A question came up yesterday concerning the annual fee posted to a home equity line of credit. Is it permissible for interest to accrue on the fee? I've been researching the Kentucky Laws but I haven't been able to find this.

We bill for the fee. Unless the total is paid off that month, it is added to the principal and accrues interest thereafter. I cannot cite anything. Late fees are another matter.

Another question about HELOC annual fees. . .does anyone know whether there are dollar limits or caps? We would like to increase our fee to $50.

I don't know of any prohibition on annual fees. I have seen $50 being charged by others in the area.

KRS 287.750 (Revolving Credit Plans) provides that a bank may charge an annual fee of only $20. As long as I have been here (7years), that is all we have ever charged on advice of counsel.

[ I've been researching the Kentucky Laws but I haven't been able to find this.

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have you tried http://www.lrc.state.ky.us/recarch/search.htm

We changed host software and added the HELOC to ARTA recently and added the annual fees to our agreement at that time. My research included the KRS, other bank's disclosures to include KY, OH, & WV. most examples included the annual fee in the initial agreement and disclosures. I know of no better, easier method to collect the fee than assess the fee to the periodic statement. and of course fc will be involved. I believe the important issue here is disclosure. Debra Stamper @ the KBA will be a good resource for info as well.

The fee on a HELOC is determined by the statute under which you lend. KRS 287.710 limits the fee to $20. It is the only fee that specifically mentions the annual fee. Other statutes are silent on this fee. Many of the lenders charging the higher annual fees in KY are out-of-state banks that have imported their rates into KY.

There are two schools of thought on charging loans fees in KY. One school believes you can charge any fee unless it is specifically prohibited by statute. The other school beleives you only charge fees prescribed by statute and any additional amount is considered interest. The courts will ultimately decide which school is right. If you adhere to the later school, you never have any usury problems, but you may forego some earnings.

These two schools of thought must also be the reason for the range of late fees being charged.