[tlogue]

We have some confusion on freeze notices for HELOC’s. When the borrower is in default and 30 days have passed we are allowed to automatically freeze the account, correct? We do not have to notify them of a “cure” period and then freeze the, do we? Should our notices also state that if the account is brought current, privileges will be reinstated? Thank you.

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[rcooper]

From 1025.9(c)(1)(iii):
(iii) Notice to restrict credit. For home-equity plans subject to the requirements of §1026.40, if the creditor prohibits additional extensions of credit or reduces the credit limit pursuant to §1026.40(f)(3)(i) or (f)(3)(vi), the creditor shall mail or deliver written notice of the action to each consumer who will be affected. The notice must be provided not later than three business days after the action is taken and shall contain specific reasons for the action. If the creditor requires the consumer to request reinstatement of credit privileges, the notice also shall state that fact.

Review your contract- it might require more notice than the regulation. Also, you need to consider if this would be adverse action and, therefore, require additional notice under Reg B and FCRA.

[tlogue]

thank you for your reply. That is what I had been reading and then I had others point me to the official interpretation of the Bureau of Consumer Financial Protection — 12 CFR Chapter X . So is #2 telling me it’s not required? Thank you.

9(c)(1)(iii) Notice to Restrict Credit

1. Written request for reinstatement. If a creditor requires the request for reinstatement of credit privileges to be in writing, the notice under §1026.9(c)(1)(iii) must state that fact.

2. Notice not required. A creditor need not provide a notice under this paragraph if, pursuant to the commentary to §1026.40(f)(2), a creditor freezes a line or reduces a credit line rather than terminating a plan and accelerating the balance.

[rcooper]

It is based on the reason for freezing the account. The regulation (1026.9(c)(1)(iii)) is referring to action taken pursuant to reasons 1026.40(f)(3)(i)and(vi), while the commentary to this part of the regulation is referring to action taken pursuant to reasons in 1026.40(f)(2).

[Author]

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