Our core processor is going through a programming change with so called 'due-trailers' and we must select an option that would direct the system when to advance payment due when the borrower makes a payment.

It appears now that our system is set up to advance the payment date one due date with with the smallest of payment made (i.e. pay $1 of a $100 on July 1, and payment advances due to Aug 1, for $199, thus making the July payment look as if paid on time).

This strikes me as odd, and am looking for some direction to guidance that addresses such options and situations, and what may or may not be acceptable.

Thank you.

I'm not in any way a Reg expert, so I'll leave that to someone else. I'll give my opinion on the operations end:

You might contact your core processor to determine what other parameter choices are available to you for accepting payments and advancing the due date.

You should review your Note to see what it says regarding payments and late payments.

I'm trying to figure out the logistics of the credit bureau reporting. Whether the customer pays the $99 for July and $1-$100 for August payment anytime after July 31st they should still be considered over 30 days late for that July payment (July being 31 days). Will your system report that correctly or not since the payment date advanced?

What happens if they pay $100 ($99 to complete the July payment and $1 towards to August payment)? Will the system continue to advance the due date every month by accepting the balance of the previous months' payment plus $1 for that month? If that is the case I would guess that your customer's payments will be mainly interest and principal is not going to decrease as fast as your collateral is depreciating!

You also need to consider at what point do you generate late payments if the payment due date advances?

Our parameters are set to advance if payment is:

Comm'l & Ag - 99% made
Consumer Loans - 99% made
Mortgage Loans - 100% made

Sounds like the person setting this parameter either set the parameter backward or didn't understand the purpose of this parameter.

Our parameter is set to advance the payment if it is 5 or less dollars short.

I just wonder if you were to audit the loans for payment application just how many "delinquent dollars" you would find.

I am scared to find out...

Any others able to provide or dorect me to regulatory citing or opinions on this subject matter? The exec row is looking for something more that suggests we should be less aggressive in our advancing due dates.

How about your Call Report? Are you masking past due loans by bumping the due dates or is it somehow picking up this loan as past due even though the due date on the loan has been bumped?

Uniform Retail Credit Classification and Account Management Policy

Partial Payments on Open- and Closed-End Credit
Institutions should use one of two methods to recognize partial payments. A payment
equivalent to 90 percent or more of the contractual payment may be considered a full payment in
computing past due status. Alternatively, the institution may aggregate payments and give credit
for any partial payment received. For example, if a regular installment payment is $300 and the
borrower makes payments of only $150 per month for a six-month period, the loan would be
$900 ($150 shortage times six payments), or three full months past due. An institution may use
either or both methods in its portfolio, but may not use both methods simultaneously with a
single loan.

Thank you!

JJ - our Core Processor (FISERV) is doing the same thing and it's about time. When we converted to FISERV we set our parameter (unknowlingly) so that if they paid at even a penny then it advanced the due date and put the rest in a "variance". It was a nightmare because the CSR would tell them they were due for September but they were really still due $XXX.XX for August. It also made the loan appear "current" on the deliquent report. The secondary market doesn't allow you to post partial payments so that parameter was set up properly at conversion. We changed that parameter on our portfolio loans to match what we were using on the secondary market loan once we discovered what the system was doing. If a partial payment is made it holds in an "unapplied" account. The due date does not advance but the system subtracts the amount in unapplied from the total due so the CSR can simply tell the customer you still owe X.XX for August. We set a $25.00 tolerance so if they are short $25.00 or less they do not get reported to the credit bureau as late if they don't pay the X.XX but month end. We had due trailers on our old sysytem and loved it. It sure made a lot more sense to us than the so called "variances".

jl - Fiserv is our core as well. When you mention a tolerance, is that what you are doing going forward, or did have (prior to Monday)?

Our site doesn't go live until October. We have had it in place since 2004 on both the Mortgage and Consumer side. If you've ever had to fix a credit report for what might be a honest mistake - such as payment increase due to rate or escrow, or tranposition of the cents on a check - you'll know why we choose to do it.