Can we establish a 3:00 p.m. cut-off time to receive residential loan payments, even if we are open until 4:00 p.m.? When do we have to post home loan payments that we receive on days that we do not process payments?

We believe that you may establish a 3:00 p.m. cut-off time for receiving (and crediting) payments on closed-end residential loans, but not for receiving (and crediting) payments on open-end residential loans.

When you establish a cut-off time for when loan payments are considered received, the cut-off time must be “reasonable.” For open-end loans secured by a residence, Regulation Z provides that a “reasonable” cut-off time may not be earlier than 5:00 p.m. Consequently, a 3:00 p.m. cutoff would not be acceptable for open-end credit secured by a residence.

However, a 3:00 p.m. cutoff might be acceptable for closed-end home loan payments, if your bank determines that such a cut-off time would not make it difficult for most customers to comply. For closed-end loans, Regulation Z does not specify a “reasonable” cut-off time, although the Official Interpretations clarify that “reasonable” in this context means that “it should not be difficult for most consumers to make conforming payments.” The Official Interpretations provide an example of 5:00 p.m. as a reasonable cut-off time for receiving payments by mail, but it is silent on examples for payments made by other means. Consequently, as a precaution, even if you establish a 3:00 p.m. cut-off for closed-end home loan payments, we recommend observing a 5:00 p.m. cut-off time for closed-end home loan payments received by mail, per the example in the Official Interpretations.

We should note that while there is no specific time for when payments must be posted, you must credit payments made to consumer loan accounts as of the date they are received. Consequently, you do not need to process or post home loan payments the day that they are received, but a delayed posting may not result in “a late charge, additional interest, or similar penalty to the consumer, or in the reporting of negative information to a consumer reporting agency.”

For resources related to our guidance, please see:

Regulation Z, Open-End Credit, 12 CFR 1026.10(b)(1) (“A creditor may specify reasonable requirements for payments that enable most consumers to make conforming payments.”)

Regulation Z, Open-End Credit, 12 CFR 1026.10(b)(2) (“Reasonable requirements for making payment may include: . . . Setting reasonable cut-off times for payments to be received by mail, by electronic means, by telephone, and in person (except as provided in paragraph (b)(3) of this section), provided that such cut-off times shall be no earlier than 5 p.m. on the payment due date at the location specified by the creditor for the receipt of such payments . . . .”)

Official Interpretations, Regulation Z, Paragraph 36(c)(1)(iii), Comment 1 (“The servicer may specify reasonable requirements for making payments in writing, such as . . . setting a cut-off hour for payment to be received, or setting different hours for payment by mail and payments made in person; specifying that only checks or money orders should be sent by mail; specifying that payment is to be made in U.S. dollars; or specifying one particular address for receiving payments, such as a post office box. . . .”)

Official Interpretations, Regulation Z, Paragraph 36(c)(1)(iii), Comment 2 (“Requirements for making payments must be reasonableit should not be difficult for most consumers to make conforming payments. For example, it would be reasonable to require a cut-off time of 5 p.m. for receipt of a mailed check at the location specified by the servicer for receipt of such check.”)

Official Interpretations, Regulation Z, Paragraph 10(b), Comment 4 (“In the absence of specified requirements for making payments (see § 1026.10(b)): (i) Payments may be made at any location where the creditor conducts business. (ii) Payments may be made any time during the creditor’s normal business hours. (iii) Payment may be by cash, money order, draft, or other similar instrument in properly negotiable form, or by electronic fund transfer if the creditor and consumer have so agreed.”)

Official Interpretations, Regulation Z, Paragraph 36(c)(1)(iii), Comment 3 (“In the absence of specified requirements for making payments, payments may be made at any location where the servicer conducts business; any time during the servicer’s normal business hours

Truth in Lending Act, 15 USC 1639f(a) (“In connection with a consumer credit transaction secured by a consumer’s principal dwelling, no servicer shall fail to credit a payment to the consumer’s loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, except as required in subsection (b).”)

Regulation Z, Open-End Credit, 12 CFR 1026.10(a) (“A creditor shall credit a payment to the consumer’s account as of the date of receipt, except when a delay in crediting does not result in a finance or other charge or except as provided in paragraph (b) of this section.”)

Official Interpretations, Regulation Z, Paragraph 10(b), Comment 1 (“Section 1026.10(a) does not require the creditor to post the payment to the consumer’s account on a particular date; the creditor is only required to credit the payment as of the date of receipt.”)

Regulation Z, Certain Home Mortgage Transactions, 12 CFR 1026.36(c)(1)(i) (“In connection with a consumer credit transaction secured by a consumer’s principal dwelling: (i) Periodic payments. No servicer shall fail to credit a periodic payment to the consumer’s loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, or except as provided in paragraph (c)(1)(iii) of this section. . . .”)

Official Interpretations, Regulation Z, Certain Home Mortgage Transactions, Paragraph 36(c)(1)(i), Comment 1 (“Under § 1026.36(c)(1)(i), a mortgage servicer must credit a payment to a consumer's loan account as of the date of receipt. This does not require that a mortgage servicer post the payment to the consumer's loan account on a particular date; the servicer is only required to credit the payment as of the date of receipt. Accordingly, a servicer that receives a payment on or before its due date (or within any grace period), and does not enter the payment on its books or in its system until after the payment's due date (or expiration of any grace period), does not violate this rule as long as the entry does not result in the imposition of a late charge, additional interest, or similar penalty to the consumer, or in the reporting of negative information to a consumer reporting agency.”)