Did You Get the Payment on Time?
NAFCU’s compliance team gets asked quite frequently about the deposit rules and availability – when is a deposit considered received, can we set a cut-off time for accepting deposits, when do we have to make the funds available, etc. But, did you know there are a similar set of rules for accepting payments on open-end credit accounts?
The key rule for accepting payments is found in section 1026.10(a), which states payments must be credited as of the date of receipt. Given the processing of the payment and ensuring good funds can take a couple of days, the commentary clarifies creditors are not required “to post the payment to the [member’s] account on a particular day; the creditor is only required to credit the payment as of the date of receipt.” So, if a payment is received on the due date, creditors are not required to process and post that same date, but they do need consider the payment received as of that date when it comes to things like determining whether the payment was timely.
This all raises a really important question – how do you determine the date of receipt? The commentary explains it is when the payment reaches the creditor and provides some helpful examples:
“2. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of completing the payment reaches the creditor. For example:
i. Payment by check is received when the creditor gets it, not when the funds are collected.
[…]
iv. Payment made via the creditor's Web site is received on the date on which the consumer authorizes the creditor to effect the payment, even if the consumer gives the instruction authorizing that payment in advance of the date on which the creditor is authorized to effect the payment. If the consumer authorizes the creditor to effect the payment immediately, but the consumer's instruction is received after 5 p.m. or any later cut-off time specified by the creditor, the date on which the consumer authorizes the creditor to effect the payment is deemed to be the next business day.”
Section 1026.10(b) gives creditors some flexibility to establish reasonable requirements for payments, including setting set cut-off times for payments. Any cut-off time must be 5 pm or later on the payment due date and nothing in the rule prohibits different cut-off times for different payment methods as long as they are all after 5 pm. The commentary explains payments received after any established cut-off time will be considered received the next business day and therefore may be credited to the account as of the next business day.
While cut-off times can apply to any payment method and any type of open-end credit, section 1026.10(b)(3) does provide a special rule for in-person payments on a credit card account. In-person payments are those payments made at a branch or office and with the assistance of an employee. Payments made without employee assistance are not in-person payments. For example, a payment provided directly to a teller at a branch is an in-person payment while a payment placed in an onsite drop box is not.
In-person payments must be accepted during all business hours and any payment made during those hours must be considered received that day. Any cut-off time for in-person payments cannot be earlier than the close of business for the branch or office where payments are accepted. A cut-off time for in-person payments can be earlier than 5 pm only if the branch or office closes before 5 pm. For example, suppose branch hours are 9 am to 6 pm Monday through Friday and 10 am to 3 pm on Saturdays and in-person credit card payments are accepted at all branches. If the payment due date falls on a weekday, the cut-off time for in-person payments must be 6 pm or later but if the payment due date falls on a Saturday, the cut-off time for in-person payments may be as early as 3 pm.
There is an additional caveat for when the payment due date falls on a day the creditor does not accept or receive mailed payments. Section 1026.10(d) explains if a creditor does not accept or receive payments by mail on the payment due date, any payment received on the next business day cannot be treated as a late payment. However, if payments by other methods can be received on a day mailed payments are not accepted, any payment by one of those other methods received on the next business day can be treated as late. For example, suppose mail is not received on Sundays but members may make credit card payments online on Sundays. The cut-off time for online payments is 8 pm. If a member makes an online payment Sunday at 9 pm and that Sunday is the payment due date, the rule permits the creditor to credit the payment as of the next business day and treat the payment as late, even if mailed payments are not accepted on Sunday.
While the movement towards online payments has led many to forget about these rules, knowing when a payment is received and when it must be credited to the account is important. The mail rule in section 1026.10(d) plays a particularly important role when it comes to holidays, so knowing when mail is not received can be important when determining the date of receipt, especially for those next day in-person payments.