Finance Charges & Construction Loan Inspection Fees

Question: For construction loans, we engage an outside party to perform inspections as construction progresses. Usually the customer pays the outside party directly. The fee does not pass through our bank. Is the fee for this a finance charge? If so, how do we calculate the amount?

Answer: These fees are indeed finance charges. It doesn't matter how you collect it. Third party fees that you require are finance charges if they would be a finance charge when imposed directly by you. As for how you calculate the amount, you will have to contact the outside party and ask about the fees. Be sure to include the fee for each inspection that you require or expect to happen.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 10, 8/02