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Is this Transaction Fee a Finance Charge?

Answered by: 
Randy Carey
Dan Persfull

Question: 
Here are a few details before the question: A Cash Reserve line of credit that is tied to the customer's checking or money market account only and the Line of credit (in increments of $100) is advanced only when funds are not in the checking account. Here's my question: The Business line wants to start charging a $10 transaction fee for each draw/advance and the $10 fee will be coming from the line of credit, not the checking account. Is this transaction fee a finance charge?
Answer: 

Answer by Dan Persfull:In my opinion, yes, because it is being asessed/advanced against the credit account.

Answer: 

Answer by Randy Carey:I have to add that it is a finance charge because it is a transaction fee for the advance of the credit line. Whether it is assessed against the credit line or the checking account would make no difference on whether it was a finance charge or not for APR purposes on the periodic statements.

See the OSC Paragraph 4(b)(2).
1. Checking account charges. A checking or transaction account charge imposed in connection with a credit feature is a finance charge under Section 226.4(b)(2) to the extent the charge exceeds the charge for a similar account without a credit feature.

First published on BankersOnline.com 10/02/06

First published on 10/02/2006

Filed under: 
Compliance
Filed under compliance as: 
Finance Charge
IT
Statements

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