We have had a few inquiries from customers who want to make their loan payment using a credit card over the phone. Some have Discover and like the 1% cash back at EOY. We are not currently doing this and wondered if this is common practice at other banks? Are there any reg issues to be aware of?

A loan payment is not a purchase. We would require the loan customer to come to the bank to make a cash advance against the card, mail us a convenience check. These options probably do not provide the favorable credit terms your customer is looking for. The alarmist side of my personality would make me concerned that my customer is using credit to pay on another extension of credit.

Then again, there are a number of credit card issuers that also have a "Bill Pay" feature where you can use your credit card to pay utility bills and such.

I believe that in order to do that, the customer has to set up bill pay from their credit card, and the payee would then either receive an ACH or paper check for payment.

You should let your customers know that you are not set up to take credit cards for payment, but if they really want to do this, they need to contact Discover (or whoever) and see if they can initiate it from their end.

Ditto the sentiment about borrowing from Peter to pay Paul.

I have bill pay set up from a credit card that offers rewards, and I pay it off in full every month, while earing free flights. It is a great win for me.

Heck - I did the same thing just to earn the points for an iPod Touch to give my daughter for a birthday present (those things are wickedly awesome btw) but one has to be very disciplined to pay the card in full each month. I know people who started out the right way, but then things happened......

Not sure about Discover Cards - but for VISA cards - you need to refer to your operating regulations:

Chapter 5: Card & Cheque Acceptance
5.2.F Prohibitions

Effective October 4, 2008, accept a Visa Consumer Credit Card or Commercial Visa Product, issued by a U.S. Issuer, to collect or refinance an existing debt.