When reiumbursing a customer under TILA for overcharges, is it acceptable to simply reduce the accrued interest on the loan by the amount of the reimbursement? The overcharges are related to interest, and I think the thought here is that it would be the easiest and best way to reimburse customer. I am thinking, however, that the customer needs to get a check or a deposit to an account. I know that the customer needs to get a notice. Any input?

Thanks!

The Policy Guide allows two methods of reimbursement, the lump sum method, and the lump sum payment reduction. You should be researching these in the Policy Guide. Obviously if a loan is paid off there would be no payment reduction. But this can be a tricky area. First and foremost be sure a reimbursement is necessary in the first place. Then go from there.

The policy guide that Andy refers to is here:

http://www.fdic.gov/regulations/laws/rules/5000-300.html

Unless the problem was identified during a compliance examination, you can make the adjustment any way you want. Just be sure the adjusted loan passes APR and FC verification tests. In this case, you are operating under the general standards of Section 130(b) of the TILA.

If your regulator discovered the problem during an exam and you are operating under a reimbursement order, then you have no choice except to follow the Policy Guide.

Thanks guys! I am grateful for the help. The good news is that I found it during an audit! Whew!