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TIL Disclosure and the Demand Feature

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Question: 
Our bank currently marks the demand feature on all loans. Also they do not mark "with assumed maturity of one year". I don't' feel that this is correct. Can you give me guidance as to the correct way?
Answer: 

You should only mark the "Demand Feature" box in the TIL disclosure if your loan contract actually has a demandfeature stated. A demand feature should not be confused with the ability to accelerate the loan in event ofdefault, however. A demand feature is just that - it means the bank can call the loan due and payable in full justbecause it wants to. Many states have state law restricting the use of demand features on consumer debt.

If your contract is of the kind where the contract and TIL disclosure are integrated, then checking this box may be, in fact adding a demand feature to the loan. If you are in a state that prohibits such practices for consumer loans, you could have a serious problem.

You would only check the box for "assumed maturity of one year" where you had a pure demand loan. By pure demand loan, I mean one where there is not other set payment date for the loan principal. This type of loan would probably be relatively rare, so that's probably not an issue for you with your practices.

First published on BankersOnline.com 10/1/01

First published on 10/01/2001

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