Answer:
Answer by Randy Carey: If you reserved the right to change the terms of your open-end credit products within the language of your credit contract, then you could make this change by following the conditions outlined in the contract, the subsequent disclosure requirements found in Regulation Z, and any State law considerations.
For closed-end credit, the complete contract is signed, sealed, and delivered at the time of closing. The only way to modify a closed-end contract would be through a modification to which the customer agreed. You would have to only implement this change on a go forward basis for these credits.
Answer:
Answer by Dan Persfull: As Randy alludes to your contract and your state law will dictate if you can change the late charge for existing accounts.
On both our closed end and open end credit we have a clause that states we may change the late charge pursuant to changes in the applicable IN code for late charges.
If your state code has not recently changed the maximum amount of late charges you can charge, then it would be my opinion that you can not change the late charge on existing accounts even if you have similar language in your contract.
My reasoning for this is that if your state law allowed you to charge $25.00 at the time you entered into the contract, and you chose to contract for $10.00. Too bad, that was your choice. Now that you (may) need additional fee income, changing the late charge without a corresponding change in your state code would be a contract violation in my opinion.
But, as said before - check your state code and your contract.
First published on BankersOnline.com 5/2/05
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