Skip-a-payment promotions – where credit
unions let members skip a loan payment for a month, often at the holiday
season – can be popular promotions. They sound simple, and members
may appreciate a break from a monthly bill. However, credit unions must
be aware of potentially complex compliance issues.
Before your credit union offers to let members
skip their December payments, review The League’s new ii Release No. B073. It summarizes several general
concerns that apply to both closed- and open-end lending, then it
focuses on issues that are specific to the type of loan.
For example, it may be a bad idea to charge
members a fee to skip a month’s payment. Skip-a-payment fees are
generally prohibited on closed-end consumer loans, and they can raise
thorny compliance issues for open-end consumer loans. The League
recommends that the credit union not charge skip-a-payment fees unless
they work with knowledgeable compliance counsel to help navigate the
Also, for both closed-end or open-end loans,
the Wisconsin Office of Credit Unions says it expects credit unions to
provide a way for members to agree in writing to the terms of any
skip-a-payment promotion. In addition, the Wisconsin Consumer Act can
require that the skip-a-pay agreement meet certain requirements and
contain certain notices. Credit unions planning a skip-a-payment
promotion need to consider:
How they will notify borrowers whose skip-a-payment
requests are approved;
Whether a credit union official will sign
skip-a-payment agreements; and
How a copy of the skip-a-payment agreement will be
provided to those obligated on the loan.
See ii Release No. B073 for more details –
before your holiday skip-a-pay promotion becomes the nightmare before
If you have any questions, please contact
me at (262) 408-6009.