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#37947 - 10/18/02 08:00 PM Consumer loan "origination fee"
Anonymous
Unregistered

We are going to start charging an origination fee of $25.00 on consumer loans. We are a National bank examined by the OCC. The loan officer will be able to waive the origination fee. A state bank (KY) has been doing this for a year. Does anyone see any problems?

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Lending Compliance
#37948 - 10/18/02 08:04 PM Re: Consumer loan "origination fee"
Lestie G Offline

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Near the Land of Enchantment
Check your state law first! Some states restrict or limit this.

After that - be sure to track waivers to ensure that you don't have any fair lending concerns. Remember that this will be a prepaid finance charge!
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#37949 - 10/18/02 08:54 PM Re: Consumer loan "origination fee"
Andy_Z Offline
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I agree w/"l". Assuming your state law allows, track your waivers and have your lenders justify them in the file.

You also want to review advertising. If you disclose rates on your Web site or telephone system, those APRs won't be correct when you add the fee in. Watch future ads as well.
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AndyZ CRCM
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#37950 - 10/21/02 01:13 PM Re: Consumer loan "origination fee"
Anonymous
Unregistered

This bank is OCC regulated, the fee we charge is termed as a processing fee and charged to consumer and business loans. An attorney's blessing based upon the use of the fee charged in addition to interest is in file. Most of the citations used are KRS in addition to the National Act of "most favored lendor" rule. This bank also borrows the Credit Union statute KRS 290. The processing fee was instituted in 1996 and has passed through two compliance examinations and several S & S examinations.

If your attorney's opinion is negative on the idea. Please pass it on. I would of course be interested.

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#37951 - 10/21/02 01:43 PM Re: Consumer loan "origination fee"
Andy_Z Offline
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These may be separate issues. It sounds as though your state allows the fees because other lenders are charging them as well. Likely you are good to go.

State laws set the usury rates. My experience is that the OCC follows Federal laws, and recognizes interest rates, but isn't intimately familiar with the "ins and outs" state laws can impose on different types of loans and under different circumstances.

So I wouldn't rest on the fact that this has been ongoing, but rather that you had competent counsel review it thoroughly. As noted, I'd watch and document the waivers as that is the tricky area you must address here.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#37952 - 10/21/02 02:53 PM Re: Consumer loan "origination fee"
Anonymous
Unregistered

Thanks for your help. Now, what if we limit the origanation fee to loans $5,000.00 and under? Does this bring up any problems? My first post and Andy Z replied . I am so honored.

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#37953 - 10/21/02 02:59 PM Re: Consumer loan "origination fee"
Andy_Z Offline
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Andy_Z
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You could argue that these "smaller" loans net the least amount of income and may have higher risks of nonpayment and that is why it is charged on them. Document your reasoning and file it in your CYA file. You'd be fine unless these loans were only taken by protected classes. That isn't likely.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#37954 - 10/22/02 02:21 PM Re: Consumer loan "origination fee"
Howard Lax Offline
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Howard Lax
Joined: Jan 2002
Posts: 478
Bloomfield Hills, Michigan
State laws governing subordinate mortgage loans and other loans sometimes dictate what you call the fee. If a state law allows a "processing fee," you may need to use that terminology.
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Howard A. Lax Lipson, Neilson, et. al. Bloomfield Hills, MI hlax@lipsonneilson.com

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#37955 - 10/23/02 02:27 PM Re: Consumer loan "origination fee"
Anonymous
Unregistered

We chose to use an "origination fee" as we will more than likely base whether the fee is charged on whether the customer has other profitable relationships with our bank. If we use processing fee our understanding is that we would have to charge everyone, or have a greater potential liability based on how the fee was waived.

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