Truth in Lending - Act PDF Book
Truth in Lending - Act PDF Book
The Truth-in-Lending Act (TILA) is a federal law that is a part of the Consumer Credit
Protection Act. It regulates how banks, credit cards and lenders must inform consumers
regarding the price and terms of credit.
The Congress finds that economic stabilization would be enhanced and the
competition among the various financial institutions and other firms engaged in the
extension of consumer credit would be strengthened by the informed use of credit.
The informed use of credit results from an awareness of the cost thereof by
consumers. It is the purpose of this subchapter to assure a meaningful disclosure of
credit terms so that the consumer will be able to compare more readily the various
credit terms available to him and avoid the uninformed use of credit, and to protect
the consumer against inaccurate and unfair credit billing and credit card practices.
The Congress also finds that there has been a recent trend toward leasing
automobiles and other durable goods for consumer use as an alternative to
installment credit sales and that these leases have been offered without adequate
cost disclosures. It is the purpose of this subchapter to assure a meaningful
disclosure of the terms of leases of personal property for personal, family, or
household purposes so as to enable the lessee to compare more readily the various
lease terms available to him, limit balloon payments in consumer leasing, enable
comparison of lease terms with credit terms where appropriate, and to assure
meaningful and accurate disclosures of lease terms in advertisements.
(a) The definitions and rules of construction set forth in this section are applicable
for the purposes of this subchapter.
(b) The term “Board” refers to the Board of Governors of the Federal Reserve
System.
(e) The term “credit” means the right granted by a creditor to a debtor to defer
payment of debt or to incur debt and defer its payment.
(f) The term “creditor” refers only to a person who both (1) regularly extends,
whether in connection with loans, sales of property or services, or otherwise,
consumer credit which is payable by agreement in more than four installments or for
which the payment of a finance charge is or may be required, and (2) is the person
to whom the debt arising from the consumer credit transaction is initially payable on
the face of the evidence of indebtedness or, if there is no such evidence of
indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of
an open-end credit plan involving a credit card, the card issuer and any person who
honors the credit card and offers a discount which is a finance charge are creditors.
For the purpose of the requirements imposed under part D of this subchapter and
sections 1637(a)(5), 1637(a)(6), 1637(a)(7), 1637(b)(1), 1637(b)(2), 1637(b)(3),
1637(b)(8), and 1637(b)(10) of this title, the term “creditor” shall also include card
issuers whether or not the amount due is payable by agreement in more than four
installments or the payment of a finance charge is or may be required, and the Board
shall, by regulation, apply these requirements to such card issuers, to the extent
appropriate, even though the requirements are by their terms applicable only to
creditors offering open-end credit plans. Any person who originates 2 or more
mortgages referred to in subsection (aa) of this section in any 12-month period or
any person who originates 1 or more such mortgages through a mortgage broker
shall be considered to be a creditor for purposes of this subchapter. The term
“creditor” includes a private educational lender (as that term is defined in section
1650 of this title) for purposes of this subchapter.
(g) The term “credit sale” refers to any sale in which the seller is a creditor. The
term includes any contract in the form of a bailment or lease if the bailee or lessee
contracts to pay as compensation for use a sum substantially equivalent to or in
excess of the aggregate value of the property and services involved and it is agreed
that the bailee or lessee will become, or for no other or a nominal consideration has
the option to become, the owner of the property upon full compliance with his
obligations under the contract.
(i) The term “open end credit plan” means a plan under which the creditor
reasonably contemplates repeated transactions, which prescribes the terms of such
transactions, and which provides for a finance charge which may be computed from
time to time on the outstanding unpaid balance. A credit plan which is an open end
credit plan within the meaning of the preceding sentence is an open end credit plan
even if credit information is verified from time to time.
(j) The term “adequate notice,” as used in section 1643 of this title, means a printed
notice to a cardholder which sets forth the pertinent facts clearly and conspicuously
so that a person against whom it is to operate could reasonably be expected to have
noticed it and understood its meaning. Such notice may be given to a cardholder by
printing the notice on any credit card, or on each periodic statement of account,
issued to the cardholder, or by any other means reasonably assuring the receipt
thereof by the cardholder.
(k) The term “credit card” means any card, plate, coupon book or other credit device
existing for the purpose of obtaining money, property, labor, or services on credit.
(l) The term “accepted credit card” means any credit card which the cardholder has
requested and received or has signed or has used, or authorized another to use, for
the purpose of obtaining money, property, labor, or services on credit.
(m) The term “cardholder” means any person to whom a credit card is issued or any
person who has agreed with the card issuer to pay obligations arising from the
issuance of a credit card to another person.
(n) The term “card issuer” means any person who issues a credit card, or the agent
of such person with respect to such card.
(o) The term “unauthorized use,” as used in section 1643 of this title, means a use
of a credit card by a person other than the cardholder who does not have actual,
implied, or apparent authority for such use and from which the cardholder receives
no benefit.
(p) The term “discount” as used in section 1666f of this title means a reduction
made from the regular price. The term “discount” as used in section 1666f of this
title shall not mean a surcharge.
(q) The term “surcharge” as used in this section and section 1666f of this title
means any means of increasing the regular price to a cardholder which is not
imposed upon customers paying by cash, check, or similar means.
(r) The term “State” refers to any State, the Commonwealth of Puerto Rico, the
District of Columbia, and any territory or possession of the United States.
(s) The term “agricultural purposes” includes the production, harvest, exhibition,
marketing, transportation, processing, or manufacture of agricultural products by a
natural person who cultivates, plants, propagates, or nurtures those agricultural
products, including but not limited to the acquisition of farmland, real property with a
farm residence, and personal property and services used primarily in farming.
(u) The term “material disclosures” means the disclosure, as required by this
subchapter, of the annual percentage rate, the method of determining the finance
charge and the balance upon which a finance charge will be imposed, the amount of
the finance charge, the amount to be financed, the total of payments, the number
and amount of payments, the due dates or periods of payments scheduled to repay
the indebtedness, and the disclosures required by section 1639(a) of this title.
(v) The term “dwelling” means a residential structure or mobile home which contains
one to four family housing units, or individual units of condominiums or cooperatives.
(w) The term “residential mortgage transaction” means a transaction in which a
mortgage, deed of trust, purchase money security interest arising under an
installment sales contract, or equivalent consensual security interest is created or
retained against the consumer's dwelling to finance the acquisition or initial
construction of such dwelling.
(x) As used in this section and section 1666f of this title, the term “regular price”
means the tag or posted price charged for the property or service if a single price is
tagged or posted, or the price charged for the property or service when payment is
made by use of an open-end credit plan or a credit card if either (1) no price is
tagged or posted, or (2) two prices are tagged or posted, one of which is charged
when payment is made by use of an open-end credit plan or a credit card and the
other when payment is made by use of cash, check, or similar means. For purposes
of this definition, payment by check, draft, or other negotiable instrument which may
result in the debiting of an open-end credit plan or a credit cardholder's open-end
account shall not be considered payment made by use of the plan or the account.
(y) Any reference to any requirement imposed under this subchapter or any
provision thereof includes reference to the regulations of the Board under this
subchapter or the provision thereof in question.
(z) The disclosure of an amount or percentage which is greater than the amount or
percentage required to be disclosed under this subchapter does not in itself
constitute a violation of this subchapter.
(A) the annual percentage rate at consummation of the transaction will exceed by
more than 10 percentage points the yield on Treasury securities having comparable
periods of maturity on the fifteenth day of the month immediately preceding the
month in which the application for the extension of credit is received by the creditor;
or
(B) the total points and fees payable by the consumer at or before closing will
exceed the greater of--
(ii) $400.
(2)(A) After the 2-year period beginning on the effective date of the regulations
promulgated under section 155 of the Riegle Community Development and
Regulatory Improvement Act of 1994, and no more frequently than biennially after
the first increase or decrease under this subparagraph, the Board may by regulation
increase or decrease the number of percentage points specified in paragraph (1)(A),
if the Board determines that the increase or decrease is--
(i) consistent with the consumer protections against abusive lending provided by the
amendments made by subtitle B of title I of the Riegle Community Development and
Regulatory Improvement Act of 1994; and
(B) An increase or decrease under subparagraph (A) may not result in the number
of percentage points referred to in subparagraph (A) being--
(4) For purposes of paragraph (1)(B), points and fees shall include--
(A) all items included in the finance charge, except interest or the time-price
differential;
(C) each of the charges listed in section 1605(e) of this title (except an escrow for
future payment of taxes), unless--
(iii) the charge is paid to a third party unaffiliated with the creditor; and
(5) This subsection shall not be construed to limit the rate of interest or the finance
charge that a person may charge a consumer for any extension of credit.
(3) Credit transactions, other than those in which a security interest is or will be
acquired in real property, or in personal property used or expected to be used as the
principal dwelling of the consumer and other than private education loans (as that
term is defined in section 1650(a) of this title), in which the total amount financed
exceeds $25,000.
(4) Transactions under public utility tariffs, if the Board determines that a State
regulatory body regulates the charges for the public utility services involved, the
charges for delayed payment, and any discount allowed for early payment.
(5) Transactions for which the Board, by rule, determines that coverage under this
subchapter is not necessary to carry out the purposes of this subchapter.
(6) Repealed. Pub.L. 96-221, Title VI, § 603(c) (3), Mar. 31, 1980, 94 Stat. 169
The Board shall prescribe regulations to carry out the purposes of this subchapter.
