Increasing Interest Rates on Past Due Loans

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Question:

Can a bank increase the interest rate on closed end loans when a customer is past due and/or in default? What are the parameters for doing this? Where can I find something in writing?

Answer:

This is a matter of state law. No matter what your laws require, your notes must outline this feature clearly. Be sure you are using a well-informed attorney for this purpose. Provisions of this type are a magnet for public complaints, so think carefully before you expose your bank's reputation.

First published on BankersOnline.com 9/01/08