Existing HELOC Promotion

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Question:

The bank would like to target unused HELOCs and offer these clients a promotional rate of 2.99% for six months to use the line. After six months, if the advance(s) are not repaid, the rate would convert to the contract rate. What disclosures would be required upfront? Would we have to specify the contract rate that each individual HELOC would convert back to or can we just give a general disclosure abuot converting back to contract rate?

Answer:

This is a subsequent event, and the contract modification you are using should be reviewed by your legal department. The promotional APR and periodic rate should be included along with any other modification to the contract terms associated with the promotion. I would also recommend disclosing how future payments will be applied. Also, make sure that your periodic statements can properly handle multiple APRs on multiple balances.

First published on BankersOnline.com 10/19/09