OLYMPIA, Wash. – State regulators last week told Qualstar CU its plans to charge prepayment penalties in home equity lines of credit are impermissible under state law.
Echoing a ruling by NCUA for federal charters, the Department of Financial Institutions here ruled the state chartered credit union may recoup any costs incurred in the prepayment of a loan, such as waived appraisal or title fees, but it may not require a prepayment penalty.
Prepayment penalties have come under fire lately from consumer advocates and regulators because millions of borrowers are being hit with hefty penalties as they refinance high-cost ARMs or other mortgages. Both Congress and legislatures in several states have proposed banning prepayment penalties altogether.
