Topic: Skip-a-Payment Program
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Iowa law states that deferral fees for certain consumer credit transactions cannot exceed $30 per deferred installment. Does Illinois have a similar restriction for fees assessed under a skip-a-payment deferral program?
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No, we do not believe that Illinois imposes a similar restriction for fees assessed under a skip-a-payment deferral program. The Illinois Banking Act generally provides that state banks may charge fees that have been agreed to by their customers and that the establishment of fees are a “business decision to be made by a bank…
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We want to provide customers with a generic “skip-a-payment” form through DocuSign that does not contain any borrower-specific information. Borrowers who would like to take advantage of this offer would have to fill in the information related to their loan. Is this permissible, or do the forms need to include the borrower’s loan information (such as the maturity date) before the form is sent out?
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We believe a bank may offer a “skip-a-payment” option using a generic offer form, and we are not aware of any laws that would require you to include borrower-specific information in such a form. Of course, we recommend verifying the information that borrowers provide on the forms against your bank’s files. Also, we are aware…
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We are considering a COVID-19 loan modification program for existing clients that would allow for skipped payments, no credit reporting for past due amounts, extended pay periods, etc. Will we still be required to obtain flood determinations due to the modifications? We are aware of the interagency guidance stating that such modifications will not automatically be categorized as troubled debt restructurings.
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Whether such a modification would require you to a obtain a flood determination depends on the nature of the modification and whether you are able reuse a previous flood determination. This is the case regardless of whether the modification is categorized as a troubled debt restructuring. However, under recent FDIC guidance, you may be able…
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With respect to Illinois law, please offer any insights into granting borrowers’ requests to skip monthly payments on adjustable rate mortgages (ARMs) with thirty-year terms or monthly interest payments on home equity lines of credit (HELOCs). For the ARMs, the skipped payments would be added to the end of the scheduled loan payments, and for the HELOCs, the skipped interest-only payments would be spread over a few months to avoid the borrower being hit with one large interest payment.
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Illinois law does not expressly address mutually agreed-upon skipped payments — whether offered by the bank as a “skip-a-payment” program or when requested by the borrower. However, such arrangements are permissible in Illinois. It is important that your “skip-a-payment” agreement does not have the effect of canceling the original loan and substituting it for a…
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We offer a Christmas loan payment deferral program to our closed-end consumer loan customers of good standing. Our loan agreements do not include the option of skipping a payment. Do any special regulations or disclosure requirements apply? Do we have to charge the borrower for the accrued interest? Can we charge a fee?
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Your bank’s holiday deferred payment program should not trigger disclosure requirements under Regulation Z. For closed-end consumer loans, Regulation Z permits lenders to informally defer payments without triggering a change in terms or other disclosure requirements. It is important that your bank not cancel the original loan and substitute it with a new loan, because…
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Does Illinois prohibit banks from charging fees for a skip-a-payment program? What about other states? And can we charge fees only to Illinois residents (if the fees are prohibited in other states)?
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Charging a skip-a-payment fee in Illinois Illinois law permits banks to determine the amount of the fee charged for “skip-a-payment” programs. In Illinois, account service charges agreed to by a borrower, including fees for a skip-a-payment program, are authorized without limitation, “subject only to the provisions of [subsection 4(1)] of the Interest Act,” provided that the…