Is it legal for a lender to allow interest to accrue after receipt of payoff on a car loan?

[cahiatt]

I'm not sure the subject asks the question in an understandable manner so let me explain.

I'm talking about car loans in general. There is usually a daily interest accrual on the account. Let's say you send them a check via traceable means and can verify they received it. If they decide to hold it or not post it for several days after receipt can they legally charge you the accrued daily interest between the time they received it and the time they decided to post it?

I ask as I recall the issue coming up with credit card payments where some lenders were not posting until the next day for anything that came in after 10am thus making some people get hit with late fees or additinoal interest charges.

[pipeguy]

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@cahiatt wrote:

I'm not sure the subject asks the question in an understandable manner so let me explain.

I'm talking about car loans in general. There is usually a daily interest accrual on the account. Let's say you send them a check via traceable means and can verify they received it. If they decide to hold it or not post it for several days after receipt can they legally charge you the accrued daily interest between the time they received it and the time they decided to post it?

I ask as I recall the issue coming up with credit card payments where some lenders were not posting until the next day for anything that came in after 10am thus making some people get hit with late fees or additinoal interest charges.

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I believe those practices were addressed in the CARD act which banned a lot of abusive practices with credit card payments.

http://ficoforums.myfico.com/fico/attachments/fico/creditcardact/1/1/Credit%20CARD%20Act%20and%20new...

[cahiatt]

But is there precedent or legal requirement that applies to auto loans in the same manner?

I'm asking as I sent a payoff to CapitalOne. I have proof of receipt but they say it may take up to 10 days for the payment to post. I can see how they may allow the interest accrual to calculate in the event the payment is returned or rejected and can add it in at that point. But the debt has been technically satisfied. I can't see how they can legally charge interest for 5 to 10 more days if they were provided with valid payment because they decide to wait a few days to process it.

[pipeguy]

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@cahiatt wrote:

But is there precedent or legal requirement that applies to auto loans in the same manner?

I'm asking as I sent a payoff to CapitalOne. I have proof of receipt but they say it may take up to 10 days for the payment to post. I can see how they may allow the interest accrual to calculate in the event the payment is returned or rejected and can add it in at that point. But the debt has been technically satisfied. I can't see how they can legally charge interest for 5 to 10 more days if they were provided with valid payment because they decide to wait a few days to process it.

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I can't say for sure having to do with Auto loans other than to check the terms of your original loan documents. There is a difference in crediting a payment and posting a payment (such as an online balance update or CRA posting). I would assume that once a payment is received it would have to be credited as a payment within 24 hours (1 business day). You might call the lender and ask when your paynment was applied and when you can expect your title to be sent. Specific auto loan (installment) payoff laws I would guess would be state regulated too.

[StartingOver10]

When you pay off installment loans, the payoff figure is good for X days. Ten days is common. Every time I've paid off a vehicle I send in the payoff overnight with the ten day figure and they refund the difference back if they only take say 3 days to process.

Even when you pay off a mortgage its the same concept, the payoff has a ten day time period for which it is valid and you are refunded the difference if the process takes fewer days.

Unless you can wire the funds the same day of pay off, I think you are looking at paying interest on the day or two to process the payoff. Check your promissory note to be sure (as posted above).

[cahiatt]

I undertand the 10 day payoff is typical to allow someone like a dealer handling a trade or bank doing a refi to do their end of the paperwork and get the check sent over for title release/transfer. In my case when you log into the Cap1 website you can get a payoff amount for the same day, next day or any combination from today to 10 days out. I pulled a payoff for the next day, used their overnight payment address and sent it over. They had it by 10am and have proof of receipt. As far as I'm concerned they were paid the next day.

I can't see how they are legally entitled to additional interest after the date they are paid if they decide to sandbag the check for a few more days.

[Chris123nTx]

When i paid off my cap one loan early (about a year early) last year, i didnt even think about sending certified checks or whatever. It just never occured to me. I used the same payment from my bank for the payoff as i did the montly payments under the loan.

They credited my account the next day as i recall, or it might have been even the same day. The only issue i had doing it that way was that it took about three weeks to get my title.

Not sure if that is how the system is supossed to work, but it did for me anyway.

[HoldingOntoHope]

Have you checked your loan online or called Capital One to inquire if the payment has processed and what the status is? I am confused as to whether there is an issue with their posting or if you are simply anticipating an issue? A simple phone call to them may give you an answer.

[Caliche]

I just refinanced an auto loan today using Wells Fargo....Capital One is the original lender.  I went to the CapOne site to get a payoff quote today before going into the Wells Fargo branch to sign the docs.  My payoff with CapOne was $32,200.  The check that Wells Fargo gave me today was made out for $32,975.  The Wells Fargo banker stated that's the amount Capone instructed them to make the check out for.  I plan on overnighting the check to Capone and understand the concept of daily accural and that it may take a few days for the check to post but that a $700 difference.  I sure hope I get a refund from CapOne.