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Error on Loans Account (In Customer's Favor)

Answered by: 
John Burnett

Question: 
During a conversion the bank made an error regarding our loans account in the customers favor. These were paying demand deposit accounts which had been overdrawn. We would like to raise the APR to charge the existing customers the correct rate. Since this would have an adverse impact on the customer, we would have to send the notice to all existing customers, at least 60 days in advance. The question would be is there a sample form that we could utilize to send to our existing customers?
Answer: 

I don't think this is the standard case of a change in the rate of an open-end credit account, which could require advance notice. It's a situation in which the bank made an error in a conversion, and has been charging less than the correct rate on the accounts. If the bank's intent is to correct the error going forward (but not try to bill and collect for the interest lost to date due to the conversion error), I think a carefully worded letter of explanation would suffice. Overly simplified, the letter would say:
- There was an error in our [date] conversion of your account
- Since the conversion, we have been charging you ___% interest on the account balance instead of the correct rate of ___%
- We have corrected the error, and have been charging the correct rate of interest beginning [date]
- You will not be billed for the interest we failed to charge before that date.

First published on 06/13/2021

Filed under: 
Lending
Filed under compliance as: 
APR/APY
Interest Rate

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