Reg Z - Same Day Credit on Loan Payments

Posted By: cindylou66

Reg Z - Same Day Credit on Loan Payments - 08/25/09 06:22 PM

Okay. I'm in a bit of a fuzz about the requirements coming down on October 1. I read that we have to give credit on the day the payment is received for loans that are secured by a consumer's principal dwelling. Our cutoff time is at 4:00, but we have branches that are open until 7:00. Does anybody else have this dilemma? I'm unsure of how to handle those loan payments made during this 3 hour period. I suggested keeping all loan payments separate and having Loan Ops. backdate them the next morning, but my bank president didn't like this idea. Any suggestions?
Posted By: swiggles

Re: Reg Z - Same Day Credit on Loan Payments - 08/25/09 06:44 PM

I attended a seminar last week where it was suggested that we treat all payments received on any given day (regardless of any cut-off times), to have been received that day even if actually posted the following day.....just make the effective date of the payment be the day the payment was actually received (back date).
Posted By: PStateBank

Re: Reg Z - Same Day Credit on Loan Payments - 08/25/09 06:51 PM

Effective dating at our bank will include the loan secretary subtracting one, two, or possibly three days (remember those monday holidays) interest, manually writing up the payments, reversing any late charges, and possibly adjusting the system to keep it from reporting a 30 days past due... if they rolled 30 over the weekend, and manually posting each one. UGGGHHHH! I feel sorry for those who have tellers taking loan payments... I am afraid this can/will turn into an accounting nightmare.

Think about a customer who makes their house and car payment on saturday.... back date and reverse any late charge on the mortgage payment, but then the car payment doesn't get the same treatment... (I would guess there will be a law in the future addressing this)
Posted By: cindylou66

Re: Reg Z - Same Day Credit on Loan Payments - 08/25/09 06:56 PM

We even talked about doing the same treatment for ALL loan payments. It would be very hard to distinguish which ones are for consumer principal dwellings and which ones are simply first mortgage loans secured by other real estate. And if you're gonna go to this much trouble for one "set" of loans, you might as well just do it for all loan payments taken during that time period between cutoff and closing time.
Posted By: PStateBank

Re: Reg Z - Same Day Credit on Loan Payments - 08/25/09 07:04 PM

I e-mailed our rep. from our core system to see how they were going to approach the issue. I am going to see what he says. Maybe they are going to create a separate saturday tran code or some other option. Contact your core processor and see what they tell you.
Posted By: cindylou66

Re: Reg Z - Same Day Credit on Loan Payments - 08/25/09 07:37 PM

swiggles, so how you would recommend ensuring that all loan payments are backdated? Do as I suggested and keep them separate from all the other teller work and have someone backdate them the next day?
Posted By: swiggles

Re: Reg Z - Same Day Credit on Loan Payments - 08/25/09 09:52 PM

Originally Posted By: cindylou66
swiggles, so how you would recommend ensuring that all loan payments are backdated? Do as I suggested and keep them separate from all the other teller work and have someone backdate them the next day?


I don't know the legistics of that.....just sayin' it was suggested at the seminar. I don't know if such a thing could be automated or not. And so far, I have not investigated the possibility with those that process payments. We're a big bank and so I don't have my hand into everything. My guess is that it will take a "meeting of the minds" in the Bank's "think tank" (meeting room) grin to iron out how we intend to comply.
Posted By: Tigg

Re: Reg Z - Same Day Credit on Loan Payments - 08/28/09 09:17 PM

*bump*

I was just re-reading the section on payments. Is anyone else gathering from the examples provided that it is ok to set a cut-off time for payments received by mail, but a payment received face to face must be credited on the day it was received (regardless of deposit cutoff times) if the customer may incur a negative result - such as late fee or reporting to the CRA? (It's my understanding that so long as there is no negative result a payment can be credited on the next business day.)

Also - if the lender is going to require payments to be made a certain way and during certain time frames, will it have to be in the promissory note?
Posted By: Tigg

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 11:25 AM

Anyone?

(My head is about to explode. crazy )
Posted By: Truffle Royale

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 02:39 PM

The servicer has the right to specify, in writing, reasonable requirements for making payments.

Any payment that doesn't comply is deemed nonconforming and must be credited within 5 days of receipt.

The Reg doesn't define 'in writing'. We're going to put a statement on our payoff letters to inform our borrowers of cutoff times.

