Modified Following

At first glance, a “modified following” sounds like something a cult leader might have. But it’s not. It’s actually a lot less dramatic than that (sorry, true crime fans).

“Modified following” refers to the practice that, if an automatic payment or exchange is due to be paid on a holiday, the due date for said transaction automatically moves to the following day. In other words, if we’ve got a payment due on September 1st, but September 1st ends up being Labor Day, our payment automatically changes so it’s due September 2nd. The goal here is to not have payments due on non-business days.

There is one exception. If we have a payment due on May 31st, for example, but Memorial Day is on May 31st, our payment will end up being due on the business day before the holiday. Why? Because May 31st is the last day of May, which means the modified following date would happen in June. If the institution or exchange in question wants the payment to process during the current month, they’ll often move it up a couple days to make sure that happens.

This isn’t just for automatic payments or exchanges. It can also apply to contracts, closing dates, and other important matters that are best conducted on business days. Whatever we’re talking about, if the phrase “modified following” is mentioned somewhere in the conversation, now we know: we’re not being asked to join a cult, we’re just being informed that payments and other important matters will be handled the day after a holiday instead of on it.