EMPLOYEE AUTO LOANS
As an employer what steps need to be taken when making employee auto loans?
Thank You,
Matt Geerdes
Answers (1)
Neither a borrower nor a lender be
My first word of advice to an employer intending to make auto loans to employees is this: DON'T DO IT! If you insist on doing it, my advice would be to think again. Then don't do it.
When you get into the business of making auto loans to your employees, you face all the problems any lender would face, plus myriad problems that employers face.
First, are you going to check people's credit reports as part of the process? You'd better know the details of the Fair Credit Reporting and Disclosure Act. It's constraints on employers are different from the rules governing lenders, and you would be wearing both hats.
Next, how are you going to collect the payments? You must have a written authorization to withhold funds from your employee's paycheck, and if the employee quits, you don't have any authority to attempt to collect the balance from the employee's last check. And you'd better know all you can about the Fair Debt Collection Practices Act, as well as the provisions of the Uniform Commercial Code that deal with secured transactions.
What if you loan money to one employee and not another? You may be asking for a complaint of discrimination, even if you think you have a good reason for favoring one over the other.
Rather than loaning to employees, perhaps you could find a suitable credit union that would give your employees favorable terms if you make it the official credit union of your company.
posted by Francis Fanning | Oct 3, 2007 1:17 PM [EST]
My first word of advice to an employer intending to make auto loans to employees is this: DON'T DO IT! If you insist on doing it, my advice would be to think again. Then don't do it.
When you get into the business of making auto loans to your employees, you face all the problems any lender would face, plus myriad problems that employers face.
First, are you going to check people's credit reports as part of the process? You'd better know the details of the Fair Credit Reporting and Disclosure Act. It's constraints on employers are different from the rules governing lenders, and you would be wearing both hats.
Next, how are you going to collect the payments? You must have a written authorization to withhold funds from your employee's paycheck, and if the employee quits, you don't have any authority to attempt to collect the balance from the employee's last check. And you'd better know all you can about the Fair Debt Collection Practices Act, as well as the provisions of the Uniform Commercial Code that deal with secured transactions.
What if you loan money to one employee and not another? You may be asking for a complaint of discrimination, even if you think you have a good reason for favoring one over the other.
Rather than loaning to employees, perhaps you could find a suitable credit union that would give your employees favorable terms if you make it the official credit union of your company.
posted by Francis Fanning | Oct 3, 2007 1:17 PM [EST]
Answer This Question
Sign In to Answer this Question
Related Questions with Answers