non-refundable processing fee

Posted By: dutchbltz

non-refundable processing fee - 12/07/21 10:22 PM

Are there any issues/concerns around charging a 'processing fee' upfront on a consumer auto loan request? More particularly if that fee is not refundable; but I'm interested in any concerns surrounding that that I should perhaps consider.

This fee is listed on our rate sheet; but does not specify if it's refundable or not; nor when it will be paid.

Thoughts?
Posted By: rlcarey

Re: non-refundable processing fee - 12/08/21 11:50 AM

If by rate sheet you mean something that ends up in the hands of a consumer - get ready for a lookback and refund of any fees collected that were not refunded if the loan did not close.
Posted By: dutchbltz

Re: non-refundable processing fee - 12/08/21 02:11 PM

Are there any citations to support this? This doesn't sit right with me but I can't lay my finger on where it says we can't.
Posted By: rlcarey

Re: non-refundable processing fee - 12/08/21 02:25 PM

Try UDAAP - false and unclear advertising.
Posted By: dutchbltz

Re: non-refundable processing fee - 12/08/21 03:03 PM

What if the rate sheet did not end up in the customers' hands? (I don't know if it did or didn't.)

One of my concerns is that the fee is not applied consistently. It feels like a Fair Lending concern to me. But I also feel like there are probably other concerns - for example, if it's charged up front, shouldn't it be an application fee not a processing fee?
Posted By: Skittles

Re: non-refundable processing fee - 12/08/21 03:23 PM

If it's not applied consistently then you definitely have fair lending concerns.
Posted By: Rocky P

Re: non-refundable processing fee - 12/08/21 07:41 PM

Besides Fair Lending, think reputational. "The bank charged me $25. and never made me the loan." Expect regulatory complaints
Posted By: Dan Persfull

Re: non-refundable processing fee - 12/09/21 03:53 PM

What loan fees you can contract for is regulated by state law. Does your state law allow contracting for non-refundable fees?

IN non-refundable fees are tiered based on loan amount and they must be contracted for as being non-refundable.