Charge-Off

Timing in the federal banking agencies' policy

The Uniform Retail Credit Classification and Account Management Policy was published by the Federal Financial Institutions Examination Council (FFIEC) on behalf of the Federal Reserve, the FDIC, the OCC and the OTS (65 FR 36903, June 12, 2000). In the policy's words:

• Days past due. "Closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date should be classified Loss and charged off."

• Month end. "For operational purposes, whenever a charge-off is necessary under this policy, it should be taken no later than the end of the month in which the applicable time period elapses."

• Bankruptcy. "Loans in bankruptcy should be classified Loss and charged off within 60 days of receipt of notification of filing from the bankruptcy court or within the time frames specified in this classification policy, whichever is shorter, unless the institution can clearly demonstrate and document that repayment is likely to occur."

• Fraud. "Fraudulent loans should be classified Loss and charged off no later than 90 days of discovery or within the time frames adopted in this classification policy, whichever is shorter."

• Deceased borrowers. "Loans of deceased persons should be classified Loss and charged off when the loss is determined or within the time frames adopted in this classification policy, whichever is shorter."

• What Loss means. "An asset, or portion thereof, classified Loss is considered uncollectible, and of such little value that its continuance on the books is not warranted." The policy adds: "This classification does not mean that the asset has absolutely no recovery or salvage value."

The 2000 notice also states that the National Credit Union Administration, "also a member of FFIEC, does not plan to adopt the Uniform Policy at this time."

A 2023 CFPB report on the credit card market describes the term this way: "Accounts that remain delinquent for 180 days must be 'charged off,' meaning that the issuer can no longer consider the outstanding balance as an asset on its balance sheet." (CFPB, The Consumer Credit Card Market, 2023)

Where the term appears in consumer finance rules

• Regulation F. 12 CFR 1006.34(b)(3) defines the itemization date as "any one of the following five reference dates for which a debt collector can ascertain the amount of the debt," and one of the five is "The charge-off date, which is the date the debt was charged off."

• Regulation Z. "A periodic statement need not be sent for an account if the creditor deems it uncollectible, if delinquency collection proceedings have been instituted, if the creditor has charged off the account in accordance with loan-loss provisions and will not charge any additional fees or interest on the account, or if furnishing the statement would violate Federal law." (12 CFR 1026.5(b)(2)(i))

• Fair Credit Reporting Act. Among items a consumer report may not contain: "Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years." (15 U.S.C. 1681c(a)(4))