- The lender does not charge the consumer any fee under the covered loan’s agreement (other than a late payment fee) or any fee under the consumer’s account agreement in the event that the lender initiates a transfer from the consumer’s account in connection with the covered loan and the account lacks sufficient funds to cover the transfer. This condition does not restrict the lender’s ability to charge a late payment fee on the covered loan, but does restrict the lender’s ability to charge any other fee under the loan agreement or account agreement due to the lack of sufficient funds in the account to cover the transfer initiated in connection with the covered loan. The loan agreement or account agreement setting forth the fee restrictions must be in effect when the loan is made and for the duration of the loan. Examples of fees subject to this restriction include but are not limited to nonsufficient fund fees, overdraft fees, and returned item fees. Comments 1041.8(a)(1)(ii)(A)-1 and -2.
- The lender does not close the consumer’s account in response to a negative balance that results from a transfer initiated in connection with the covered loan. This condition is only met if the terms of the loan agreement or account agreement provide that the lender will not close the account in such circumstances. The agreement must be in effect when the lender makes the covered loan and for the duration of the loan. Comment 1041.8(a)(1)(ii)(B)-2. A lender may close the account in response to events other than a transfer initiated in connection with the covered loan, such as at the consumer’s request, to meet other regulatory requirements, or to protect the account from suspected fraud or unauthorized use. Comment 1041.8(a)(1)(ii)(B)-1.
Although the restrictions do not need to be set forth in payday loans Lorain Ohio the consumer’s deposit account agreement if they are set forth in the consumer’s loan agreement, the restrictions must be in effect at the time that the covered loan is made and for the duration of the loan
Additionally, certain requirements set forth in the Rule may apply differently to a payment transfer that is also a “single immediate payment transfer at the consumer’s request.” For more information on single immediate payment transfers at the consumer’s request, see Payday Lending Rule Payment Transfers Question 7.
However, the terms restricting the fees and account closure must be in effect at the time that the covered loan is made and remain in effect for the duration of the loan
Yes, a lender that is also the institution holding the consumer’s deposit account can rely on the conditional exclusion if the loan agreement includes the fee and account closure restrictions set forth in 12 CFR §1041.8(a)(1)(ii), even though the deposit agreement does not. 12 CFR §1041.8(a)(1)(ii); comments 1041.8(a)(1)(ii)(A)-1 and 1041.8(a)(1)(ii)(B)-2.
The conditional exclusion only applies if the conditions in 12 CFR §1041.8(a)(1)(ii) are met. To meet these conditions, the lender must not actually charge the consumer any fee in the event that the account lacks sufficient funds to cover a transfer the lender initiates in connection with the covered loan, and the lender must not actually close the consumer’s account in response to a negative balance that results from a transfer the lender initiates in connection with the covered loan. 12 CFR §1041.8(a)(1)(ii); comment 1041.8(a)(1)(ii)(B)-1. Additionally, the lender must include these fee and account closure restrictions in either the terms of a consumer’s loan agreement or the terms of a consumer’s deposit account agreement. Comments 1041.8(a)(1)(ii)(A)-1 and 1041.8(a)(1)(ii)(B)-2.
No. 8(a)(1)(ii)(B) may not close a consumer’s account in response to a negative balance that results from a lender-initiated transfer in connection with the covered loan, but the lender is not restricted from closing the consumer’s account in response to another event, even if the event occurs after a lender-initiated transfer has brought the account to a negative balance. For example, a lender may close the account at the consumer’s request, for purposes of complying with other regulatory requirements (such as safety and soundness requirements), or to protect the account from suspected fraudulent use or unauthorized access and still meet the condition in 12 CFR §1041.8(a)(1)(ii)(B). Comment 1041.8(a)(1)(ii)(B)-1.
