[tlogue]

Our loan department is wanting to implement a new HELOC product. They have added a few fees and charges to the disclosure that I am reviewing for this product. My question is are these allowable. I have been told fees are a matter of state law and I have looked and googled KRS statutes and have not had any luck. I am looking for some input and/or guidance. They are wanting to charge the following: an over the limit fee, a returned check fee and a stop payment fee. Are these allowable?
Thank you.

[jholzknecht]

HELOCs and Kentucky law don’t mix well. Whoever told you that fees are a matter of state law was correct. The question is which state law. Rates and fees on a loan are usury issues. Lenders in Kentucky can choose to make a HELOC under a number of statues. Many choose to lend under the Credit Union statute, which sound unusual, but is very common. That statute allows charges not exceeded 2% per month. The issue that is not clear is whether the 2% rate is limited to interest or does it include other charges, such as those your bank plans to impose. The safe interpretation is to include all charges in the total.

You need to determine which lending statute your bank has chosen to lend under. You may need to research minutes back to the 1980s to make that determination. Once you identified the statute you need to research the rate and fee limits under the statute and make sure your bank is operating safely within those limits.

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