Pyramiding Late Fees

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ChrisGreen
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Pyramiding Late Fees

Postby ChrisGreen » Mon Jul 28, 2014 2:14 pm

A portion of the Credit Practices Rule implemented by the FTC, banks and credit unions prohibit "pyramiding" late fees. A bank or credit union may not assess late charges when a loan is current on principal and interest due but is in arrears on previous late charges. 12 CFR section 706.4(a).

The late fee portion of the Credit Practices Rule is as follows:

Section 444.4
(a) In connection with collecting a debt arising out of an extension of credit to a consumer in or affecting commerce, as commerce is defined in the Federal Trade Commission Act, it is an unfair act or practice within the meaning of section 5 of that Act for a creditor, directly or indirectly, to levy or collect any deliquency charge on a payment, which payment is otherwise a full payment for the applicable period and is paid on its due date or within an applicable grace period, when the only delinquency is attributable to late fee(s) or delinquency charge(s) assessed on earlier installment(s).

(b) For purposes of this section, collecting a debt means any activity other than the use of judicial process that is intended to bring about or does bring about repayment of all or part of a consumer debt.

16 C.F.R. section 444.4 (FTC), 12 C.F.R. section 227.15 (bank loans), 12 C.F.R. section 706.4 (credit union loans), 12 C.F.R. section 226.36(c)(1)(ii)(home loans), 12 C.F.R. section 1024.33c (transfer mortgage servicing).

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Chris Green
Christopher Green
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