Are you, as a secured creditor, obligated to provide a borrower with a payoff statement on demand? In Wisconsin, the answer is a resounding yes. Under Wisconsin Statute section 708.15 (“Mortgage satisfaction”), a borrower may make a request to a secured creditor for a payoff statement, to be delivered to the borrower within 30 days of the request, and the secured creditor must provide the payoff statement.
The request is for a payoff within 30 days, so there’s no rush, right? Not so fast (or really, slow), says Wisconsin. Though the borrower’s request may ask for a payoff statement within 30 days, Wisconsin requires that the secured creditor provide the payoff statement within 7 business days of receiving the request if the encumbered property is residential property; if the encumbered property is not residential property, then the secured lender must deliver the payoff statement within a “reasonable longer time” after the request. Thus, there’s not even time to “drop the ball.” Payoff should be ordered immediately after receiving the request, and sent to the borrower as soon as it is available.
Will your institutional payoff statement work? It depends. Under the statute, the payoff statement must include: (a) the date the statement was prepared; (b) the payoff amount as of the date prepared; (c) a breakdown of the payoff amount; (d) the information necessary to calculate the payoff amount as of another date; (e) the time and location where payment is to be made; (f) the method of payment required; and, most importantly (g) the secured lender MAY NOT qualify the payoff statement with a statement such as “subject to change.” If your standard payoff statement states it is “subject to change,” you may want to consider a revision to make sure your statement complies with the statute.
In all the rush to get a payoff statement out to the borrower, what happens if the payoff amount is inaccurate? If the payoff statement reflects an inaccurate amount, the secured creditor may rectify the error with a revised statement unless the borrower has reasonably and detrimentally relied upon the original payoff statement. That being said, even if the payoff statement includes an inaccurate amount, it will not prohibit the secured creditor from recovering any sum not included in the erroneous payoff statement against any person liable.
What happens if you do, in fact, “drop the ball”? Failure to comply with this statute may result in actual damages, plus five hundred dollars, and attorney fees and costs being awarded to the borrower. However, the secured creditor is not liable under this section in any event if the secured creditor i) has established a reasonable procedure to achieve compliance with its obligations under this section, ii) complied with that procedure in good faith, and iii) was unable to comply with its obligations because of circumstances beyond its control.
Let’s say you send out the payoff statement and, ta da, you receive a check or wire for full payment. What are you obliged to do? The statute makes it clear that the secured creditor must record a satisfaction of the security interest within 30 days of receipt of full payment. In the case of a line of credit, a request for termination of the line of credit from the borrower must accompany the full satisfaction. But again, like with the payoff statement, if the secured creditor fails to comply with the statute, the secured creditor may be liable for actual damages, plus five hundred dollars, plus attorneys’ fees and costs being awarded to the borrower. Thus, it looks like the best bet for the secured creditor in Wisconsin is i) to provide an accurate payoff statement that includes the statutorily required information, ii) to provide that payoff statement quickly, and iii) to let the world know immediately after payoff that the security interest has been satisfied.
This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
