Did Not Provide Periodic Statement on HELOC

Posted By: ComplyCycle

Did Not Provide Periodic Statement on HELOC - 10/16/18 12:37 PM

Hi, we inadvertently selected the incorrect payment start date on a HELOC and therefore have not been providing a periodic statement. Approximately six months ago, a significant withdrawal was made. Since we did not provide a periodic statement, the consumer has not been making any payments (interest only or otherwise). Therefore, the consumer currently owes over $1000.00 in interest.

I am wondering what our options are. Since we never provided a periodic statement, can we still charge the consumer for interest? Clearly, we won't apply fees of any type to the account. I believe our main regulatory concerns are 1026.7 and UDAAP; am I missing anything else?

Thank you for the feedback.
Posted By: ComplyCycle

Re: Did Not Provide Periodic Statement on HELOC - 10/17/18 08:01 PM

After completing additional research, I don't see anything that would limit us from collecting the outstanding interest on the account. Regulation Z allows us to correct inadvertent errors. While the billing error notice section (1026.13) addresses a failure to provide a periodic statement, I'm unable to locate this elsewhere in Regulation Z.

Can anyone please confirm if it's acceptable for us to collect the outstanding interest on an account in which we failed to provide a periodic statement for six months?

Thank you.
Posted By: rlcarey

Re: Did Not Provide Periodic Statement on HELOC - 10/17/18 09:22 PM

How did you disclosure the applicable APR for those months? As long as it was interest only and no fees where involved, then you might be OK.
Posted By: Richard Insley

Re: Did Not Provide Periodic Statement on HELOC - 10/17/18 10:27 PM

State law and your contract govern whether or not you're allowed to collect interest, how, and when. These issues should be discussed with the bank's attorney.

TILA civil liability becomes an issue when you violate Regulation Z. If you are in court litigating a violation, the liability and penalties are set by Section 130(a) of the TILA (15 USC 1640(a)). When a violation is self-discovered (such as your case), you can eliminate the risk of civil liability by following the "cure" procedure outlined in TILA Section 130(b)--HOWEVER--in order to achieve the cure, you must "make whatever adjustments in the appropriate account are necessary to assure that the person will not be required to pay an amount in excess of the charge actually disclosed...." Since you disclosed nothing, collecting any interest would appear to stand between you and a cure.

Finally, violations of Regulation Z are subject to the regulators' Interagency Enforcement Policy on Reg. Z. This policy statement is available from various sources, including online here: https://www.fdic.gov/regulations/laws/rules/5000-300.html. The bulk of this policy deals with non-disclosure or inaccurate disclosure of the FC and APR, however it's very important for you to note that the policy is triggered by examiner findings of patterns and practices of violations. If this case is truly one-of-a-kind, then the Interagency Policy would not be applicable.

Bottom line: Talk to your attorney about state law, your contract, and the liklihood of beating down a TILA lawsuit by this borrower.
Posted By: ComplyCycle

Re: Did Not Provide Periodic Statement on HELOC - 10/18/18 02:42 PM

Thank you both for the feedback. APR was interest only, no fees. State law and our contract do not appear to limit us. My main concern is consumer impact, so I'll work through that with my associates.