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Thursday, May 12, 2016

Reinstating Credit Privileges

QUESTION
We are a bank that received a warning from our regulator regarding the fact that we had suspended credit privileges for a borrower but did not restore the credit privileges in a timely manner. The borrower did not request the suspense. We made the determination based on some concerns involving their handling of the credit extension. What I want to know is this: when do we have to restore credit privileges?

ANSWER
Creditors must restore credit privileges as soon as reasonably possible after the condition that permitted the suspension of credit privileges cease to exists. [12 CFR Supp. I to Part 226 – Official Staff Commentary, § 226.5b(f)(3)(vi)-4]

If a consumer requested the suspension of credit privileges, a creditor must reinstate the privileges upon request of the consumer, provided no other circumstances justifying a suspension exists at the time. [12 CFR Supp. I to Part 226 – Official Staff Commentary, § 226.5b(f)(3)(vi)-5]

As to monitoring for a reasonable period of time after the condition that permitted the suspension ceases to exist, one method the creditor may use is to monitor the account on an ongoing basis to determine when the condition permitting the suspension ceases to exist. The creditor must investigate the account on a frequent enough basis to assure itself the condition continues to exist. [12 CFR Supp. I to Part 226 – Official Staff Commentary, § 226.5b(f)(3)(vi)-4]

Jonathan Foxx
President & Managing Director 
Lenders Compliance Group