I'm at a bankers bank so we don't take payments directly from customers. Maybe you could post a sign in your lobby and another at your drive-up?
Posted By: Tigg

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 05:17 PM

I'm hoping to get some clarification - I have questions out to other compliance peers - on whether or not you can use the same cut-offs as your funds availability policy.

I am wondering how a separate cut-off for deposits and loans would look to the customer base.

Thanks for your thoughts Truff -- I appreciate it! smile
Posted By: CO Officer

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 05:56 PM

Our branches are open on Saturdays but it is not a processing day...Can we put in writing that payments made in person are accepted Mon-Fri...Sat payments will be considered made on Monday?
Posted By: Ninky

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 07:10 PM

What are reasonable requirements? That is so subjective. Can we notify each borrower at closing "in writing" that payments made with coupon to the p.o. box listed on their coupon, will be posted the same day. Any received after 5:00 in person or on Saturday, will be posted the next business day. Can this be accomplished by a mailer to our existing customers, and add a disclosure at closing for new customers going forward? It seems like I have read that a lobby sign is not considered "in writing".
Posted By: Ninky

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 09:07 PM

**Bump**

Anyone?
Posted By: David Dickinson

Re: Reg Z - Same Day Credit on Loan Payments - 08/31/09 09:12 PM

I think your ideas are exactly right - notify all new borrowers (on the note) at closing and notify existing customers with a mailer.
Posted By: bstritecky

Re: Reg Z - Same Day Credit on Loan Payments - 09/02/09 02:00 PM

How are banks handling payments on loans that have been demanded or are in foreclosure. We may have a loan that is three months past due that we have demanded - if the consumer sends only one payment and we accept this will start our demand process over. Anyone with any suggestions?
Posted By: JGo

Re: Reg Z - Same Day Credit on Loan Payments - 09/02/09 08:23 PM

I think I have a handle on how to give new customers guidelines on how payments are to be made to coincide with our current cutoff time. If anyone uses a Wolters Kluwer product such as ARTA I called them today and they told me they are not making any adjustments due to this change. I was told I could put additional wording in a loan template under the Additional Terms section or I could do an Addendum. I'm pretty sure they charge if you do an Addendum. My problem is with notifying current customers. I've attended training on this issue given by one of the Bankersonline Guru's and I've got a call into them now. They said in training that you would need to refer to your note to see how you have to notify your customers. Easy enough, but our note doesnít speak to this issue at all. Does this mean I don't have to notify them? I'm hoping I don't just because I'm going to send them a notice telling him how to make their payment and it's the same as we handle things now and they know that. I'm afraid it's just going to cause more confusion for the customers and if I don't have to do that I would love to avoid it.
Posted By: Farm Girl

Re: Reg Z - Same Day Credit on Loan Payments - 09/02/09 08:40 PM

We were, up until a few months ago, manually posting payments made after cut-off and on weekends and effective dating them to the date they were actually made. Due to some computer programs/software changes, we just stopped doing the manually posting and now this Reg Z change comes out!! I called our Senior Review Examiner (we are an FDIC bank)and he told me we would be okay to let them post the next day if they were made after cutoff or weekends as long as we had a notice about our cutoff time posted in the bank where customers could see it. We now have, besides our Funds Availability Notice, a notice telling them any loan payments made after our 3:00 cutoff time or on weekends will be posted the following day. However, if we have a customer complain that a late fee was assessed because the payment was not posted the actual day he made the payment, we will just automatically waive the late fee.
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/03/09 02:57 PM

Originally Posted By: csnyder
We now have, besides our Funds Availability Notice, a notice telling them any loan payments made after our 3:00 cutoff time or on weekends will be posted the following day. However, if we have a customer complain that a late fee was assessed because the payment was not posted the actual day he made the payment, we will just automatically waive the late fee.


Would you be willing to share your language for this? Did you model it like the Funds Availability Disclosure or make it simpler? (I think that disclosure is so confusing!)
Posted By: JGo

Re: Reg Z - Same Day Credit on Loan Payments - 09/03/09 08:42 PM

I didn't get the answer I was hoping for on the notification of currnet loan customers. Since our note doesn't address it I was told that we would need to get the customer to sign and send back a modification. The other alternative proposed was to send them notice of the payment stipulations and give them a time frame for responding.

