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Small Servicer Partial Payments

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  • #32692
    Send2k1
    Participant

    What, if any, notice is required for a Small Servicer to change practices regarding treatment of Partial Payments and start using a suspense account instead of applying when received?

    1026 Official interpretation of Paragraph 36(c)(1)(ii) says, in part,
    1. Handling of partial payments. If a servicer receives a partial payment from a consumer, to the extent not prohibited by applicable law or the legal obligation between the parties, the servicer may take any of the following actions:
    iii. Hold the payment in a suspense or unapplied funds account. If the payment is held in a suspense or unapplied funds account, this fact must be reflected on future periodic statements, in accordance with ยง 1026.41(d)(3).

    The Bank however does not send Statements as exempt under the Small Servicer standards.
    I’m told vendor does not allow to add verbiage to the payment coupon.

    This change did not appear to trigger subsequent disclosures under 1026.20.
    I understand there is UDAAP risk with a change in practice, but would appreciate any help in assessing that and/or identifying other considerations.

    #32696
    rcooper
    Keymaster

    I think you’d need to determine what you’re contractually obligated to do. If you’re contractually obligated to apply it when received then you’d need to do that unless your customer(s) agree to amendmend/modify the contract (written/signed by the customer). I’d recommend getting legal counsel involved.

    There’s also a information that is required to be disclosed in transfer disclosures that you may need to consider (1026.39(d)(5)).

    • This reply was modified 3 weeks, 4 days ago by rcooper.
    #32761
    jholzknecht
    Keymaster

    Your partial payment policy is disclosed on your TRID Closing Disclosures. If the policy changes between delivery and closing a revised CD may be needed.

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