Skip to content

Placing Floor Rate On Existing HELOCs

Question: 
With interest rates continuing to decline, is it permissible to give a 30 day notice to current HELOC customers and place a floor rate?
Answer: 

After reading Section 226.5b(f) of Regulation Z, you will discover that creditors may NOT initiate unilateral ANY unfavorable change to HELOCs. In spite of the fact that other types of open end credit accounts can be administered this way, the HELOC is subject to much tougher rules.

Notice, however, that the prohibition only addresses unilateral changes. With the customer's agreement, you can modify anything. Although customers may not accept a floor with nothing in return, you might interest them in both a floor and a generously low ceiling. It's important to note that mutually agreeable modifications must be negotiated with each customer - you still can't impose changes across the board.

First published on BankersOnline.com 08/4/03

First published on 08/04/2003

Filed under: 
Filed under lending as: 

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics