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#994562 - 07/14/08 05:16 PM Unsecured Consumer Line of Credit
Anonymous
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We have open-ended consumer lines of credit that are unsecured for up to $7,500 that are set up for 7 years. We have several accounts that have been inactive for at least 2 years with a zero balance. Can we just close these? Do we have to send the customer anything?

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#994595 - 07/14/08 05:34 PM Re: Unsecured Consumer Line of Credit Anonymous
Ray_ Offline
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If you've contracted a 7 year note with the customer, why would you attempt to close it?

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#994617 - 07/14/08 05:43 PM Re: Unsecured Consumer Line of Credit Ray_
Anonymous
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Management wants to get these off the books.

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#994624 - 07/14/08 05:45 PM Re: Unsecured Consumer Line of Credit Anonymous
Ray_ Offline
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I can't see how you can terminate the agreement now just because the customer doesn't have a balance. But, maybe there is a provision in the note/agreement that would allow it.

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#994699 - 07/14/08 06:29 PM Re: Unsecured Consumer Line of Credit Ray_
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Anon, review your contract as LS advises. However, generally there is nothing preventing you from closing the accounts for inactivity.

It would be advisable from a PR perspective to a send a notice informing them you are closing the account and if they wish to keep it open they should contact you.

Under the definition of adverse action in Reg.B closing an account for inactivity is not adverse action therefor no AAN would be required.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#994748 - 07/14/08 06:54 PM Re: Unsecured Consumer Line of Credit Dan Persfull
Ray_ Offline
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Originally Posted By: Dan Persfull
However, generally there is nothing preventing you from closing the accounts for inactivity.


Dan, so it's still permissible to close the account for inactivity even without a provision to do so in the original agreement?

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#994932 - 07/14/08 08:39 PM Re: Unsecured Consumer Line of Credit Ray_
Dan Persfull Online
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Dan Persfull
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IMO yes. It would be no different than closing a credit card for inactivity.
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#994940 - 07/14/08 08:43 PM Re: Unsecured Consumer Line of Credit Dan Persfull
Ray_ Offline
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Wow, I didn't know that was possible. Thanks!

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#995112 - 07/15/08 02:02 AM Re: Unsecured Consumer Line of Credit Ray_
rlcarey Online
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rlcarey
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Galveston, TX
Not that I disagree with you Dan, but if these lines really had a stated maturity of seven years, I would recommend visiting with the bank's attorney prior to closure. I think you would have to treat these a little different than you might a typical evergreen open-end account.
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#995166 - 07/15/08 12:50 PM Re: Unsecured Consumer Line of Credit rlcarey
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Most open-end agreements I have dealt with have the following statement in the "Change of Terms" section:

This agreement may be canceled by you or me at any time upon giving notice.

Again I go back to my original statement of reviewing the contract; but generally the open-end contract in most cases (that I have seen) will have a similar statement in it.

But even without such a statement I still think you have the right to close the account if it's not being used; especially if you send the "PR Notice" as I suggested and they do not contact you.
Last edited by Dan Persfull; 07/15/08 12:53 PM.
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The opinions expressed are mine and they are not to be taken as legal advice.

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