Cut-Off Time Roulette
There are also operational issues to
consider, again affecting both credit card
and non-credit card plans. The Credit
CARD Act amended Reg. Z rules specifying how and when payments must be
credited, including prohibiting late fees
if a due date falls on a day you don’t normally receive payments. Also included
are rules governing cut-off times, and
this is where it gets really interesting.
And confusing. And maddening if you’re
trying to get your arms around what can
be credited to tomorrow’s work compared to what must be processed today.
The rules address reasonable requirements for “conforming payments.” The
basic rule is that the bank must credit
a payment to the account as of the date
of receipt, but crediting a payment later
is not a problem as long as there are no
adverse consequences to the customer
(such as a late fee). No problem so far.
The difficulty comes when a payment is
made on the due date.
If a customer makes a payment on
the due date, in a method specified by
the bank (at a branch, telephone response system, Web site, etc.) and before
the cut-off time specified for receipt of
such payments, it is conforming and
therefore must be considered on-time.
The cut-off time cannot be before 5
p.m.; this goes for payments made
in-person, by mail, over the phone, or
electronically. The cut-off time can be
after 5, but not before (for example, for
payments received over the Internet,
perhaps the cut-off time is 9 or 10 p.m.).
Remember that 5 p.m. refers to the
time zone of the location specified by the
bank (the billing address), rather than
5 p.m. where the customer is located
(it’s always 5 o’clock somewhere, right?
Happy hour time!), so you don’t have to
worry about customers on vacation in
Hawaii arguing that their payments were
timely since it was 4:45 there when they
pressed the “Submit” button.
An additional wrinkle specifies that if a
credit card payment is made in-person at a
branch or office location at any time before
the close of business, it is considered to be
made that day (and therefore on-time). In
other words, there is no cut-off time. These
are payments made to branch staff; I can’t
just drop my payment in a mail slot at a
branch and have it be considered on-time.
But
this
sets up
a situation,
assuming a 5
p.m. cut-off time,
where if both my credit card
and HELOC payments are due on July 10,
and at 5: 10 p.m. on that date I show up at
a branch and make a payment to each account, my credit card payment is on-time
but my HELOC payment is late.
The rule doesn’t mandate that banks
keep their branches open until any particular time, however. You don’t have to
keep your branches open until 5 (or any
other time) if you don’t want to. If your
branches close at 4 p.m., then 4 p.m. is
your cut-off time for in-person credit card
payments (as well as any other in-person
open-end account payments); however,
payments made by other allowable methods can’t have an “end of the business day”
before 5 p.m.. You may have cut-off times
that vary by payment method, though;
for instance, branches close at 4 p.m., but
payments made via the Internet are considered on-time if made by 9 p.m.
All this must be made clear, of course,
so customers know where and how payments must be made to be conforming.
If there are no such guidelines (or if
they’re not disclosed), then payments
made at any time during normal business hours are assumed to be on-time.
Contrast these with the cut-off time
rules under Reg. CC to determine the day
of deposit to transaction accounts. Cut-off
times there can be no earlier than 2 p.m.
(noon for deposit-taking ATMs or off-site
locations). This further complicates the
previous scenario: again if I make a credit
card and HELOC payment at 5: 10 p.m. on
the due date, plus I also make a deposit to
changes to Reg. Z brought about by the Credit CARD Act have caused a lot of confusion among bankers. For starters, it’s not all about credit cards; some of the changes affect non-credit card open-end accounts. Change-in-terms rules, college student marketing provisions, and other
amendments affect both credit cards and non-credit card accounts (such as overdraft
lines and even HELOCs). It is the Credit CARD Act, right?
The basic rule is
that the bank must
credit a payment to
the account as of the
date of receipt, but
crediting a payment
later is not a problem
as long as there are no
adverse consequences
to the customer.