Except in the case of a mortgage referred to in section 1602(aa) of this title, these
regulations may contain such classifications, differentiations, or other provisions, and
may provide for such adjustments and exceptions for any class of transactions, as in
the judgment of the Board are necessary or proper to effectuate the purposes of this
subchapter, to prevent circumvention or evasion thereof, or to facilitate compliance
therewith.
(b) Model disclosure forms and clauses; publication, criteria, compliance, etc.
The Board shall publish model disclosure forms and clauses for common transactions
to facilitate compliance with the disclosure requirements of this subchapter and to
aid the borrower or lessee in understanding the transaction by utilizing readily
understandable language to simplify the technical nature of the disclosures. In
devising such forms, the Board shall consider the use by creditors or lessors of data
processing or similar automated equipment. Nothing in this subchapter may be
construed to require a creditor or lessor to use any such model form or clause
prescribed by the Board under this section. A creditor or lessor shall be deemed to
be in compliance with the disclosure provisions of this subchapter with respect to
other than numerical disclosures if the creditor or lessor (1) uses any appropriate
model form or clause as published by the Board, or (2) uses any such model form or
clause and changes it by (A) deleting any information which is not required by this
subchapter, or (B) rearranging the format, if in making such deletion or rearranging
the format, the creditor or lessor does not affect the substance, clarity, or
meaningful sequence of the disclosure.
Model disclosure forms and clauses shall be adopted by the Board after notice duly
given in the Federal Register and an opportunity for public comment in accordance
with section 553 of Title 5.
(1) In general
The Board may exempt, by regulation, from all or part of this subchapter any class of
transactions, other than transactions involving any mortgage described in section
1602(aa) of this title, for which, in the determination of the Board, coverage under
all or part of this subchapter does not provide a meaningful benefit to consumers in
the form of useful information or protection.
(A) The amount of the loan and whether the disclosures, right of rescission, and
other provisions provide a benefit to the consumers who are parties to such
transactions, as determined by the Board.
(B) The extent to which the requirements of this subchapter complicate, hinder, or
make more expensive the credit process for the class of transactions.
(D) whether the loan is secured by the principal residence of the consumer; and
(1) In general
The Board, by regulation, may exempt from the requirements of this subchapter
certain credit transactions if--
(ii) having net assets in excess of $1,000,000 at the time of the transaction;
and
(B) a waiver that is handwritten, signed, and dated by the consumer is first obtained
from the consumer.
Except as otherwise provided in this section, the amount of the finance charge in
connection with any consumer credit transaction shall be determined as the sum of
all charges, payable directly or indirectly by the person to whom the credit is
extended, and imposed directly or indirectly by the creditor as an incident to the
extension of credit. The finance charge does not include charges of a type payable in
a comparable cash transaction. The finance charge shall not include fees and
amounts imposed by third party closing agents (including settlement agents,
attorneys, and escrow and title companies) if the creditor does not require the
imposition of the charges or the services provided and does not retain the charges.
Examples of charges which are included in the finance charge include any of the
following types of charges which are applicable:
(1) Interest, time price differential, and any amount payable under a point,
discount, or other system of additional charges.
(5) Premium or other charge for any guarantee or insurance protecting the creditor
against the obligor's default or other credit loss.
(6) Borrower-paid mortgage broker fees, including fees paid directly to the broker or
the lender (for delivery to the broker) whether such fees are paid in cash or
financed.
(1) the coverage of the debtor by the insurance is not a factor in the approval by the
creditor of the extension of credit, and this fact is clearly disclosed in writing to the
person applying for or obtaining the extension of credit; and
(2) in order to obtain the insurance in connection with the extension of credit, the
person to whom the credit is extended must give specific affirmative written
indication of his desire to do so after written disclosure to him of the cost thereof.
(c) Property damage and liability insurance premiums included in finance charge
Charges or premiums for insurance, written in connection with any consumer credit
transaction, against loss of or damage to property or against liability arising out of
the ownership or use of property, shall be included in the finance charge unless a
clear and specific statement in writing is furnished by the creditor to the person to
whom the credit is extended, setting forth the cost of the insurance if obtained from
or through the creditor, and stating that the person to whom the credit is extended
may choose the person through which the insurance is to be obtained.
(d) Items exempted from computation of finance charge in all credit transactions
If any of the following items is itemized and disclosed in accordance with the
regulations of the Board in connection with any transaction, then the creditor need
not include that item in the computation of the finance charge with respect to that
transaction:
(1) Fees and charges prescribed by law which actually are or will be paid to public
officials for determining the existence of or for perfecting or releasing or satisfying
any security related to the credit transaction.
(2) The premium payable for any insurance in lieu of perfecting any security interest
otherwise required by the creditor in connection with the transaction, if the premium
does not exceed the fees and charges described in paragraph (1) which would
otherwise be payable.
(e) Items exempted from computation of finance charge in extensions of credit secured by
an interest in real property
The following items, when charged in connection with any extension of credit secured
by an interest in real property, shall not be included in the computation of the
finance charge with respect to that transaction:
(1) Fees or premiums for title examination, title insurance, or similar purposes.
(5) Appraisal fees, including fees related to any pest infestation or flood hazard
inspections conducted prior to closing.
(1) shall be treated as being accurate for purposes of this subchapter if the amount
disclosed as the finance charge--
(A) does not vary from the actual finance charge by more than $100; or
(B) is greater than the amount required to be disclosed under this subchapter; and
(2) shall be treated as being accurate for purposes of section 1635 of this title if--
(A) except as provided in subparagraph (B), the amount disclosed as the finance
charge does not vary from the actual finance charge by more than an amount equal
to one-half of one percent of the total amount of credit extended; or
(i) is a refinancing of the principal balance then due and any accrued and
unpaid finance charges of a residential mortgage transaction as defined in
section 1602(w) of this title, or is any subsequent refinancing of such a
transaction; and
if the amount disclosed as the finance charge does not vary from the actual
finance charge by more than an amount equal to one percent of the total
amount of credit extended.
The annual percentage rate applicable to any extension of consumer credit shall be
determined, in accordance with the regulations of the Board,
(1) in the case of any extension of credit other than under an open end credit plan,
as
(A) that nominal annual percentage rate which will yield a sum equal to the amount
of the finance charge when it is applied to the unpaid balances of the amount
financed, calculated according to the actuarial method of allocating payments made
on a debt between the amount financed and the amount of the finance charge,
pursuant to which a payment is applied first to the accumulated finance charge and
the balance is applied to the unpaid amount financed; or
(B) the rate determined by any method prescribed by the Board as a method which
materially simplifies computation while retaining reasonable accuracy as compared
with the rate determined under subparagraph (A).
(2) in the case of any extension of credit under an open end credit plan, as the
quotient (expressed as a percentage) of the total finance charge for the period to
which it relates divided by the amount upon which the finance charge for that period
is based, multiplied by the number of such periods in a year.
(b) Computation of rate of finance charges for balances within a specified range
Where a creditor imposes the same finance charge for balances within a specified
range, the annual percentage rate shall be computed on the median balance within
the range, except that if the Board determines that a rate so computed would not be
meaningful, or would be materially misleading, the annual percentage rate shall be
computed on such other basis as the Board may by regulation require.
The disclosure of an annual percentage rate is accurate for the purpose of this
subchapter if the rate disclosed is within a tolerance not greater than one-eighth of 1
per centum more or less than the actual rate or rounded to the nearest one-fourth of
1 per centum. The Board may allow a greater tolerance to simplify compliance where
irregular payments are involved.
(d) Use of rate tables or charts having allowable variance from determined rates
The Board may authorize the use of rate tables or charts which may provide for the
disclosure of annual percentage rates which vary from the rate determined in
accordance with subsection (a)(1)(A) of this section by not more than such
tolerances as the Board may allow. The Board may not allow a tolerance greater
than 8 per centum of that rate except to simplify compliance where irregular
payments are involved.
In the case of creditors determining the annual percentage rate in a manner other
than as described in subsection (d) of this section, the Board may authorize other
reasonable tolerances.
Compliance with the requirements imposed under this subchapter shall be enforced
under
(1) section 8 of the Federal Deposit Insurance Act [12 U.S.C.A. § 1818], in the case
of--
(A) national banks, and Federal branches and Federal agencies of foreign banks, by
the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national banks),
branches and agencies of foreign banks (other than Federal branches, Federal
agencies, and insured State branches of foreign banks), commercial lending
companies owned or controlled by foreign banks, and organizations operating under
section 25 or 25(a) of the Federal Reserve Act [12 U.S.C.A. §§ 601 et seq., 611 et
seq.], by the Board; and
(C) banks insured by the Federal Deposit Insurance Corporation (other than
members of the Federal Reserve System) and insured State branches of foreign
banks, by the Board of Directors of the Federal Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insurance Act [12 U.S.C.A. § 1818], by the
Director of the Office of Thrift Supervision, in the case of a savings association the
deposits of which are insured by the Federal Deposit Insurance Corporation.
(3) the Federal Credit Union Act [12 U.S.C.A. § 1751 et seq.], by the National Credit
Union Administration Board with respect to any Federal credit union.
(4) part A of subtitle VII of title 49, by the Secretary of Transportation with respect
to any air carrier or foreign air carrier subject to that part.