The thing I don't like about either option is that you could be handeling customers differently, which is bound to lead to disaster.

I've heard of one bank that is going to in essense going to extened their grace period by a few hours (excluding the whole Saturday deal) and any payments that would apply that are taken after the cutoff time and result in a late fee, that they are going to refund the late fee. I don't know about you but this should keep you in compliance from what I understand; I'm just not sure how easily it can be done. I'll have to check with some people in operations on that one.
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/08/09 07:45 PM

Has anyone come up with language for the payment processing yet? Here's my shot at it - please let me know what you think:

Our policy, when you make a payment on your loan, is to give you credit for that payment on the date we receive your payment coupon/statement and source of funds. Our cut off times for loan payments are: (insert cut off times). If you do not have your payment coupon/statement or make your payment after the above cut off time, we will consider your payment as non-conforming. Nonconforming payments will be posted as soon as we are able to identify the loan to which the payment applies (for payments without coupons/statements) or on our next business day or no later than within five business days of receipt. If you make your loan payments by ACH or AFT, your payments are credited upon receipt. For these purposes, Saturdays, Sundays and federal holidays are not business days.

Payments can made in person, at the night depository, by telephone transfer (AFT), ACH or by mail to any of the branches.
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/09/09 04:06 PM

Bump? Am I way off here or is no one doing a disclosure/notice to the customers? Help!
Posted By: JGo

Re: Reg Z - Same Day Credit on Loan Payments - 09/10/09 06:28 PM

I believe we've decided to take a different approach. We've found a way to monitor payments that would have not received a late fee or been reported to the CB's as being late, if we had a 5:00 cut off time. 5:00 was used as an example as to what a reasonable time cut off time is.

We are going to reverse fees and/or backdate transactions as needed. We've looked at this for an entire month and didn't have any items that would have needed to of been adjusted.

This should eliminate the need to disclose to your current customers of any changes. Be sure to see your note how to handle this but our note didn't address it at all so to be safe we would have had to do modification agreements for all of them accoring to lending guru. This also eliminates the need to adjust your notes for new customers. I've spoken with our loan originating software company and there is a way to do it but it's just not ideal; that is to add the wording of specifying payment requirements.

I hope this helps.
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/10/09 06:59 PM

Thanks! Our Ops Dept didn't think it was possible to back date the transactions without making a lot of work for a lot of people. Interestingly, the note is silent regarding specifics on payments (other than due date and amount).

I guess my thinking was by disclosing the cut off time, etc. it was providing us a little protection under the reg.

I appreciate your comments. smile
Posted By: dottiec

Re: Reg Z - Same Day Credit on Loan Payments - 09/10/09 07:18 PM

I understand that that approach will stop any late charges. But if you calculate interest on a daily basis, that will not stop you from charging the customer "additional interest" as mentioned in the Crediting of Payments in section 36. How do you plan to address that?
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/10/09 07:53 PM

I don't know. Are you doing what the other poster suggested?
Posted By: dottiec

Re: Reg Z - Same Day Credit on Loan Payments - 09/11/09 01:21 PM

JGo's solution only handles the late charge issue. I wanted to know how they plan to address the "additional interest" problem.
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/11/09 01:54 PM

I re-read that section in the commentary and I wonder if they mean "additional interest" as in punitive interest, not the agreed upon accruing interest. I have a call into our examiners, I'll let you know what I find out, if anything.
Posted By: dottiec

Re: Reg Z - Same Day Credit on Loan Payments - 09/11/09 02:20 PM

Good luck getting an answer from the regulators. My OCC portfolio manager can't get answers to my questions and it's less than 20 days to implementation! I appreciate the help.
Posted By: comp123

Re: Reg Z - Same Day Credit on Loan Payments - 09/11/09 03:25 PM

We were informed that our regulators stated 4:00 was an acceptable cutoff time and Saturdays could be credited the following business day. We handled this by sending out a notice to customers the first of Sept. We included the cutoff times, must have coupon/acct # (or we have up to 5 days to credit), etc. The note for new customers will have appropriate language.
Posted By: Tesla

Re: Reg Z - Same Day Credit on Loan Payments - 09/11/09 06:26 PM

Thanks - that was what I was planning on doing too, but the interest restriction question came up. Are you backdating payments to avoid additional interest?
Posted By: comp123

Re: Reg Z - Same Day Credit on Loan Payments - 09/13/09 05:42 PM

If we do not receive the payments in the timeslot we indicated on the customer notice, we are not backdating. i.e. if we receive payment on Friday after 4, we will post and credit on Monday even though the bank is open until 6 on Friday. Our data service center processes M-F 8-4, so since the regulations allow us to follow that time if it was legally agreed upon (our current note allows for changes if provide notice), then we feel we are in good shape. (we hope!!)
Posted By: mbernard

Re: Reg Z - Same Day Credit on Loan Payments - 09/16/09 09:39 PM

Ok, on a related note...

