In mid-April 2009 GMAC Mortgage suspended my credit privileges on my Home Equity line of credit (HELOC). I had mistakenly underpaid a bill by a small amount, and had not caught it before the 45-day grace period expired. GMAC Mortgage sent me a letter the very first day they possibly could suspend my credit, telling me that credit privileges had been permanently revoked and apologizing for “any inconvenience”. Good thing I wasn’t counting on that money to, say, cover a tuition payment that month.
I paid the bill and the late fee, and called the customer service number and asked for reinstatement. Every representative and supervisor I spoke to over the next several days said the same thing: Federal Law allowed them to revoke the line, and that it was not possible to reinstate it. One customer service rep was relatively non-defensive and human about it, and offered a rationale why the no-reinstatement policy existed. “If it was revoked for something we got wrong, for instance a too-low valuation of your home, we could reinstate it if you sent us documentation proving that your house was worth more than we thought. With a late payment, though, it’s just a fact and you can’t change that.” She also offered a fax number and mailing address where I could file a written appeal, while cautioning me that 99% of requests are not fulfilled.
By contrast, the supervisor I spoke with was extremely defensive, and stated categorically that there was no way I could have my credit reinstated without going through the entire application process again, and this only after paying my bill on time for “two or three months, or two or three years.” He also mentioned that it would be more likely to be reinstated if the economy improved, which is a red flag that the policy is not a reasonable response to an isolated, minor infraction, but instead a systematic tactic to reduce credit exposure in this economy, and that they are counting on poor customer education to remove customer protection.
Meanwhile my wife did some research and discovered a paper published by the Office of Thrift Supervision (OTS), Home Equity Line Of Credit Account Management Guidance, which says in very plain language that the law and official commentary are clear: all home equity line suspensions are meant to be temporary, and credit must be reinstated immediately when the conditions leading to suspension cease to exist.
With some help and encouragement from the OTS, I wrote a letter to GMAC Mortgage quoting the official comments on FDIC Regulation Z, which govern home equity line banking. Today, about 2 weeks later, we received notice that the line has been reinstated. So it does pay to be a squeaky wheel.
Here is the exact quote from my letter that I believe did the trick, and that I would recommend you use in your own letter if you ever need to write one:
“According to FDIC Regulation Z, lenders have the right to suspend credit for any breach of contract. They also have the responsibility to reinstate credit promptly. The official commentary states, according to e-CFR Title 12 Part 226 Subpart E, Paragraph 5b(f)(3)(vi), comment 2:
Temporary nature of suspension or reduction. Creditors are permitted to prohibit additional extensions of credit or reduce the credit limit only while one of the designated circumstances exist. When the circumstance justifying the creditor’s action ceases to exist, credit privileges must be reinstated, assuming that no other circumstances permitting such action exists at that time.
“Furthermore, in comment 4 of the same section:
Reinstatement of credit privileges. Creditors are responsible for ensuring that credit privieges are restored as soon as reasonably possible after the condition that permitted the creditor’s action ceases to exist…
“I paid the late amount plus the late fee as quickly as I could after learning of the oversight. Thus the ‘condition that permitted the creditors action’ has ceased to exist.”
I will update with status on my complaint to the FDIC against GMAC Mortgage for their obstructionist, and possibly illegal, policy of refusing to acknowledge, during phone conversations, the possibility of reinstating credit that has been suspended. If there is a policy that this kind of credit reinstatement is only possible as a result of written request, then it is equal to a denial of consumer protection to consistently give the impression while on the phone that there is no recourse.
If you get stonewalled by the supervisor or service rep, ask for a fax or address where you can send a written request for reinstatement so that you can lay out your legal argument in writing chapter and verse. Get your account up to date, and then blast away.