(5) the Packers and Stockyards Act, 1921 [7 U.S.C.A. § 181 et seq.] (except as
provided in section 406 of that Act [7 U.S.C.A. §§ 226, 227]), by the Secretary of
Agriculture with respect to any activities subject to that Act.
(6) the Farm Credit Act of 1971 [12 U.S.C.A. § 2001 et seq.] by the Farm Credit
Administration with respect to any Federal land bank, Federal land bank association,
Federal intermediate credit bank, or production credit association.
The terms used in paragraph (1) that are not defined in this subchapter or otherwise
defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall
have the meaning given to them in section 1(b) of the International Banking Act of
1978 (12 U.S.C. § 3101).
For the purpose of the exercise by any agency referred to in subsection (a) of this
section of its powers under any Act referred to in that subsection, a violation of any
requirement imposed under this subchapter shall be deemed to be a violation of a
requirement imposed under that Act. In addition to its powers under any provision of
law specifically referred to in subsection (a) of this section, each of the agencies
referred to in that subsection may exercise, for the purpose of enforcing compliance
with any requirement imposed under this subchapter, any other authority conferred
on it by law.
Except to the extent that enforcement of the requirements imposed under this
subchapter is specifically committed to some other Government agency under
subsection (a) of this section, the Federal Trade Commission shall enforce such
requirements. For the purpose of the exercise by the Federal Trade Commission of
its functions and powers under the Federal Trade Commission Act [15 U.S.C.A. § 41
et seq.], a violation of any requirement imposed under this subchapter shall be
deemed a violation of a requirement imposed under that Act. All of the functions and
powers of the Federal Trade Commission under the Federal Trade Commission Act
are available to the Commission to enforce compliance by any person with the
requirements imposed under this subchapter, irrespective of whether that person is
engaged in commerce or meets any other jurisdictional tests in the Federal Trade
Commission Act.
The authority of the Board to issue regulations under this subchapter does not impair
the authority of any other agency designated in this section to make rules respecting
its own procedures in enforcing compliance with requirements imposed under this
subchapter.
(1) In carrying out its enforcement activities under this section, each agency
referred to in subsection (a) or (c) of this section, in cases where an annual
percentage rate or finance charge was inaccurately disclosed, shall notify the creditor
of such disclosure error and is authorized in accordance with the provisions of this
subsection to require the creditor to make an adjustment to the account of the
person to whom credit was extended, to assure that such person will not be required
to pay a finance charge in excess of the finance charge actually disclosed or the
dollar equivalent of the annual percentage rate actually disclosed, whichever is
lower. For the purposes of this subsection, except where such disclosure error
resulted from a willful violation which was intended to mislead the person to whom
credit was extended, in determining whether a disclosure error has occurred and in
calculating any adjustment, (A) each agency shall apply (i) with respect to the
annual percentage rate, a tolerance of one-quarter of 1 percent more or less than
the actual rate, determined without regard to section 1606(c) of this title, and (ii)
with respect to the finance charge, a corresponding numerical tolerance as generated
by the tolerance provided under this subsection for the annual percentage rate;
except that (B) with respect to transactions consummated after two years following
March 31, 1980, each agency shall apply (i) for transactions that have a scheduled
amortization of ten years or less, with respect to the annual percentage rate, a
tolerance not to exceed one-quarter of 1 percent more or less than the actual rate,
determined without regard to section 1606(c) of this title, but in no event a tolerance
of less than the tolerances allowed under section 1606(c) of this title, (ii) for
transactions that have a scheduled amortization of more than ten years, with respect
to the annual percentage rate, only such tolerances as are allowed under section
1606(c) of this title, and (iii) for all transactions, with respect to the finance charge,
a corresponding numerical tolerance as generated by the tolerances provided under
this subsection for the annual percentage rate.
(2) Each agency shall require such an adjustment when it determines that such
disclosure error resulted from (A) a clear and consistent pattern or practice of
violations, (B) gross negligence, or (C) a willful violation which was intended to
mislead the person to whom the credit was extended. Notwithstanding the preceding
sentence, except where such disclosure error resulted from a willful violation which
was intended to mislead the person to whom credit was extended, an agency need
not require such an adjustment if it determines that such disclosure error--
(A) resulted from an error involving the disclosure of a fee or charge that would
otherwise be excludable in computing the finance charge, including but not limited to
violations involving the disclosures described in sections 1605(b), (c) and (d) of this
title, in which event the agency may require such remedial action as it determines to
be equitable, except that for transactions consummated after two years after March
31, 1980, such an adjustment shall be ordered for violations of section 1605(b) of
this title;
(B) involved a disclosed amount which was 10 per centum or less of the amount that
should have been disclosed and (i) in cases where the error involved a disclosed
finance charge, the annual percentage rate was disclosed correctly, and (ii) in cases
where the error involved a disclosed annual percentage rate, the finance charge was
disclosed correctly; in which event the agency may require such adjustment as it
determines to be equitable;
(C) involved a total failure to disclose either the annual percentage rate or the
finance charge, in which event the agency may require such adjustment as it
determines to be equitable; or
(D) resulted from any other unique circumstance involving clearly technical and
nonsubstantive disclosure violations that do not adversely affect information
provided to the consumer and that have not misled or otherwise deceived the
consumer.
In the case of other such disclosure errors, each agency may require such an
adjustment.
(A) if it would have a significantly adverse impact upon the safety or soundness of
the creditor, but in any such case, the agency may--
(i) require a partial adjustment in an amount which does not have such an impact;
or
(ii) require the full adjustment, but permit the creditor to make the required
adjustment in partial payments over an extended period of time which the agency
considers to be reasonable, if (in the case of an agency referred to in paragraph (1),
(2), or (3) of subsection (a) of this section), the agency determines that a partial
adjustment or making partial payments over an extended period is necessary to
avoid causing the creditor to become undercapitalized pursuant to section 38 of the
Federal Deposit Insurance Act [12 U.S.C.A. § 1831o];
(B) the amount of the adjustment would be less than $1, except that if more than
one year has elapsed since the date of the violation, the agency may require that
such amount be paid into the Treasury of the United States, or
(C) except where such disclosure error resulted from a willful violation which was
intended to mislead the person to whom credit was extended, in the case of an
open-end credit plan, more than two years after the violation, or in the case of any
other extension of credit, as follows:
(i) with respect to creditors that are subject to examination by the agencies referred
to in paragraphs (1) through (3) of subsection (a) of this section, except in
connection with violations arising from practices identified in the current examination
and only in connection with transactions that are consummated after the date of the
immediately preceding examination, except that where practices giving rise to
violations identified in earlier examinations have not been corrected, adjustments for
those violations shall be required in connection with transactions consummated after
the date of examination in which such practices were first identified;
(ii) with respect to creditors that are not subject to examination by such agencies,
except in connection with transactions that are consummated after May 10, 1978;
and
(iii) in no event after the later of (I) the expiration of the life of the credit extension,
or (II) two years after the agreement to extend credit was consummated.
(4)(A) Notwithstanding any other provision of this section, an adjustment under this
subsection may be required by an agency referred to in subsection (a) or (c) of this
section only by an order issued in accordance with cease and desist procedures
provided by the provision of law referred to in such subsections.
(B) In case of an agency which is not authorized to conduct cease and desist
proceedings, such an order may be issued after an agency hearing on the record
conducted at least thirty but not more than sixty days after notice of the alleged
violation is served on the creditor. Such a hearing shall be deemed to be a hearing
which is subject to the provisions of section 8(h) of the Federal Deposit Insurance
Act [12 U.S.C.A. § 1818(h)] and shall be subject to judicial review as provided
therein.
(6) A creditor shall not be subject to an order to make an adjustment, if within sixty
days after discovering a disclosure error, whether pursuant to a final written
examination report or through the creditor's own procedures, the creditor notifies the
person concerned of the error and adjusts the account so as to assure that such
person will not be required to pay a finance charge in excess of the finance charge
actually disclosed or the dollar equivalent of the annual percentage rate actually
disclosed, whichever is lower.
In the exercise of its functions under this subchapter, the Board may obtain upon
requests the views of any other Federal agency which, in the judgment of the Board,
exercises regulatory or supervisory functions with respect to any class of creditors
subject to this subchapter.
§ 1609. Repealed. Pub.L. 94-239, § 3(b)(1), Mar. 23, 1976, 90 Stat. 253
(1) Except as provided in subsection (e) of this section, this part and parts B and C
of this subchapter do not annul, alter, or affect the laws of any State relating to the
disclosure of information in connection with credit transactions, except to the extent
that those laws are inconsistent with the provisions of this subchapter and then only
to the extent of the inconsistency. Upon its own motion or upon the request of any
creditor, State or other interested party which is submitted in accordance with
procedures prescribed in regulations of the Board, the Board shall determine whether
any such inconsistency exists. If the Board determines that a State-required
disclosure is inconsistent, creditors located in that State may not make disclosures
using the inconsistent term or form, and shall incur no liability under the law of that
State for failure to use such term or form, notwithstanding that such determination is
subsequently amended, rescinded, or determined by judicial or other authority to be
invalid for any reason.