We have a branch that closes at 4pm and almost all of our branches close at 1pm on Saturdays. So if we set our overall cutoff time at 5pm, does that mean we have to effective date all payments that are made to a "Night Drop Box" back to the previous day? Or can we set reasonable cutoff times per branch? LIke 4pm for Branch A and 5pm for Branch B.

Also, Our branches are open until 6pm on Saturday. So how does this cutoff time work when the branches are open that extra hour on that one day?

Thanks!
Posted By: mbernard

Re: Reg Z - Same Day Credit on Loan Payments - 09/17/09 04:04 PM

**Bump**

Anyone? =)
Posted By: comp123

Re: Reg Z - Same Day Credit on Loan Payments - 09/25/09 06:23 PM

From our understanding, if we disclose the requirements for crediting of payments (we have just added the language to note), then you can state that it can be 4:00 at one branch, or 5:00 at another. We too have branches that are open at different times on Friday. We decided to make it 4:00 for all branches to make it consistent. For any payment received after 4:00, we inform customers it will be credited the next day (as previously disclosed).
Posted By: southerngirl09

Re: Reg Z - Same Day Credit on Loan Payments - 09/25/09 06:30 PM

Does the new rule apply to everyone? Or is it only HELOCs and OD Line of Credit?
Posted By: comp123

Re: Reg Z - Same Day Credit on Loan Payments - 09/25/09 07:02 PM

REG Z - 226.36(c)(1) crediting of payments applies to credit secured by a consumer's principal dwelling. This does not apply to HELOC.
Posted By: rlcarey

Re: Reg Z - Same Day Credit on Loan Payments - 09/25/09 08:41 PM

But almost that same requirements will apply to all open-end credit in 07/10.
Posted By: AuditorK

Re: Reg Z - Same Day Credit on Loan Payments - 09/28/09 04:12 PM

Ok, someone tell me if I got this right.

Our notes currently state nothing about payment crediting guidelines. If we send out a letter to current borrowers, and include in the notes for new loans, that payments (regardless of method/type) are subject to the same cut-offs as our deposits (payments after 2:00 PM M-F will be credited next day, Saturday payments credited Monday) - we'd be okay? How do we know if 2:00 is "reasonable".
Posted By: Truffle Royale

Re: Reg Z - Same Day Credit on Loan Payments - 09/28/09 05:42 PM

Been wrestling with the same early cutoff monster here. Got this from a fellow banker...

Quote:
Under the October 1, 2009 Regulation Z rules, institutions may set a reasonable cut-off time for crediting loan payments. We have been asked about the reasonableness of a variety of cut-off times, some as early as 2 pm. So we ran it by the Fed and they informed us that a "reasonable" cut-off time would be 4 or 5 pm, Monday - Friday, where an institution is not substantially open for business on Saturdays. But the Fed has not budged for committing to anything less, ....
Posted By: Bank Angler

Re: Reg Z - Same Day Credit on Loan Payments - 09/28/09 07:25 PM

I ran the customer notification piece by our forms software provider, and here is there response. They also cited the reg and commentary for 226.26. Is notification to all current and future customers necessary?
Found the following information regarding Reg Z and the payment posting change effective 10/1/09. Iíve included the reg and commentary also.



We are not making revisions to our documents.

This pertains to one of the changes that are effective on October 1,2009. New requirements for servicing practices (no pyramiding of late charges, must credit payments as of the date of receipt, must provide loan payoff statements within a reasonable time).

Regulation Z does not require an institution to give their payments requirements in writing. Institutions MAY give the payment requirements in writing; however, if the requirements are not given in writing the regulation imposes implied guidelines.

With that being said, weis not creating any new documents or revising any existing documents at this time for this. Users may choose to add language to the additional terms area of the note, if applicable, or create an addendum to the note outside of the system.