Correcting a Closing Fee Error

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Question:

If it is determined after the closing that a customer was overcharged a fee (documented on the HUD-1), is it necessary to mail the customer a letter explaining what happened or could we just adjust their account? I do not see anything that specifically addresses this in the regulation, but it seems a good customer service move to alert them via letter.

Answer:

If the overcharge involves a fee that is also a finance charge, then you should "take the cure" prescribed by Section 130(b) of the Truth in Lending Act. In any case, the inflated fee can be viewed as a violation of Section 8(b) of RESPA. Given the severity of the penalty for Section 8 violations (up to one year at Club Fed), you will certainly want to document the steps you are taking to refund the unearned portion of the fee charged.

First published on BankersOnline.com 6/25/07