(2) Upon its own motion or upon the request of any creditor, State, or other
interested party which is submitted in accordance with procedures prescribed in
regulations of the Board, the Board shall determine whether any disclosure required
under the law of any State is substantially the same in meaning as a disclosure
required under this subchapter. If the Board determines that a State-required
disclosure is substantially the same in meaning as a disclosure required by this
subchapter, then creditors located in that State may make such disclosure in
compliance with such State law in lieu of the disclosure required by this subchapter,
except that the annual percentage rate and finance charge shall be disclosed as
required by section 1632 of this title, and such State-required disclosure may not be
made in lieu of the disclosures applicable to certain mortgages under section 1639 of
this title.
Except as provided in section 1639 of this title, this subchapter does not otherwise
annul, alter or affect in any manner the meaning, scope or applicability of the laws of
any State, including, but not limited to, laws relating to the types, amounts or rates
of charges, or any element or elements of charges, permissible under such laws in
connection with the extension or use of credit, nor does this subchapter extend the
applicability of those laws to any class of persons or transactions to which they would
not otherwise apply. The provisions of section 1639 of this title do not annul, alter,
or affect the applicability of the laws of any State or exempt any person subject to
the provisions of section 1639 of this title from complying with the laws of any State,
with respect to the requirements for mortgages referred to in section 1602(aa) of
this title, except to the extent that those State laws are inconsistent with any
provisions of section 1639 of this title, and then only to the extent of the
inconsistency.
In any action or proceeding in any court involving a consumer credit sale, the
disclosure of the annual percentage rate as required under this subchapter in
connection with that sale may not be received as evidence that the sale was a loan
or any type of transaction other than a credit sale.
Except as specified in sections 1635, 1640, and 1666e of this title, this subchapter
and the regulations issued thereunder do not affect the validity or enforceability of
any contract or obligation under State or Federal law.
(e) Certain credit and charge card application and solicitation disclosure provisions
The provisions of subsection (c) of section 1632 of this title and subsections (c), (d),
(e), and (f) of section 1637 of this title shall supersede any provision of the law of
any State relating to the disclosure of information in any credit or charge card
application or solicitation which is subject to the requirements of section 1637(c) of
this title or any renewal notice which is subject to the requirements of section
1637(d) of this title, except that any State may employ or establish State laws for
the purpose of enforcing the requirements of such sections.
(2) uses any chart or table authorized by the Board under section 1606 of this title
in such a manner as to consistently understate the annual percentage rate
determined under section 1606(a)(1)(A) of this title, or
(3) otherwise fails to comply with any requirement imposed under this subchapter,
shall be fined not more than $5,000 or imprisoned not more than one year, or both.
Any department or agency of the United States which administers a credit program
in which it extends, insures, or guarantees consumer credit and in which it provides
instruments to a creditor which contain any disclosures required by this subchapter
shall, prior to the issuance or continued use of such instruments, consult with the
Board to assure that such instruments comply with this subchapter.
(b) Inapplicability of Federal civil or criminal penalties to Federal, state, and local agencies
No civil or criminal penalty provided under this subchapter for any violation thereof
may be imposed upon the United States or any department or agency thereof, or
upon any State or political subdivision thereof, or any agency of any State or political
subdivision.
Each year the Board shall make a report to the Congress concerning the
administration of its functions under this subchapter, including such
recommendations as the Board deems necessary or appropriate. In addition, each
report of the Board shall include its assessment of the extent to which compliance
with the requirements imposed under this subchapter is being achieved.
§ 1614. Repealed. Pub.L. 96-221, Title VI, 616(b), Mar. 31, 1980, 94 Stat. 182
(1) In general
If a consumer prepays in full the financed amount under any consumer credit
transaction, the creditor shall promptly refund any unearned portion of the interest
charge to the consumer.
This subsection shall apply with respect to any prepayment of a consumer credit
transaction described in paragraph (1) without regard to the manner or the reason
for the prepayment, including--
(B) any prepayment made as a result of the acceleration of the obligation to repay
the amount due with respect to the transaction.
For the purpose of calculating any refund of interest required under subsection (a) of
this section for any precomputed consumer credit transaction of a term exceeding 61
months which is consummated after September 30, 1993, the creditor shall compute
the refund based on a method which is at least as favorable to the consumer as the
actuarial method.
(1) In general
Before the end of the 5-day period beginning on the date an oral or written request
is received by a creditor from a consumer for the disclosure of the amount due on
any precomputed consumer credit account, the creditor or assignee shall provide the
consumer with a statement of--
(B) if the amount disclosed pursuant to subparagraph (A) includes an amount which
is required to be refunded under this section with respect to such prepayment, the
amount of such refund.
If the customer's request is in writing, the statement under paragraph (1) shall be in
writing.
A consumer shall be entitled to obtain 1 statement under paragraph (1) each year
without charge.
(d) Definitions
The term “actuarial method” means the method of allocating payments made on a
debt between the amount financed and the finance charge pursuant to which a
payment is applied first to the accumulated finance charge and any remainder is
subtracted from, or any deficiency is added to, the unpaid balance of the amount
financed.
The terms “consumer” and “creditor” have the meanings given to such terms in
section 1602 of this title.
(3) Creditor
(A) has the meaning given to such term in section 1602 of this title; and
(B) includes any assignee of any creditor with respect to credit extended in
connection with any consumer credit transaction and any subsequent assignee with
respect to such credit.
(a) Duty of creditor or lessor respecting one or more than one obligor
Subject to subsection (b) of this section, a creditor or lessor shall disclose to the
person who is obligated on a consumer lease or a consumer credit transaction the
information required under this subchapter. In a transaction involving more than one
obligor, a creditor or lessor, except in a transaction under section 1635 of this title,
need not disclose to more than one of such obligors if the obligor given disclosure is
a primary obligor.
If a transaction involves one creditor as defined in section 1602(f) of this title, or one
lessor as defined in section 1667(3) of this title, such creditor or lessor shall make
the disclosures. If a transaction involves more than one creditor or lessor, only one
creditor or lessor shall be required to make the disclosures. The Board shall by
regulation specify which creditor or lessor shall make the disclosures.
(c) Estimates as satisfying statutory requirements; basis of disclosure for per diem interest
The Board may provide by regulation that any portion of the information required to
be disclosed by this subchapter may be given in the form of estimates where the
provider of such information is not in a position to know exact information. In the
case of any consumer credit transaction a portion of the interest on which is
determined on a per diem basis and is to be collected upon the consummation of
such transaction, any disclosure with respect to such portion of interest shall be
deemed to be accurate for purposes of this subchapter if the disclosure is based on
information actually known to the creditor at the time that the disclosure documents
are being prepared for the consummation of the transaction.
The Board shall determine whether tolerances for numerical disclosures other than
the annual percentage rate are necessary to facilitate compliance with this
subchapter, and if it determines that such tolerances are necessary to facilitate
compliance, it shall by regulation permit disclosures within such tolerances. The
Board shall exercise its authority to permit tolerances for numerical disclosures other
than the annual percentage rate so that such tolerances are narrow enough to
prevent such tolerances from resulting in misleading disclosures or disclosures that
circumvent the purposes of this subchapter.
(a) Information clearly and conspicuously disclosed; “annual percentage rate” and “finance
charge”; order of disclosures and use of different terminology
Any creditor or lessor may supply additional information or explanation with any
disclosures required under parts D and E of this subchapter and, except as provided
in sections 1637a(b)(3) and 1638(b)(1) of this title, under this part.
(c) Tabular format required for certain disclosures under section 1637(c)
(1) In general
In the regulations prescribed under paragraph (1)(A) of this subsection, the Board
shall require that the disclosure of such information shall, to the extent the Board
determines to be practicable and appropriate, be in the form of a table which--
(i) contains clear and concise headings for each item of such information;
and
(ii) provides a clear and concise form for stating each item of information
required to be disclosed under each such heading.
In prescribing the form of the table under subparagraph (A), the Board may--
(i) list the items required to be included in the table in a different order than
the order in which such items are set forth in paragraph (1)(A) or (4)(A) of
section 1637(c) of this title; and
Either the heading or the statement under the heading which relates to the time
period referred to in section 1637(c)(1)(A)(iii) of this title shall contain the term
“grace period”.
The Board shall by regulation exempt from the requirements of this part any class of
credit transactions within any State if it determines that under the law of that State
that class of transactions is subject to requirements substantially similar to those
imposed under this part, and that there is adequate provision for enforcement.
Except as otherwise provided in this section, in the case of any consumer credit
transaction (including opening or increasing the credit limit for an open end credit
plan) in which a security interest, including any such interest arising by operation of
law, is or will be retained or acquired in any property which is used as the principal
dwelling of the person to whom credit is extended, the obligor shall have the right to
rescind the transaction until midnight of the third business day following the
consummation of the transaction or the delivery of the information and rescission
forms required under this section together with a statement containing the material
disclosures required under this subchapter, whichever is later, by notifying the
creditor, in accordance with regulations of the Board, of his intention to do so. The
creditor shall clearly and conspicuously disclose, in accordance with regulations of
the Board, to any obligor in a transaction subject to this section the rights of the
obligor under this section. The creditor shall also provide, in accordance with
regulations of the Board, appropriate forms for the obligor to exercise his right to
rescind any transaction subject to this section.
