nsf fee charged on returned oan payment

Does anyone know the implications for charging nsf fees on a loan payment from another institution. We would be adding the fee to the loan balance? I do not think there are Reg Z issues since it is an unanticipated fee. Are there any other issues? Would it need to be disclosed in the Note?

You would have to first contract for the fee and I also recommend you check State law for any limitations.

I would like to ask another question on this issue.

If the loan was an indirect dealer loan, would there be any issues from the Reg Z standpoint as to adding the NSF fee to the loan balance if the customer incurs a NSF fee for a returned loan payment?

You could only do that if the original contract and State law allows for it.

Just to expand on Randy's answer, Texas is an example that allows this. Contractually a retailer can charge a fee for a returned check. A bank receiving a bad check can too. Loan contracts must allow for this. Currently we could charge up to $30. This allowance and fee have nothing to do with NSF fees under TISA.

Certain loan types allow fees to be added to the loan, and some do not. So you have state laws to contend with and these may break down into finer components like loan types.

Thanks Randy and Andy, I appreciate your help.