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Automatic Payment Rates-Rate Sheets

Answered by: 
Dan Persfull

Question: 
In the past, we discounted our auto rates when a customer set up automatic payments. Going forward, we would like to set our rates sheets at a rate assuming automatic payments and then add 25bps to the rate if the customer does not wish to set up automatic payments. We would determine their wishes before disclosing the rate/APR and only disclose based on their given rate. Do you see any compliance issues with this providing that our rate sheets clearly indicate what is required to get the stated rate?
Answer: 

Your "preferred" rate is not your stated product rate. That rate is only available if the the auto payment is agreed too. I think the UDAAP would come into play if this rate sheet is available to the public or posted on your Web site. A reasonable person looking a that rate sheet would, or could, conclude that in order to be approved for the loan they must agree to an automatic payment.

First published on BankersOnline.com 9/5/11

First published on 09/05/2011

Filed under: 
Compliance
Lending
Filed under compliance as: 
Auto
Filed under lending as: 
Auto

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