Does anyone know of a state law that requires disclosure that loan payments made on Saturday will be applied using Mondays date? What do Indiana banks do regarding loan payments when you process them as of Mondays date? Anything we need to be concerned about-disclosures, etc
Thanks

IC 24-4.5-3-408
A lender must credit a payment to a consumer's account as of the date of receipt, except when a delay in crediting does not result in a finance charge or any other charge, including a late charge. See id. at §24-4.5-3-408. A delay in posting does not violate this requirement as long as the payment is credited as of the date of receipt. See id. If a lender specifies requirements for the consumer to follow in making payments of the contract, payment coupon book, payment coupon or statement, or periodic statement, but accepts a payment that does not conform to the requirements, the lender must credit the payment within two days of receipt of the payment. See id. If a lender fails to credit a payment as required, in time to avoid the imposition of a finance or other charge, the lender must adjust the consumer's account so that the charges imposed are credited to the consumer's account during the next payment period. See id.

You may want to put a sign at your transaction windows similar to:

Transactions received Mon - Thurs after X:XX PM will be posted the following business days.

Transactions received after X:XX PM on Fri and Transactions recieved on Sat will be posted Mon unless Mon is a holiday then they will be posted on Tues.

However, if you take a loan payment after the Fri cut off or on Sat, you have to make sure by posting the payment on Mon does not create a late charge.

The IN DFI's phone number is 317-232-3955 and they are most helpful.

I was doing some research and found this old post and want to bring it back up for discussion. It says that when we receive loan payments after our processing cutoff time or on a saturday we don't have to credit them as of that day if we put signs in our lobby stating that they'll be credited as of the next business day.

I noticed that the section of the Indiana UCCC cited here comes very close to Reg Z 226.10 for open end loans. But in Reg Z it says you don't have to credit the payment as of the same day if you specify requirements "on or with the periodic statement". It doesn't allow you to do it by putting a sign in the lobby.

This section of the Indiana UCCC says you can do it if the bank "specifies requirements for the consumer to follow in making payments of the contract, payment coupon book, payment coupon or statement, or periodic statement. . ."

Based on this wording does the Indiana law allow you to set up a cutoff time for this purpose? If so, can you do it by putting a sign in the lobby? Since the Indiana law covers closed-end loans eventhough Reg Z doesn't, can you add this type of requirement to an existing loan if it wasn't in the original loan note?

I'd like to hear from other state chartered banks in Indiana to find out how you deal with this issue.

Thank you.

I'm not sure what you are asking. If you're asking if you can set up a cut off time specifically for payments, then I would have to opine no.

Also keep in mind the section of the Code that requires the payment to be posted as of the date of receipt if posting later will cause a finance charge or late charge to be added to the account.

I.e., grace period ends on 1/8/05. At 2:30 PM on 1/7/05 you switch to 1/10/05 business. Borrower makes their payment at 4:00 PM on 1/7/05. You have to post the payment as of 1/7/05 to avoid the late charge, or you must reverse the late charge.

I'm not suggesting that we establish a cutoff time just for loan payments. We already have a cutoff time for all processing which includes deposit and loan transactions. Everything received before cutoff will be credited as of that day when it's processed overnight. The problem is that everything received after cutoff won't be run as part of the batch to be credited as of that day. It will be run with the next day's processing and will be credited as of the next day. So, in order to credit those payments received after cutoff as of the same calendar day on which they were received we have to process each one manually.

Section 408(3) says that if we specify a requirement for the customer to follow when making the payment but accept a payment that doesn't meet the requirement, we have two extra days to credit the payment. I don't think it's saying that we still have to credit it as of the day received. I think it's allowing us to credit it as of two days later.

So here's what I'm asking:

1. The commentary to Reg Z says that you can specify a cutoff time as one of those requirements so any payment received after cutoff doesn't have to be credited as of that same calendar day. Does the Indiana UCCC allow the use of a cutoff time for that reason too?

2. Reg Z says in 226.10(b) that the requirements specified by the bank must be on or with the periodic statement. The Indiana UCCC doesn't dictate where we list those requirements. In your old post you seemed to be recommending that the bank could put signs in its lobby to specify those requirements. Is that the case, or would we need to do it in a more direct way such as on the periodic statements or on the payment coupon?

