Reg Z - Crediting of Payments

According to Reg Z if you receive payment for a loan secured by a customer's principal dwelling on Saturday you must credit the customer's account effective on Saturday as well and not wait until Monday?

Where?

226.10(d)

But, this is for all open-end credit, not necessarily secured by a primary dwelling. Is that what you were looking for?

226.36(c)(1)(i)

You should review the OSC to 226.36 Here is a link http://www.bankersonline.com/regs/226/suppi226-36.html

I take two things from it:

1)it's not the date of crediting that matters, it's whether a delay in crediting causes extra fees, interest, negative credit reporting, etc.

2)the 5:00 example in 226.36(c)(2)only addresses payments recieved by mail and is only an example. The comment right before it states that a bank may specify reasonable cut-off
times in writing--I sent a notice to our existing customers and include the same notice with disclosures for new loans.

226.10 is much stricter than 226.36

The rules states you cannot have a delay that causes additional interest. What is additional interest? If we are simple interest and a payment comes in on Sat, but does not get applied until Monday does the two days of interest on the old principal balance amount to additional interest?

We also interpreted that additional interest would accrue on all payments if processed the next business day (after our cut-off time). Therefore, we are manually pulling all of our affected loan payments (from our 4:00 cut-off through end of day, though you only need to go until 5:00 according to the reg) and posting those on the same DATE they are received.

I don't think the Saturday is an issue, because it's not a business day. As Spin stated, the bank may specify a reasonable (clarified to be no earlier than 5:00PM) cut-off time. We have payments received on Saturday disclosed to customers as next business day items to be applied the following Monday.

Just to keep things straight for those who are following this:

226.36 (special rules for certain home mortgage transactions) is a different monster than 226.10 (open-end credit)

226.36 allows you to specify in writing "reasonable" cut-off times and, IMHO, set rules about weekends and holidays. The 5:00 example in 226.36 only deals with payments recieved by mail.

226.10 does not allow a cut-off of earlier than 5:00 for any type of payment for any type of open-end credit. The exception is that credit card payments recieved in person must be accepted until the bank closes for the day (which can be before 5:00)

The one thing both sections have in common is that the focus is not so much on when you post payments, but whether the way you post payments negativly affects customers.

Regarding Saturdays for open-end credit (226.10), if mail is not recieved or accepted on Saturdays (or Sundays, or Holidays) and a due date falls on a Saturday, you cannot treat a payment reveived on Monday (or the next business day) as late. There is an exception for electronic and telephone transactions accepted on a non-mail day. [226.10(d)(2)]

I spoke with a FDIC examiner and he believed not crediting payments on Saturday was unreasonable even if you have established resonable requirements to accept payments (Monday through Friday; 5 pm cut-off; various methods to accept payments). Therefore, payments must be accepted when received, no exceptions other than those spelled out in the Reg. I also spoke to the federal reserve and they disagreed. Has anyone dealt with this issue or have an opinion?

How are banks handling payments made via internet banking after your cut-off time but before 5:00? Do you manually check for those and then backdate the payment to the date it was made?

We post all payments received over a weekend on Monday night. If the due date fell over the past weekend, we are backdating the payment to that day it was due. If you paid on the weekend and are due the following Tuesday, we are posting as of Monday's business. We worked with outside counsel, who also talked to the Fed extensively about this one.

226.10 does not allow for any cut-off before 5pm. BUT is anyone just establishing reasonable requirements for 226.10 and leaving it at that???