When an obligor exercises his right to rescind under subsection (a) of this section, he
is not liable for any finance or other charge, and any security interest given by the
obligor, including any such interest arising by operation of law, becomes void upon
such a rescission. Within 20 days after receipt of a notice of rescission, the creditor
shall return to the obligor any money or property given as earnest money,
downpayment, or otherwise, and shall take any action necessary or appropriate to
reflect the termination of any security interest created under the transaction. If the
creditor has delivered any property to the obligor, the obligor may retain possession
of it. Upon the performance of the creditor's obligations under this section, the
obligor shall tender the property to the creditor, except that if return of the property
in kind would be impracticable or inequitable, the obligor shall tender its reasonable
value. Tender shall be made at the location of the property or at the residence of the
obligor, at the option of the obligor. If the creditor does not take possession of the
property within 20 days after tender by the obligor, ownership of the property vests
in the obligor without obligation on his part to pay for it. The procedures prescribed
by this subsection shall apply except when otherwise ordered by a court.
(4) advances under a preexisting open end credit plan if a security interest has
already been retained or acquired and such advances are in accordance with a
previously established credit limit for such plan.
An obligor's right of rescission shall expire three years after the date of
consummation of the transaction or upon the sale of the property, whichever occurs
first, notwithstanding the fact that the information and forms required under this
section or any other disclosures required under this part have not been delivered to
the obligor, except that if (1) any agency empowered to enforce the provisions of
this subchapter institutes a proceeding to enforce the provisions of this section within
three years after the date of consummation of the transaction, (2) such agency finds
a violation of this section, and (3) the obligor's right to rescind is based in whole or
in part on any matter involved in such proceeding, then the obligor's right of
rescission shall expire three years after the date of consummation of the transaction
or upon the earlier sale of the property, or upon the expiration of one year following
the conclusion of the proceeding, or any judicial review or period for judicial review
thereof, whichever is later.
In any action in which it is determined that a creditor has violated this section, in
addition to rescission the court may award relief under section 1640 of this title for
violations of this subchapter not relating to the right to rescind.
An obligor shall have no rescission rights arising solely from the form of written
notice used by the creditor to inform the obligor of the rights of the obligor under
this section, if the creditor provided the obligor the appropriate form of written notice
published and adopted by the Board, or a comparable written notice of the rights of
the obligor, that was properly completed by the creditor, and otherwise complied
with all other requirements of this section regarding notice.
(1) In general
Notwithstanding section 1649 of this title, and subject to the time period provided in
subsection (f) of this section, in addition to any other right of rescission available
under this section for a transaction, after the initiation of any judicial or nonjudicial
foreclosure process on the primary dwelling of an obligor securing an extension of
credit, the obligor shall have a right to rescind the transaction equivalent to other
rescission rights provided by this section, if--
(A) a mortgage broker fee is not included in the finance charge in accordance with
the laws and regulations in effect at the time the consumer credit transaction was
consummated; or
(B) the form of notice of rescission for the transaction is not the appropriate form of
written notice published and adopted by the Board or a comparable written notice,
and otherwise complied with all the requirements of this section regarding notice.
Notwithstanding section 1605(f) of this title, and subject to the time period provided
in subsection (f) of this section, for the purposes of exercising any rescission rights
after the initiation of any judicial or nonjudicial foreclosure process on the principal
dwelling of the obligor securing an extension of credit, the disclosure of the finance
charge and other disclosures affected by any finance charge shall be treated as being
accurate for purposes of this section if the amount disclosed as the finance charge
does not vary from the actual finance charge by more than $35 or is greater than the
amount required to be disclosed under this subchapter.
(4) Applicability
§ 1636. Repealed. Pub.L. 96-221, Title VI, § 614(e)(1), Mar. 31, 1980, 94 Stat. 180
(1) The conditions under which a finance charge may be imposed, including the time
period (if any) within which any credit extended may be repaid without incurring a
finance charge, except that the creditor may, at his election and without disclosure,
impose no such finance charge if payment is received after the termination of such
time period. If no such time period is provided, the creditor shall disclose such fact.
(2) The method of determining the balance upon which a finance charge will be
imposed.
(3) The method of determining the amount of the finance charge, including any
minimum or fixed amount imposed as a finance charge.
(4) Where one or more periodic rates may be used to compute the finance charge,
each such rate, the range of balances to which it is applicable, and the corresponding
nominal annual percentage rate determined by multiplying the periodic rate by the
number of periods in a year.
(5) Identification of other charges which may be imposed as part of the plan, and
their method of computation, in accordance with regulations of the Board.
(6) In cases where the credit is or will be secured, a statement that a security
interest has been or will be taken in (A) the property purchased as part of the credit
transaction, or (B) property not purchased as part of the credit transaction identified
by item or type.
(8) In the case of any account under an open end consumer credit plan which
provides for any extension of credit which is secured by the consumer's principal
dwelling, any information which--
(B) the Board determines is not described in any other paragraph of this subsection.
The creditor of any account under an open end consumer credit plan shall transmit to
the obligor, for each billing cycle at the end of which there is an outstanding balance
in that account or with respect to which a finance charge is imposed, a statement
setting forth each of the following items to the extent applicable:
(1) The outstanding balance in the account at the beginning of the statement period.
(2) The amount and date of each extension of credit during the period, and a brief
identification, on or accompanying the statement of each extension of credit in a
form prescribed by the Board sufficient to enable the obligor either to identify the
transaction or to relate it to copies of sales vouchers or similar instruments
previously furnished, except that a creditor's failure to disclose such information in
accordance with this paragraph shall not be deemed a failure to comply with this part
or this subchapter if (A) the creditor maintains procedures reasonably adapted to
procure and provide such information, and (B) the creditor responds to and treats
any inquiry for clarification or documentation as a billing error and an erroneously
billed amount under section 1666 of this title. In lieu of complying with the
requirements of the previous sentence, in the case of any transaction in which the
creditor and seller are the same person, as defined by the Board, and such person's
open end credit plan has fewer than 15,000 accounts, the creditor may elect to
provide only the amount and date of each extension of credit during the period and
the seller's name and location where the transaction took place if (A) a brief
identification of the transaction has been previously furnished, and (B) the creditor
responds to and treats any inquiry for clarification or documentation as a billing error
and an erroneously billed amount under section 1666 of this title.
(3) The total amount credited to the account during the period.
(4) The amount of any finance charge added to the account during the period,
itemized to show the amounts, if any, due to the application of percentage rates and
the amount, if any, imposed as a minimum or fixed charge.
(5) Where one or more periodic rates may be used to compute the finance charge,
each such rate, the range of balances to which it is applicable, and, unless the
annual percentage rate (determined under section 1606(a)(2) of this title) is
required to be disclosed pursuant to paragraph (6), the corresponding nominal
annual percentage rate determined by multiplying the periodic rate by the number of
periods in a year.
(6) Where the total finance charge exceeds 50 cents for a monthly or longer billing
cycle, or the pro rata part of 50 cents for a billing cycle shorter than monthly, the
total finance charge expressed as an annual percentage rate (determined under
section 1606(a)(2) of this title), except that if the finance charge is the sum of two
or more products of a rate times a portion of the balance, the creditor may, in lieu of
disclosing a single rate for the total charge, disclose each such rate expressed as an
annual percentage rate, and the part of the balance to which it is applicable.
(7) The balance on which the finance charge was computed and a statement of how
the balance was determined. If the balance is determined without first deducting all
credits during the period, that fact and the amount of such payments shall also be
disclosed.
(8) The outstanding balance in the account at the end of the period.
(9) The date by which or the period (if any) within which, payment must be made to
avoid additional finance charges, except that the creditor may, at his election and
without disclosure, impose no such additional finance charge if payment is received
after such date or the termination of such period.
(10) The address to be used by the creditor for the purpose of receiving billing
inquiries from the obligor.
(11)(A) In the case of an open end credit plan that requires a minimum monthly
payment of not more than 4 percent of the balance on which finance charges are
accruing, the following statement, located on the front of the billing statement,
disclosed clearly and conspicuously: “Minimum Payment Warning: Making only the
minimum payment will increase the interest you pay and the time it takes to repay
your balance. For example, making only the typical 2% minimum monthly payment
on a balance of $1,000 at an interest rate of 17% would take 88 months to repay the
balance in full. For an estimate of the time it would take to repay your balance,
making only minimum payments, call this toll-free number: __________.” (the blank
space to be filled in by the creditor).
(B) In the case of an open end credit plan that requires a minimum monthly
payment of more than 4 percent of the balance on which finance charges are
accruing, the following statement, in a prominent location on the front of the billing
statement, disclosed clearly and conspicuously: “Minimum Payment Warning: Making
only the required minimum payment will increase the interest you pay and the time
it takes to repay your balance. Making a typical 5% minimum monthly payment on a
balance of $300 at an interest rate of 17% would take 24 months to repay the
balance in full. For an estimate of the time it would take to repay your balance,
making only minimum monthly payments, call this toll-free number: __________.”
(the blank space to be filled in by the creditor).
(C) Notwithstanding subparagraphs (A) and (B), in the case of a creditor with
respect to which compliance with this title is enforced by the Federal Trade
Commission, the following statement, in a prominent location on the front of the
billing statement, disclosed clearly and conspicuously: “Minimum Payment Warning:
Making only the required minimum payment will increase the interest you pay and
the time it takes to repay your balance. For example, making only the typical 5%
minimum monthly payment on a balance of $300 at an interest rate of 17% would
take 24 months to repay the balance in full. For an estimate of the time it would take
to repay your balance, making only minimum monthly payments, call the Federal
Trade Commission at this toll-free number: __________.” (the blank space to be
filled in by the creditor). A creditor who is subject to this subparagraph shall not be
subject to subparagraph (A) or (B).
