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We are in the middle of an exam and they are telling us that our HELOC periodic statement should have the information regarding the grace period before a late charge is assessed. Our late fees are not additional finance charges. Our initial HELOC Disclosure and our credit agreement both state the late charge language. And we do not charge a late fee before the grace period ends. Do our HELOC statements have to have the language for the grace period before a late charge is assessed?
8) Grace period. The date by which or the time period within which the new balance or any portion of the new balance must be paid to avoid additional finance charges. If such a time period is provided, a creditor may, at its option and without disclosure, impose no finance charge if payment is received after the time period’s expiration.
Official interpretation of 7(b)(8) Grace Period
1. Terminology. In describing the grace period, the language used must be consistent with that used on the account-opening disclosure statement. (See § 1026.5(a)(2)(i).)
2. Deferred interest transactions. See comment 7(b)-1.iv.
3. Limitation on the imposition of finance charges in § 1026.54. Section 1026.7(b)(8) does not require a card issuer to disclose the limitations on the imposition of finance charges as a result of a loss of a grace period in § 1026.54, or the impact of payment allocation on whether interest is charged on transactions as a result of a loss of a grace period.
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Replies
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Good afternoon,
When reviewing the official interpretation on the CFPB website (https://www.consumerfinance.gov/rules-policy/regulations/1026/7/#a-6-i). It states –
Terminology. Although the creditor is required to indicate any time period the consumer may have to pay the balance outstanding without incurring additional finance charges, no specific wording is required, so long as the language used is consistent with that used on the account-opening disclosure statement. For example, “To avoid additional finance charges, pay the new balance before _” would suffice.
Based on this guidance, I would agree you do not need to have the language you have already disclosed in the HELOC disclosure and the credit agreement BUT it does indicate you would need some statement to “remind” them of the grace period. As shown above in what was taken from the CFPB.
Please let us know if you have additional questions.
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