Consumer Loans: Bank is considering allowing a $5 tolerance on loan payments received and still advance the payment date in the core system. That is, if your monthly payment is $400 and you pay $395, your payment due date would would advance in system to the next month. Currently, if someone makes a payment (not in full) their due date stays the same.

Thus, the $5 deficiency would simply be added to your final payment. No late fee charged if within $5 of your total due. Are their any potential issues with this? Do we need to notify the customer of the deficiency each time they make a partial payment?

If these are retail loans, the following regulatory guidance applies:

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.