(D) Notwithstanding subparagraph (A), (B), or (C), in complying with any such
subparagraph, a creditor may substitute an example based on an interest rate that is
greater than 17 percent. Any creditor that is subject to subparagraph (B) may elect
to provide the disclosure required under subparagraph (A) in lieu of the disclosure
required under subparagraph (B).
(E) The Board shall, by rule, periodically recalculate, as necessary, the interest rate
and repayment period under subparagraphs (A), (B), and (C).
(F)(i) The toll-free telephone number disclosed by a creditor or the Federal Trade
Commission under subparagraph (A), (B), or (G), as appropriate, may be a toll-free
telephone number established and maintained by the creditor or the Federal Trade
Commission, as appropriate, or may be a toll-free telephone number established and
maintained by a third party for use by the creditor or multiple creditors or the
Federal Trade Commission, as appropriate. The toll-free telephone number may
connect consumers to an automated device through which consumers may obtain
information described in subparagraph (A), (B), or (C), by inputting information
using a touch-tone telephone or similar device, if consumers whose telephones are
not equipped to use such automated device are provided the opportunity to be
connected to an individual from whom the information described in subparagraph
(A), (B), or (C), as applicable, may be obtained. A person that receives a request for
information described in subparagraph (A), (B), or (C) from an obligor through the
toll-free telephone number disclosed under subparagraph (A), (B), or (C), as
applicable, shall disclose in response to such request only the information set forth in
the table promulgated by the Board under subparagraph (H)(i).
(ii)(I) The Board shall establish and maintain for a period not to exceed 24 months
following the effective date of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, a toll-free telephone number, or provide a toll-free telephone
number established and maintained by a third party, for use by creditors that are
depository institutions (as defined in section 1813 of Title 12), including a Federal
credit union or State credit union (as defined in section 1752 of Title 12), with total
assets not exceeding $250,000,000. The toll-free telephone number may connect
consumers to an automated device through which consumers may obtain information
described in subparagraph (A) or (B), as applicable, by inputting information using a
touch-tone telephone or similar device, if consumers whose telephones are not
equipped to use such automated device are provided the opportunity to be
connected to an individual from whom the information described in subparagraph (A)
or (B), as applicable, may be obtained. A person that receives a request for
information described in subparagraph (A) or (B) from an obligor through the toll-
free telephone number disclosed under subparagraph (A) or (B), as applicable, shall
disclose in response to such request only the information set forth in the table
promulgated by the Board under subparagraph (H)(i). The dollar amount contained
in this subclause shall be adjusted according to an indexing mechanism established
by the Board.
(II) Not later than 6 months prior to the expiration of the 24-month period
referenced in subclause (I), the Board shall submit to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on Financial Services of
the House of Representatives a report on the program described in subclause (I).
(G) The Federal Trade Commission shall establish and maintain a toll-free number
for the purpose of providing to consumers the information required to be disclosed
under subparagraph (C).
(i) establish a detailed table illustrating the approximate number of months that it
would take to repay an outstanding balance if a consumer pays only the required
minimum monthly payments and if no other advances are made, which table shall
clearly present standardized information to be used to disclose the information
required to be disclosed under subparagraph (A), (B), or (C), as applicable;
(ii) establish the table required under clause (i) by assuming--
(IV) that only minimum monthly payments are made and no additional
extensions of credit are obtained; and
(I) The disclosure requirements of this paragraph do not apply to any charge card
account, the primary purpose of which is to require payment of charges in full each
month.
(J) A creditor that maintains a toll-free telephone number for the purpose of
providing customers with the actual number of months that it will take to repay the
customer's outstanding balance is not subject to the requirements of subparagraph
(A) or (B).
(K) A creditor that maintains a toll-free telephone number for the purpose of
providing customers with the actual number of months that it will take to repay an
outstanding balance shall include the following statement on each billing statement:
“Making only the minimum payment will increase the interest you pay and the time it
takes to repay your balance. For more information, call this toll-free number:
__________.” (the blank space to be filled in by the creditor).
(12) If a late payment fee is to be imposed due to the failure of the obligor to make
payment on or before a required payment due date, the following shall be stated
clearly and conspicuously on the billing statement:
(A) The date on which that payment is due or, if different, the earliest date on which
a late payment fee may be charged.
(B) The amount of the late payment fee to be imposed if payment is made after
such date.
Any application to open a credit card account for any person under an open end
consumer credit plan, or a solicitation to open such an account without requiring an
application, that is mailed to consumers shall disclose the following information,
subject to subsection (e) of this section and section 1632(c) of this title:
(I) Each annual percentage rate applicable to extensions of credit under such
credit plan.
(II) Where an extension of credit is subject to a variable rate, the fact that
the rate is variable, the annual percentage rate in effect at the time of the
mailing, and how the rate is determined.
(III) Where more than one rate applies, the range of balances to which each
rate applies.
(I) Any annual fee, other periodic fee, or membership fee imposed for the
issuance or availability of a credit card, including any account maintenance
fee or other charge imposed based on activity or inactivity for the account
during the billing cycle.
(II) Any minimum finance charge imposed for each period during which any
extension of credit which is subject to a finance charge is outstanding.
(III) Any transaction charge imposed in connection with use of the card to
purchase goods or services.
(I) The date by which or the period within which any credit extended under
such credit plan for purchases of goods or services must be repaid to avoid
incurring a finance charge, and, if no such period is offered, such fact shall be
clearly stated.
(II) If the length of such “grace period” varies, the card issuer may disclose
the range of days in the grace period, the minimum number of days in the
grace period, or the average number of days in the grace period, if the
disclosure is identified as such.
(I) The name of the balance calculation method used in determining the
balance on which the finance charge is computed if the method used has been
defined by the Board, or a detailed explanation of the balance calculation
method used if the method has not been so defined.
(II) In prescribing regulations to carry out this clause, the Board shall define
and name not more than the 5 balance calculation methods determined by
the Board to be the most commonly used methods.
(B) Other information
(A) In general
In any telephone solicitation to open a credit card account for any person under an
open end consumer credit plan, the person making the solicitation shall orally
disclose the information described in paragraph (1)(A).
(B) Exception
(II) does not impose any fee in connection with telephone solicitations unless
the consumer signifies acceptance by using the card;
(ii) the card issuer discloses clearly and conspicuously in writing the
information described in paragraph (1) within 30 days after the consumer
requests the card, but in no event later than the date of delivery of the card;
and
(iii) the card issuer discloses clearly and conspicuously that the consumer is
not obligated to accept the card or account and the consumer will not be
obligated to pay any of the fees or charges disclosed unless the consumer
elects to accept the card or account by using the card.
Any application to open a credit card account for any person under an open end
consumer credit plan, and any solicitation to open such an account without requiring
an application, that is made available to the public or contained in catalogs,
magazines, or other publications shall meet the disclosure requirements of
subparagraph (B), (C), or (D).
(I) described in paragraph (1)(A) in the form required under section 1632(c)
of this title, subject to subsection (e) of this section, and
(III) the applicant should contact the creditor for information on any change
in the information contained in the application or solicitation since it was
printed;
(II) the applicant may contact the creditor to request disclosure of specific
information of such costs by calling a toll free telephone number or by writing
to an address, specified in the application;
(iii) does not contain any of the items described in paragraph (1).
(i) the disclosures required by paragraphs (1) through (6) of subsection (a)
of this section;
(ii) the disclosures required by subparagraphs (A) and (B) of paragraph (1)
of this subsection included clearly and conspiciously [FN1] (except that the
provisions of section 1632(c) of this title shall not apply); and
(iii) a toll free telephone number or a mailing address at which the applicant
may contact the creditor to obtain any change in the information provided.
Upon receipt of a request for any of the information referred to in subparagraph (B),
(C), or (D), the card issuer or the agent of such issuer shall promptly disclose all of
the information described in paragraph (1).
(A) In general
Any application or solicitation to open a charge card account shall disclose clearly
and conspicuously the following information in the form required by section 1632(c)
of this title, subject to subsection (e) of this section:
(i) Any annual fee, other periodic fee, or membership fee imposed for the
issuance or availability of the charge card, including any account maintenance
fee or other charge imposed based on activity or inactivity for the account
during the billing cycle.
(ii) Any transaction charge imposed in connection with use of the card to
purchase goods or services.
(iii) A statement that charges incurred by use of the charge card are due and
payable upon receipt of a periodic statement rendered for such charge card
account.
Any application to open a charge card account, and any solicitation to open such an
account without requiring an application, that is made available to the public or
contained in catalogs, magazines, or other publications shall contain--
(I) described in subparagraph (A) in the form required under section 1632(c)
of this title, subject to subsection (e) of this section, and
(III) the applicant should contact the creditor for information on any change
in the information contained in the application or solicitation since it was
printed;
(iii) a clear and conspicuous disclosure of the date the application or
solicitation was printed; and
(D) Issuers of charge cards which provide access to open end consumer credit plans
If a charge card permits the card holder to receive an extension of credit under an
open end consumer credit plan, which is not maintained by the charge card issuer,
the charge card issuer may provide the information described in subparagraphs (A)
and (B) in the form required by such subparagraphs in lieu of the information
required to be provided under paragraph (1), (2), or (3) with respect to any credit
extended under such plan, if the charge card issuer discloses clearly and
conspicuously to the consumer in the application or solicitation that--
(i) the charge card issuer will make an independent decision as to whether to
issue the card;
(ii) the charge card may arrive before the decision is made with respect to an
extension of credit under an open end consumer credit plan; and
(iii) approval by the charge card issuer does not constitute approval by the
issuer of the extension of credit.
