When sending a billing statement for the next payment due on a loan, does Reg-Z require lenders to do a "look back" to see when the customer made their last payment in order to calculate the estimated amount to be applied towards Interest on the "next" payment, or, Is it acceptable under Reg-Z to calculate a straight 30 or 31 day billing cycle, REGARDLESS, of when the borrower made their last payment? Reg-Z allows creditors to disclose estimated amounts based on the best information available, however, wanting to confirm if a straight calculation for a (30) day billing cycle is acceptable since borrower is able to see on the "next" statement how much was actually applied towards interest or principal depending on when they actually make the payment?

From the preamble, you have to base it on the actual projected interest due if the payment is made on the due date.

The Bureau understands the concerns about determining the breakdown for daily simple interest loans, as the breakdown would change depending on which day the consumer makes the payment. In determining the breakdown of amount due, the servicer may assume the consumer will make the payment on the due date. Servicers may include a note explaining this if they believe it is necessary. The Bureau considered the risk that this may cause confusion for consumers, but believes the consumer protection benefits of enabling the consumer to understand what they are being billed for, and thus to question improper charges, outweighs the risk of possible confusion. Further, the Bureau believes that if a consumer with a daily simple interest loan pays his or her loan late, the difference in the amount of the payment that goes to the principal under the amount due (shown on the earlier statement), and the amount of payment that goes to the principal under the application of payment (shown on the next statement) may highlight the additional cost of paying such loans late.

Thank you so much. We and the vendor for the loan accounting system are of the opinion that it is acceptable to use a straight (30 or 31) day calculation without doing a "look back" when estimating the breakdown in the "Explanation of Amount Due" box but want to be sure you agree this is an acceptable method for CFPB.

In your response you stated: "From the preamble: "you have to base it on the actual projected interest due if the payment is made on the due date for the next payment" -

We knew we had liberty to assume that they would make a timely payment on the payment due date...but my question is more focused on whether we need to do a "look back" to the last payment made in order to calculate and disclose "actual" interest accrued or is an estimated straight calculation of (30) or (31) days sufficient regardless of when they last paid?

You assume the upcoming payment due date and projecting the principle and interest due on that date based on the legal obligation.

I think they stated it pretty plainly here:

The Bureau understands the concerns about determining the breakdown for daily simple interest loans, as the breakdown would change depending on which day the consumer makes the payment. In determining the breakdown of amount due, the servicer may assume the consumer will make the payment on the due date.

Thank you so much for the guidance