18 Hoosier Banker September 2015 customer who makes his or her payment between the 11th and the 13th day beyond the scheduled due date is permitted, application of a delinquency charge for a payment from the last billing cycle in the first 10 days of a new billing cycle is not allowed. The current installment rule requires a lender to apply any payment made in this new billing cycle to current installments or payments due, and then to any delinquent payments or installments.2 Applying the following payment pattern: Because the January and February payments were made within 10 days of the February scheduled due date, they are first applied to the current payment due, even though the account has an added outstanding balance of $18.50 as a result of the late fee incurred in January. It is important to note, however, that the bank does not have to accept just one installment if the prior installment remains unpaid. Follow-up question: What if the February payment was made on Feb. 13: Would a bank be allowed to collect the delinquent late fee associated with January from the February payment first, and then apply the remainder to the February installment due? COMPLIANCE CONNECTION Question: How do I apply a late payment on a consumer loan for a preceding month made more than 30 days past its initial due date, but made before a subsequent payment becomes late? May I assess a late fee on the preceding installment first, and then apply the remainder to the current payment? Answer: If the payment is made on or within 10 days of the scheduled due date of the subsequent payment, you must apply the payment to 1 Indiana Code § 24-4.5-3-203.5(1); indexed pursuant to 750 I.A.C. 1-1-1. 2 I.C. § 24-4.5-3-203.5(3).A delinquency charge may not be collected on an installment or payment due that is paid in full within 10 days after its scheduled due date, even though an earlier maturing installment, minimum payment or a delinquency charge on: (a) an earlier installment, or (b) payment due; may not have been paid in full. For purposes of this subsection, payments are applied first to current installments or payments due, and then to delinquent installments or payments due. 3 I.C. § 24-4.5-3-203.5(3). the current amount due, prior to applying payment to any earlier and now-delinquent installment. Indiana is one of several states that applies the “current installment rule” when permitting a lender to assess a late fee on a consumer loan. Indiana law permits a bank to assess a delinquency charge of $18.50 on any installment or minimum payment due not paid in full within 10 days after its scheduled due date.1 While assessing a late fee to a Payment due Payment made Late fee 1/1/2015 $18.50 2/1/2015 2/2/2015 $0.00 3/1/2015 3/2/2015 $0.00 4/1/2015 4/2/2015 $0.00 © 2015 Krieg DeVault LLP THINKING BEYOND TRADITIONAL SOLUTIONS FOR FINANCIAL INSTITUTIONS FOR OVER 130 YEARS • Corporate Representation • Mergers and Acquisitions • Capital Offerings • Regulatory • Compliance • Supervision and Enforcement • New Product Development • Litigation • Commercial / Consumer Loan • Creditors’ Rights • Trust • Tax • Securities • Employment • Intellectual Property One Indiana Square • Suite 2800 • Indianapolis, Indiana 46204 p: 317.636.4341 f: 317.636.1507 INDIANA • ILLINOIS • GEORGIA • FLORIDA • MINNESOTA www.kriegdevault.com Continued on facing page.
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