Interest Incorrectly Documented on Consumer Loan

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Question:

The interest basis on a consumer loan (under $25,000, non-real estate secured) is documented incorrectly at 30/365 when it is supposed to be 365/365. Would a modification to the note suffice or would this require redisclosure? Should it be redrafted as a new loan?

Answer:

If the borrower agrees then a modification would suffice. How was the loan disclosed for TIL purposes? Are your disclosed APR and finance charges within tolerances? If not, those violations have to follow the requirements in section 130 of the TILA. A modification will not negate the violation if one exists.

First published on BankersOnline.com 1/12/09