Academic journal article ABA Banking Journal

What's Appropriate Daily Deadline for Closed-End Payments?

Academic journal article ABA Banking Journal

What's Appropriate Daily Deadline for Closed-End Payments?

Article excerpt

Q. Regulation Z states that banks can establish a reasonable cutoff time for payment of closed-end loans if the bank sends a conforming payment notice. However, our federal regulator says that the 3:00 p.m. cutoff time we set for closed-end loans is unreasonable. They claim that Federal Reserve guidance states that anything before 4:00 p.m. would be unreasonable. What has ABA heard to be considered a reasonable cut-off time on closed-end credit?

A. We recommend that you respectfully ask the examiner for formal, written guidance evidencing such an interpretation. The Commentary to 36(c)(2)-1 states:

"Payment requirements. The servicer may specify reasonable requirements for making payments in writing, such as requiring that payments be accompanied by the account number or payment coupon; 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. The servicer may be prohibited, however, from requiring payment solely by preauthorized electronic fund transfer. (See Sect. 913, Electronic Fund Transfer Act, 15 U.S.C. 1693k)" [Emphasis added.]

There is a relevant discussion on prompt crediting provisions in the final rule published in the Federal Register on July 30, 2008, located on page FR 44571 (http://tinyurl. …

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