Academic journal article ABA Banking Journal

Home Equity Change in Terms

Academic journal article ABA Banking Journal

Home Equity Change in Terms

Article excerpt

Q. Is it permissible for a bank to add an annual fee to an existing home equity product if the fee is not covered in the original contract?

A. Paragraph 5b (f) (3)(v), of 12 CFR 226, states:

"1. Insignificant changes. A creditor is permitted to make insignificant changes after a plan is opened. This rule accommodates operational and similar problems, such as changing the address of the creditor for purposes of sending payments. It does not permit a creditor to change a term such as a fee charged for late payments.

"2. Examples of insignificant changes. Creditors may make minor changes to features such as the billing cycle date, the payment due date (as long as the consumer does not have a diminished grace period if one is provided), and the day of the month on which index values are measured to determine changes to the rate for variable-rate plans. A creditor also may change its rounding practice in accordance with the tolerance rules set forth in [section] 226. …

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