When managing loan agreements, issuing clear and accurate statements is crucial. These documents not only serve as a record of the transaction, but also as a communication tool between the lender and the borrower. Errors and omissions can lead to confusion, mistrust, and even compliance violations that lead to legal complications. Here are seven mistakes to avoid when creating loan statements:.
1. Inaccuracies
From simple typos to significant inaccuracies such as incorrect balance or interest rate information, errors have no place on loan statements. Even small mistakes cause embarrassment and erode trust, while serious discrepancies can result in legal disputes.
Using automated systems that cross-reference data from loan documents can minimize mistakes. If data is entered manually it should be double-checked, and regular audits should be implemented to ensure accuracy.
2. Omissions and Lack of Transparency
Essential details like minimum payment amounts, due dates, and past-due and outstanding balances, should never be omitted from loan statements. By the same token, these documents should also facilitate transparency by clearly itemizing loan components such as interest, payment schedules, interest rates, and other charges. Craft templates that include all key data and avoid complicated language to reduce borrower confusion.
3. Outdated Information
When borrowers have questions about or require assistance with their loans, they need to know when and how to contact the lender. In the event of an office move, new or changed phone numbers or email addresses, or an updated web address, customers should be informed immediately. Make necessary alterations to loan statement templates so that all distributed correspondence is up-to-date.
4. Inaccessibility
It shouldn’t be difficult for borrowers to access and review their loan statements. If lenders aren’t providing multiple delivery and viewing options, there is a greater risk of late payments and customer dissatisfaction.
Offering statements via email or through an online portal that follows strong document security protocols is a smart way to ensure safe and simple availability. Allowing clients to opt in or out of paper mailings ensures they can access their loan statements in the manner that best meets their needs.
5. Hidden Changes and Inconsistencies
When loan statements include new or altered details, they shouldn’t be hard for borrowers to find. If anything is different, whether it be a new website address or a change in due dates, it should be clearly noted on statements. Consider bolding, highlighting, or using different colors to call attention to what is different. Attention should be called to the alterations for several billing cycles to ensure awareness.
Care should also be taken to limit frequent changes to the appearance of loan statements. The format and presentation of data should be familiar and consistent to avoid borrower misunderstandings. Stick with a standardized template and only make revisions when absolutely necessary. For maximum uniformity, aim for all loan documents to follow similar layouts across digital and printed formats by using the same sizing, positioning, fonts, etc.
6. Limited Payment Options
The more convenient it is for borrowers to make loan payments, the more likely they’ll be to adhere to due dates and remain compliant with repayment terms. Clearly outline all options available, including in-person, online, and mail-in payments.
In addition to providing a pre-addressed payment envelope in all loan statement mailings, be sure to also include a current mailing address on the statement itself. This gives borrowers the information they need to send the payment off promptly in the event that the remittance envelope is damaged or misplaced.
For online payments, using a secure payment system offers lenders a simplified means to accept credit, debit, and other digital remittances. By using a payment gateway, lenders don’t take on the direct burden of encrypting and securing sensitive data.
7. Legal Noncompliance
The errors and missteps outlined above aren’t just problems that frustrate borrowers. In many instances, they can also run lenders afoul of regulatory compliance. Getting into legal trouble is a costly situation in terms of both expense and reputational damage.
Perhaps the most significant law impacting loan statements is the Dodd-Frank Act, enacted in 2010. Among other measures meant to promote financial stability, the act established the Consumer Financial Protection Bureau (CFPB), which is tasked with issuing regulations and guidelines that all lenders must follow. The CFPB also has the power to penalize any entity or person it believes has violated the law. Using automated tools helps lenders monitor compliance and stay current on meeting regulatory requirements so they avoid legal repercussions.
Distributing accurate and fully transparent loan statements is key to maintaining trust and satisfaction among borrowers. By avoiding these mistakes, lenders can ensure that their loan statements are effective, clear, and compliant.