3. You added a new point in your response today:

Quote:

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Also keep in mind the section of the Code that requires the payment to be posted as of the date of receipt if posting later will cause a finance charge or late charge to be added to the account.

I.e., grace period ends on 1/8/05. At 2:30 PM on 1/7/05 you switch to 1/10/05 business. Borrower makes their payment at 4:00 PM on 1/7/05. You have to post the payment as of 1/7/05 to avoid the late charge, or you must reverse the late charge.

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Section 408(4) only says that the bank must adjust the consumer's account to avoid the imposition of a finance charge or other charge "if a creditor fails to credit a payment as required by this section". In my view, if the bank specifies a requirement and credits the payment within two days after receipt as required in 408(3) then the bank didn't fail to credit it as required, so they don't have to credit back the late charge or the additional interest accrued during those few extra days. So my question is why would section 408(3) say you have two extra days to credit the account if section 408(4) says you have to credit it back the next month? In our view the refund of the late charge is not a real problem. We're not trying to gouge customers. The real issue is the daily operational burden of going back each day and manually processing any payment received after cutoff time since our system considers to be part of the next day's processing.

After reading your post and re-reading the Code, I think the differences of opinion may be reliant on what is considered the "date of receipt". Is the date of receipt the "actual" day received, or the "business" day received. I have always interpreted the Code to mean the "actual", but I also see where you're coming from.

I have placed a call to Mark Tarpey of the IN DFI. I will post the result of the conversation after he returns my call.

After conversation with the DFI, and I apologize I forgot to write the person's name down that called, but it wasn't Mark, indicates the date of receipt is the business date, not actual date because the Code does allow a bank to set a daily cutoff.

He indicated that the 2 day allowance is additional time to post the payment because it was received out side the stated criteria, however it does not negate the fact the payment has to post in a manner to avoid a finance charge or late charge if such delay would cause one. But, he also added, which surprised me, that the DFI does not look real close at this unless they see a pattern of payments being delayed and additional charges are occurring because of the delay.

As I have said many times before, the IN DFI is very helpful and I would recommend you contact them with any further questions on this issue.

Hope our exchange has been helpful.

Thanks! This has been helpful. But I'm still not sure I understand completely. I've called the DFI once in a while and I agee that they're very helpful, but I was hesitant to call them on this one. If we're not doing it properly I'd hate to bring it to their attention at this time because it could be a real mess to unwind.

So, based on your explanation, if we receive the loan payment after the cutoff time on Friday the "date of receipt" would be Monday, so we'd be allowed to post it as of Monday. But in cases where they'd be charged a late fee because the 10 day grace period ended on Friday, it sounds like the DFI is saying we would have to waive the late fee anyway. Is that correct? If we're allowed to credit the payment as of the "date of receipt" why would we have to reverse a fee that is charged as of the "date of receipt"?

If we have to reverse the late charge, here's the next logical step. Crediting the payment as of Monday will result in the consumer paying more over the life of the loan because it accures interest for a few more days at the larger principal amount until it is reduced by the payment on Monday. This additional interest is also a finance charge. So, if we have to reverse the late charge because we credit the payment as of Monday, don't we also need to reverse the additional interest that is caused by the slower principal reduction? If so, then we've really credited the payment as of Friday, not Monday, and we're right back where we started because the cutoff would have no effect.

Remember that my original explanation was based on my interpretation that the date of receipt was the "actual" date the payment was received. However, after the conversation with the DFI yesterday the date of receipt is the "business" date you receive the payment. If you receive the payment after the cutoff, it is allowable to post the payment as of the "business date" received, therefore you would not have to back date the payment or refund the fee.

However, the two day allowance, as I understood it in the conversation, was a leeway to process payments for ones received outside of your "specified requirements", however the delay in processing should not cause any additional charges to the account. IOW, if you received a payment at your branch on the 10th's business, but the payment has to be forwarded to a payment processing center, you have the two days to get the payment posted to the account, but it should be posted as of the business date received.

Although our loan agreement calls for the late charge after the 10th day, our system does not assess the late charge until the 11th day. We did this "one day" delay to allow for the borrowers that made their payment after the cutoff. In the borrower's mind they made the payment the day they were in the bank.

As long as you are posting the payment as of the "business" date it was received, you should be fine.

Now I've got it! And I'm relieved by the final outcome too. Thanks so much for your patience on this one.

You're welcome, and I also learned something new in this exchange!