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IR Disclosed in Promissory Note is Incorrect

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Question: 
If the interest rate disclosed in a promissory note is incorrect (it is lower than what is actually being charged), is that a Reg Z problem? What if the TILA disclosure is within tolerance and is considered correct, could this then be an issue with UDAAP?
Answer: 

A promissory note is not a collection of disclosures--it is the contract between your bank and the borrower. If you contracted for a rate that is below your prevailing price sheet, too bad. You must honor the terms in the note. If you are actually charging a rate other than the one stated in your note, you are in breach of contract. In some states, you may also be guilty of usury.

The only way to make this right is to rip off all payments since consummation and repost them according to the exact terms in your note. If the result of any of the incorrect calculations reached the borrower, you should send a letter explaining what happened and the steps you are taking to reverse your servicing error.

First published on 03/31/2019

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