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
