This question could be posted in either Loan or Gen, and since no one answered me in the loan forum, I'm going to try here.

I just discovered that our overdraft lines of credit do not include an automatic transfer authorization since 2004 (training error).

However, what do I do with all the loans out there now? I can think of a few options: (1)have the loan department send the AFT authorization for the customer's to sign and explain that if they do not return, the auto debit feature will stop; (2)stop all auto debits until we get the customer to sign the AFT (not very customer-friendly); (3)do nothing with the ones already closed, but start today with getting the authorizations signed.

Any ideas?

Wouldn't the product and the note in and of itself be your agreement since this is an Overdraft Line of Credit?

I have a similiar problem, I am with a new organization and they do not require automatic transfer forms at all. Now what? Go back and ask for the form?
BTW - does anyone have a form that they wouldnt mind sharing?

Responding to Georgia, unfortunately no. Reg E requires a signed authorization. It would have been a "yes" IF for the last 6 years the loan processor had clicked a little box indicating automatic payments - in which case the form would have been generated.

We still need to decide what to do - attempt to get signed AFT authorizations or make a business decision to acknowledge the error and continue to take the payments without auth.

IMHO, you should send the AFT notice out to the affected customers and get the signed authorizations back. Document your efforts from the identification of the problem to resolution.

You should probably include a "we need this back by" date in your cover letter to the clients, as well as a follow-up campaign from the account officers to get the forms in since most people will not open the letter and read it.

For those who do not return the form, I would turn off the auto-debit feature since you don't have a contractual agreement that authorizes you to draft the account under AFT. Of course because of the precidence you have set by your practice, there could theoretically be Reg E change in terms notification due for that (maybe include that in the cover letter and make the drop dead date 21 days out from the date of the letter?).

You might want to look further than just training. If it is an overdraft LOC only that cannot be accessed by any other means than a sweep to the DDA, consider hard-coding your system to always check the yes box for that loan type if you have a separate loan type for just that product.