For the purposes of this subsection, the term “charge card” means a card, plate, or
other single credit device that may be used from time to time to obtain credit which
is not subject to a finance charge.
(A) In general
Except as provided in subparagraph (B), an application or solicitation to open a credit
card account and all promotional materials accompanying such application or
solicitation for which a disclosure is required under paragraph (1), and that offers a
temporary annual percentage rate of interest, shall--
(i) use the term “introductory” in immediate proximity to each listing of the
temporary annual percentage rate applicable to such account, which term
shall appear clearly and conspicuously;
(ii) if the annual percentage rate of interest that will apply after the end of
the temporary rate period will be a fixed rate, state in a clear and
conspicuous manner in a prominent location closely proximate to the first
listing of the temporary annual percentage rate (other than a listing of the
temporary annual percentage rate in the tabular format described in section
1632(c) of this title), the time period in which the introductory period will end
and the annual percentage rate that will apply after the end of the
introductory period; and
(iii) if the annual percentage rate that will apply after the end of the
temporary rate period will vary in accordance with an index, state in a clear
and conspicuous manner in a prominent location closely proximate to the first
listing of the temporary annual percentage rate (other than a listing in the
tabular format prescribed by section 1632(c) of this title), the time period in
which the introductory period will end and the rate that will apply after that,
based on an annual percentage rate that was in effect within 60 days before
the date of mailing the application or solicitation.
(B) Exception
Clauses (ii) and (iii) of subparagraph (A) do not apply with respect to any listing of a
temporary annual percentage rate on an envelope or other enclosure in which an
application or solicitation to open a credit card account is mailed.
(ii) if the annual percentage rate that will apply upon the revocation of the
temporary annual percentage rate--
(I) will be a fixed rate, the annual percentage rate that will apply upon the
revocation of the temporary annual percentage rate; or
(II) will vary in accordance with an index, the rate that will apply after the
temporary rate, based on an annual percentage rate that was in effect within
60 days before the date of mailing the application or solicitation.
(D) Definitions
In this paragraph--
(i) the terms “temporary annual percentage rate of interest” and “temporary
annual percentage rate” mean any rate of interest applicable to a credit card
account for an introductory period of less than 1 year, if that rate is less than
an annual percentage rate that was in effect within 60 days before the date of
mailing the application or solicitation; and
(ii) the term “introductory period” means the maximum time period for which
the temporary annual percentage rate may be applicable.
(A) In general
In any solicitation to open a credit card account for any person under an open end
consumer credit plan using the Internet or other interactive computer service, the
person making the solicitation shall clearly and conspicuously disclose--
(i) the information described in subparagraphs (A) and (B) of paragraph (1);
and
(ii) updated regularly to reflect the current policies, terms, and fee amounts
applicable to the credit card account.
(C) Definitions
(ii) the term “interactive computer service” means any information service,
system, or access software provider that provides or enables computer access
by multiple users to a computer server, including specifically a service or
system that provides access to the Internet and such systems operated or
services offered by libraries or educational institutions.
(1) In general
Except as provided in paragraph (2), a card issuer that imposes any fee described in
subsection (c)(1)(A)(ii)(I) or (c)(4)(A)(i) of this section shall transmit to a consumer
at least 30 days prior to the scheduled renewal date of the consumer's credit or
charge card account a clear and conspicuous disclosure of--
(A) the date by which, the month by which, or the billing period at the close of
which, the account will expire if not renewed;
(B) the information described in subsection (c)(1)(A) or (c)(4)(A) of this section that
would apply if the account were renewed, subject to subsection (e) of this section;
and
(C) the method by which the consumer may terminate continued credit availability
under the account.
(A) In general
(ii) with the periodic billing statement first disclosing that the fee has been
posted to the account.
(i) the consumer is given a 30-day period to avoid payment of the fee or to
have the fee recredited to the account in any case where the consumer does
not wish to continue the availability of the credit; and
(ii) the consumer is permitted to use the card during such period without
incurring an obligation to pay such fee.
(3) Short-term renewals
The Board may by regulation provide for fewer disclosures than are required by
paragraph (1) in the case of an account which is renewable for a period of less than
6 months.
(e) Other rules for disclosures under subsections (c) and (d)
If the amount of any fee required to be disclosed under subsection (c) or (d) of this
section is determined on the basis of a percentage of another amount, the
percentage used in making such determination and the identification of the amount
against which such percentage is applied shall be disclosed in lieu of the amount of
such fee.
If a credit or charge card issuer does not impose any fee required to be disclosed
under any provision of subsection (c) or (d) of this section, such provision shall not
apply with respect to such issuer.
If the amount of any fee required to be disclosed by a credit or charge card issuer
under paragraph (1)(B), (3)(B)(i)(II), (4)(B), or (4)(C)(i)(II) of subsection (c) of this
section varies from State to State, the card issuer may disclose the range of such
fees for purposes of subsection (c) of this section in lieu of the amount for each
applicable State, if such disclosure includes a statement that the amount of such fee
varies from State to State.
(g) Insurance in connection with certain open end credit card plans
Whenever a card issuer that offers any guarantee or insurance for repayment of all
or part of the outstanding balance of an open end credit card plan proposes to
change the person providing that guarantee or insurance, the card issuer shall send
each insured consumer written notice of the proposed change not less than 30 days
prior to the change, including notice of any increase in the rate or substantial
decrease in coverage or service which will result from such change. Such notice may
be included on or with the monthly statement provided to the consumer prior to the
month in which the proposed change would take effect.
In any case in which a proposed change described in paragraph (1) occurs, the
insured consumer shall be given the name and address of the new guarantor or
insurer and a copy of the policy or group certificate containing the basic terms and
conditions, including the premium rate to be charged.
(3) Right to discontinue guarantee or insurance
The notices required under paragraphs (1) and (2) shall each include a statement
that the consumer has the option to discontinue the insurance or guarantee.
A creditor of an account under an open end consumer credit plan may not terminate
an account prior to its expiration date solely because the consumer has not incurred
finance charges on the account. Nothing in this subsection shall prohibit a creditor
from terminating an account for inactivity in 3 or more consecutive months.
[FN1]
§ 1637a. Disclosure requirements for open end consumer credit plans secured by
consumer's principal dwelling
In the case of any open end consumer credit plan which provides for any extension
of credit which is secured by the consumer's principal dwelling, the creditor shall
make the following disclosures in accordance with subsection (b) of this section:
Each annual percentage rate imposed in connection with extensions of credit under
the plan and a statement that such rate does not include costs other than interest.
In the case of a plan which provides for variable rates of interest on credit extended
under the plan--
(A) a description of the manner in which such rate will be computed and a statement
that such rate does not include costs other than interest;
(B) a description of the manner in which any changes in the annual percentage rate
will be made, including--
(i) any negative amortization and interest rate carryover;
(iii) any index or margin to which such changes in the rate are related; and
(C) if an initial annual percentage rate is offered which is not based on an index--
(i) a statement of such rate and the period of time such initial rate will be in
effect; and
(ii) a statement that such rate does not include costs other than interest;
(D) a statement that the consumer should ask about the current index value and
interest rate;
(E) a statement of the maximum amount by which the annual percentage rate may
change in any 1-year period or a statement that no such limit exists;
(F) a statement of the maximum annual percentage rate that may be imposed at
any time under the plan;
(i) the maximum annual percentage rate which may be imposed under each
repayment option of the plan;
(ii) the minimum amount of any periodic payment which may be required,
based on a $10,000 outstanding balance, under each such option when such
maximum annual percentage rate is in effect; and
(iii) the earliest date by which such maximum annual interest rate may be
imposed; and
(I) a statement that interest rate information will be provided on or with each
periodic statement.
An itemization of any fees imposed by the creditor in connection with the availability
or use of credit under such plan, including annual fees, application fees, transaction
fees, and closing costs (including costs commonly described as “points”), and the
time when such fees are payable.
An estimate, based on the creditor's experience with such plans and stated as a
single amount or as a reasonable range, of the aggregate amount of additional fees
that may be imposed by third parties (such as governmental authorities, appraisers,
and attorneys) in connection with opening an account under the plan.
A statement that the consumer may ask the creditor for a good faith estimate by the
creditor of the fees that may be imposed by third parties.
A statement that--
(A) any extension of credit under the plan is secured by the consumer's dwelling;
and
(B) in the event of any default, the consumer risks the loss of the dwelling.
(i) of the time by which an application must be submitted to obtain the terms
disclosed; or
A statement that--
(i) the consumer may elect not to enter into an agreement to open an
account under the plan if any term changes (other than a change
contemplated by a variable feature of the plan) before any such agreement is
final; and
(ii) if the consumer makes an election described in clause (i), the consumer
is entitled to a refund of all fees paid in connection with the application.
A statement that--
(A) under certain conditions, the creditor may terminate any account under the plan
and require immediate repayment of any outstanding balance, prohibit any additional
extension of credit to the account, or reduce the credit limit applicable to the
account; and
(B) the consumer may receive, upon request, more specific information about the
conditions under which the creditor may take any action described in subparagraph
(A).
