Reimbursement: required? recommended?

I've searched for this, and it appears the posted responses are not consistent. Please give me you thoughts: On construction loans (a clear pattern on about 20 loans) the inspection fee was consistently not included in the finance charge or APR. The finance charge is clearly out of legal tolerance (more than $100), but all APRs are within legal tolerance (irregular transaction - understated by not more than 1/4 of one percent). The reason for the difference between what should have been disclosed and what was disclosed for both the APR and FC are the same thing: the failure to include the inspection fee. Clearly we have a FC violation, but must we reimburse? My thought is that since the APR is within legal tolerance (even though the finance charge is not), we do not need to.

The only time you MUST reimburse is when ordered to to do by your regulator. If you discover an error on your own, you have choices: you can voluntarily reimburse the customer and make them whole or you can take your chances and wait for an examiner to find your mistake and order you to reimburse. I would recommend the voluntary reimbursement. Send the customer a check for the amount of the omitted fee (assuming that's your only error) with a letter saying the bank discovered the error while performing its normal quality control reviews. The customer will be happy to get a check and your examiners will be happy that you did the right thing.

I agree with Deena. This is the risk-averse approach. It is also the lowest cost approach if anything does blow up. When you reimburse the fees to the customer, you make any claims or lawsuits not worth their while. You also leave the examiners with nothing to order you to do. Plus, you can put the "See, we really do have an effective compliance program" banner up and get extra points. Repaying a few inspection fees can put you ahead in the compliance game.