Answer:
Answer by Al Miller:
Section 205.10(e)(1) says that no "financial institution or other person may condition an extension of credit to a consumer on the consumer's repayment by preauthorized electronic fund transfers, except for credit extended under an overdraft credit plan ..."
You are not conditioning the credit on automatic payments, only offering a reduced rate for automatic payments. Just make sure you include the fact that automatic payments from an account at your bank are required for the reduced rate.
Answer:
Answer by Bud Kudzu
Forget about the Reg for a minute and consider the financials...if you had a $150K loan (20 yr ammo, 5 yr balloon) at 9.25% and would drop the rate to 9% with auto-debit, you're essentially giving that customer approximately $236 every year for 5 years for the convenience. In my experience, most banks give too large a price break for this feature. The truth is, you are better off offering a dollar incentive to your lenders for selling auto debit, and selling the customer on the convenience aspect.
First published on BankersOnline.com 10/1/01
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