We are a state chartered bank in PA and are going to begin offering interest extensions on installment loans. I know we are limited to permitting 6 extensions over the life of the loan. What I do not know is if there are any limitations on the amount of the fee we can charge for this service?

What kind of fee are other PA banks charging to extend the term of an installment loan?

If you are still looking for information on this, I've done a lot of research on the subject. I think what you refer to in your post regarding the 6 extensions over the life of the loan comes from PA Banking Code 309. This is the same section that sets a limit on the fee at 1% of the outstanding balance at the time of the extension. (309 (f)(iv)). However, I doubt that you are still doing any lending under this authority as it applies to "add-on" loans. You may set your simple interest installment loans extension parameters without regulatory restriction.

If you are lending under Section 310 for real estate loans, the maturity date can not be extended more than 5 months past the original maturity date. (310 (f.2)(i))

Several years ago we switched to a flat fee rather than a percentage. For example, balances between $x,000 and $xx,000 pay a $50 fee to skip-a-payment.

Hope that helps. I would add one word of caution -- during our last FDIC examination we were criticized regarding extensions. The examiners wanted us to better document the reason for the extension, ie, what was the hardship, unless the extension was granted as part of a bank-wide offer. Also, they wanted us to provide the Board of Directors with regular (quarterly) reports of extensions over a certain number for the life of the loan. The point of the critism was to make sure the bank was not putting off the inevitable by granting "excessive" extensions.

Thank you for sharing your experience with me. This is just the type of information I was looking for.

Thanks again

Are you saying that we can extend loans more than six times and charge more that the 1% of we want? We have always gone by the state banking code but it appears from what you are saying that we don't need to.