reg Z deals more with disclosures (what, how, and when to disclose) and billing disputes than how and when payments are made.

Am I overlooking something in Reg Z? And do I have the right take on Reg E?

As long as you have a signed agreement with the borrower to take the payment out on a set date each month I see nothing wrong with this setup. Even though you are required to send the notice 25 days before the due date the customer can pay the payment at anytime before the due date if they wish. If there should ever be a problem with the payment they always have the dispute mechanism to fall back on.

I seem to be missing something - where can I find the cite reference for the 25 day requirement?

I think the requirement is that the statement be sent out at least 14 days prior to the payment due date [see 226.5(b)(2)(ii)]. In this case, they've chosen to give the customer more time by sending it 25 days ahead of the due date.

that was my understanding - the statements need to be sent out at least 14 days prior to payment due date, but Dan's reply to the original post stated a 25 day requirement?

I'm guessing Dan will chime in here too, but if I'm not mistaken the 25 day rule is for ARM's when a payment changes due to a rate change.

Ok, I'm chiming but my chimes aren't very good to listen to.

The 14 day requirement is for the statement is correct and the 25 day requirment for ARMs is also correct.

In re-reading my post I didn't choose my words very well. The original poster is givng the borrower 25 days from the statment date to make the payment. The "required 25 days" was meant to allude to that time period.

Sorry if I created confusion.

Although the 25 days may not be required, I do think that is (or use to be) an "industry standard". The 25 days allowed time for the statment preparation and getting the statment mailed 14 days before the due date.

thanks for the clarification

Generally Reg. E would require 10 days notice prior to pulling an automatic payment of varying amounts, (see 205.10(d)), but you are correct, these transfers are exempt from Reg. E if you hold both the deposit account and the HELOC. If you don't hold the deposit account then I believe you would have to provide 10 days notice of the amount of the EFT.