FLYNN: With a missed loan payment, know who to talk to

Everyone these days seems to have a horror story to tell about a lost or misapplied loan payment. The likely explanation is downsizing, changes in regulatory law and aging computer systems — not greedy lenders.

Regardless of cause, if you experience a lost or misapplied payment, you’re probably in for an unpleasant adventure trying to get the matter resolved (with your first challenge being to find someone to talk to). Although, because of cost, there’s not much the legal profession can do to help you with these situations, here are a few thoughts that might be of use.

To begin, be sure to keep track of when and how your loan payments are made. If you can monitor activity in your loan account online, do so after every payment. In all events, read your billing statements carefully.

Next, be sure you understand the accounting system for your loan. Most credit card accounts, home equity lines of credit and car loans use a “simple interest” system. Here, payments are applied first to cover accrued interest and then to reduce principal. Since interest is charged daily, the sooner you make a payment, the less interest you pay.

Mortgage loans, on the other hand, use an amortization schedule. Under this system, your payment is applied to the next installment due, no matter when it is received.  No additional interest accrues if your payment is received a few days after its due date, and you don’t save money by making your payment before its due date. However, if your payment is received after the payment grace period — usually 15 days following the due date — you will owe a painful late fee.

Now, what to do if you’re the victim of a lost or misapplied payment? Well, you need to complain — politely but persistently — to your lender. And, if your lender is not being responsive, you need to complain to third parties who might have some influence over your lender. This includes the lender’s regulatory agency, as follows:  for national banks, the Office of the Comptroller of the Currency; for federally chartered savings and loans, the Office of Thrift Supervision; for federal credit unions, the National Credit Union Administration; for state banks, the Colorado Division of Banking; for state credit unions and savings and loans, the Colorado Division of Financial Services; for both state and federal banks and savings and loans, the Federal Deposit Insurance Corporation; and for lenders that aren’t banks (because they don’t take deposits), the Federal Trade Commission, the Colorado Division of Financial Services, and the Colorado Attorney General.  

If your payment dispute involves a credit card or home equity line of credit, it’s useful to know — and to let your lender know that you know —that the Federal Truth In Lending Act requires creditors to post payments on the day of receipt.  This same law sets up a formal billing error resolution process that credit card and HELOC lenders must follow. The process should be explained in your monthly billing statement.

After the dust settles on your dispute, order a free credit report at www.annualcreditreport.com or 1-877-322-8228 to be sure your credit history hasn’t been slammed as a consequence of the lost or misapplied payment.
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Jim Flynn is a private attorney at Flynn Wright & Fredman LLC in Colorado Springs. The firm primarily represents clients in the real estate, financial services and small-business sectors. Reach him at jtflynn@fwflegal.com.