Request for Reimbursement of Loan Origination Fee

B-200615: Jun 15, 1981

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An employee requested reimbursement of a loan origination fee incurred incident to his transfer to a new permanent duty station. The employing agency denied the reimbursement. Although the employee is aware that reimbursement for this fee is normally not allowed, he has asked GAO to reconsider its prior decisions in the light of the position taken by the Internal Revenue Service (IRS) that a loan origination fee is not interest. Legislation and regulations governing an employee's reimbursable expenses incident to a transfer from one permanent duty station to another prohibit the reimbursement of any fee, cost, charge, or expense which is determined to be part of the finance charge under the Truth in Lending Act. GAO has consistently held that where the Act and the implementing regulations define an item as a finance charge, reimbursement may not be allowed for that item. GAO has no authority to waive or modify the application of those regulations. The employee's entitlement to reimbursement is governed by the laws and regulations cited, not the laws and regulations governing taxation. The GAO position that loan origination fees are finance charges is based on the rationale that a fee which is stated as a fixed percentage of the amount loaned without reference to the type or extent of services actually performed. It is more in the nature of a charge for the use of money than it is for the costs of customary services performed in the course of settlement and processing a loan. GAO requires an itemization of those charges in order to insure that reimbursement is authorized only for those charges which are not a part of finance charges. The employee did not provide an itemization of the charges which make up the origination fee. GAO held that, if the employee believes that the fee contains reimbursable items, he may submit an itemization to his agency showing the specific charges that are included in the fee for reimbursement of otherwise proper expenses.