Skip a Payment - Marketing & Compliance Issues

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Question:

Our marketing department wants to offer a skip a payment program to consumer loan customers. They will be sending out a mailer offering the customer the ability to skip one month’s payment during the Christmas holidays. Actually, it will be December through February and the customer can choose the month they want to skip payment. The mailer will explain what happens when they skip a payment, fees, etc. Are there any marketing/compliance issues we need to consider?

Answer:

Internally you have to know what the fee is for the skip a payment program. This can vary based on your lending laws, by state and loan product. Some loans may not allow the extension. If flood verifications are involved, you need to ensure that your certifications are up to date and if the property is in a SFHA that you provide the borrower notice informing them of this. This applies even if you are sure they know this already. If your flood certification is current, it need not be done again. This exception does not carry over to the borrower notice, however.

Your regulator may request that you track extensions. A customer receiving several extensions during the year and then requesting one again, may be deemed as being excessive and not demonstrating a proper payment plan to extinguish the debt. You should have in place a procedure that allows no more than (as an example) two to three extensions in any year and no more than four over the life of the loan. Certainly your policy can differ from these examples and may be tied to the original term of the loan.

First published on BankersOnline.com 12/17/07