(i) any period during which additional extensions of credit may be obtained;
and
(B) the length of any repayment period, including any differences in the length of
any repayment period with regard to the periods described in clauses (i) and (ii) of
subparagraph (A); and
(C) an explanation of how the amount of any minimum monthly or periodic payment
will be determined under each such option, including any differences in the
determination of any such amount with regard to the periods described in clauses (i)
and (ii) of subparagraph (A).
An example, based on a $10,000 outstanding balance and the interest rate (other
than a rate not based on the index under the plan) which is, or was recently, in
effect under such plan, showing the minimum monthly or periodic payment, and the
time it would take to repay the entire $10,000 if the consumer paid only the
minimum periodic payments and obtained no additional extensions of credit.
If, under any repayment option of the plan, the payment of not more than the
minimum periodic payments required under such option over the length of the
repayment period--
(A) would not repay any of the principal balance; or
(B) would repay less than the outstanding balance by the end of such period,
as the case may be, a statement of such fact, including an explicit statement that at
the end of such repayment period a balloon payment (as defined in section 1665b(f)
of this title) would result which would be required to be paid in full at that time.
(A) any limitation in the plan on the amount of any increase in the minimum
payments may result in negative amortization;
(C) negative amortization reduces the consumer's equity in the consumer's dwelling.
Any limitation contained in the plan on the number of extensions of credit and the
amount of credit which may be obtained during any month or other defined time
period.
A statement that--
(A) the consumer should consult a tax advisor regarding the deductibility of interest
and charges under the plan; and
(B) in any case in which the extension of credit exceeds the fair market value (as
defined under Title 26) of the dwelling, the interest on the portion of the credit
extension that is greater than the fair market value of the dwelling is not tax
deductible for Federal income tax purposes.
(14) Disclosure requirements established by Board
(A) In general
The disclosures required under subsection (a) of this section with respect to any
open end consumer credit plan which provides for any extension of credit which is
secured by the consumer's principal dwelling and the pamphlet required under
subsection (e) of this section shall be provided to any consumer at the time the
creditor distributes an application to establish an account under such plan to such
consumer.
(2) Form
(A) In general
The disclosures required under subsection (a) of this section shall be conspicuously
segregated from all other terms, data, or additional information provided in
connection with the application, either by grouping the disclosures separately on the
application form or by providing the disclosures on a separate form, in accordance
with regulations of the Board.
The disclosures required by paragraphs (5), (6), and (7) of subsection (a) of this
section shall precede all of the other required disclosures.
In preparing the table required under subsection (a)(2)(G) of this section, the
creditor shall consistently select one rate of interest for each year and the manner of
selecting the rate from year to year shall be consistent with the plan.
In the case of an application to open an account under any open end consumer credit
plan described in subsection (a) of this section which is provided to a consumer by
any person other than the creditor--
(A) the disclosures required under subsection (a) of this section with respect to such
plan, in accordance with subsection (b) of this section; and
(2) if such person cannot provide specific terms about the plan because specific
information about the plan terms is not available, no nonrefundable fee may be
imposed in connection with such application before the end of the 3-day period
beginning on the date the consumer receives the disclosures required under
subsection (a) of this section with respect to the application.
For purposes of this section and sections 1647 and 1665b of this title, the term
“principal dwelling” includes any second or vacation home of the consumer.
(e) Pamphlet
In addition to the disclosures required under subsection (a) of this section with
respect to an application to open an account under any open end consumer credit
plan described in such subsection, the creditor or other person providing such
disclosures to the consumer shall provide--
(1) a pamphlet published by the Board pursuant to section 4 of the Home Equity
Consumer Protection Act of 1988; or
(2) any pamphlet which provides substantially similar information to the information
described in such section, as determined by the Board.
For each consumer credit transaction other than under an open end credit plan, the
creditor shall disclose each of the following items, to the extent applicable:
(2)(A) The “amount financed”, using that term, which shall be the amount of credit
of which the consumer has actual use. This amount shall be computed as follows, but
the computations need not be disclosed and shall not be disclosed with the
disclosures conspicuously segregated in accordance with subsection (b)(1) of this
section:
(i) take the principal amount of the loan or the cash price less downpayment and
trade-in;
(ii) add any charges which are not part of the finance charge or of the principal
amount of the loan and which are financed by the consumer, including the cost of
any items excluded from the finance charge pursuant to section 1605 of this title;
and
(iii) subtract any charges which are part of the finance charge but which will be paid
by the consumer before or at the time of the consummation of the transaction, or
have been withheld from the proceeds of the credit.
(B) In conjunction with the disclosure of the amount financed, a creditor shall
provide a statement of the consumer's right to obtain, upon a written request, a
written itemization of the amount financed. The statement shall include spaces for a
“yes” and “no” indication to be initialed by the consumer to indicate whether the
consumer wants a written itemization of the amount financed. Upon receiving an
affirmative indication, the creditor shall provide, at the time other disclosures are
required to be furnished, a written itemization of the amount financed. For the
purposes of this subparagraph, “itemization of the amount financed” means a
disclosure of the following items, to the extent applicable:
(ii) the amount that is or will be credited to the consumer's account to discharge
obligations owed to the creditor;
(iii) each amount that is or will be paid to third persons by the creditor on the
consumer's behalf, together with an identification of or reference to the third person;
and
(iv) the total amount of any charges described in the preceding subparagraph
(A)(iii).
(4) The finance charge expressed as an “annual percentage rate”, using that term.
This shall not be required if the amount financed does not exceed $75 and the
finance charge does not exceed $5, or if the amount financed exceeds $75 and the
finance charge does not exceed $7.50.
(5) The sum of the amount financed and the finance charge, which shall be termed
the “total of payments”.
(6) The number, amount, and due dates or period of payments scheduled to repay
the total of payments.
(7) In a sale of property or services in which the seller is the creditor required to
disclose pursuant to section 1631(b) of this title, the “total sale price”, using that
term, which shall be the total of the cash price of the property or services, additional
charges, and the finance charge.
(9) Where the credit is secured, a statement that a security interest has been taken
in (A) the property which is purchased as part of the credit transaction, or (B)
property not purchased as part of the credit transaction identified by item or type.
(10) Any dollar charge or percentage amount which may be imposed by a creditor
solely on account of a late payment, other than a deferral or extension charge.
(12) A statement that the consumer should refer to the appropriate contract
document for any information such document provides about nonpayment, default,
the right to accelerate the maturity of the debt, and prepayment rebates and
penalties.
(14) In the case of any variable interest rate residential mortgage transaction, in
disclosures provided at application as prescribed by the Board for a variable rate
transaction secured by the consumer's principal dwelling, at the option of the
creditor, a statement that the periodic payments may increase or decrease
substantially, and the maximum interest rate and payment for a $10,000 loan
originated at a recent interest rate, as determined by the Board, assuming the
maximum periodic increases in rates and payments under the program, or a
historical example illustrating the effects of interest rate changes implemented
according to the loan program.
(15) In the case of a consumer credit transaction that is secured by the principal
dwelling of the consumer, in which the extension of credit may exceed the fair
market value of the dwelling, a clear and conspicuous statement that--
(A) the interest on the portion of the credit extension that is greater than the fair
market value of the dwelling is not tax deductible for Federal income tax purposes;
and
(B) the consumer should consult a tax adviser for further information regarding the
deductibility of interest and charges.
(1) Except as otherwise provided in this part, the disclosures required under
subsection (a) of this section shall be made before the credit is extended. Except for
the disclosures required by subsection (a)(1) of this section, all disclosures required
under subsection (a) of this section and any disclosure provided for in subsection (b),
(c), or (d) of section 1605 of this title shall be conspicuously segregated from all
other terms, data, or information provided in connection with a transaction, including
any computations or itemization.
(3) In the case of a credit transaction described in paragraph (15) of subsection (a)
of this section, disclosures required by that paragraph shall be made to the
consumer at the time of application for such extension of credit.
(2) If a creditor receives a request for a loan by mail or telephone without personal
solicitation and the terms of financing, including the annual percentage rate for
representative amounts of credit, are set forth in the creditor's printed material
distributed to the public, or in the contract of loan or other printed material delivered
to the obligor, then the disclosures required under subsection (a) of this section may
be made at any time not later than the date the first payment is due.
(1) to (4) [See italics note set out under this section]
Not later than 2 years after August 14, 2008, the Board shall, based on consumer
testing, and in consultation with the Secretary of Education, develop and issue model
forms that may be used, at the option of the private educational lender, for the
provision of disclosures required under this subsection.
(B) Format
(iii) enable borrowers easily to identify material terms of the loan and to
compare such terms among private education loans; and
Any private educational lender that elects to provide a model form developed under
this subsection that accurately reflects the practices of the private educational lender
shall be deemed to be in compliance with the disclosures required under this
subsection.
(6) to (8) [See italics note set out under this section]
In issuing regulations under this subsection, the Board shall prevent, to the extent
possible, duplicative disclosure requirements for private educational lenders that are
otherwise required to make disclosures under this subchapter, except that in any
case in which the disclosure requirements of this subsection differ or conflict with the
disclosure requirements of any other provision of this subchapter, the requirements
of this subsection shall be controlling.
(10) Definitions
For purposes of this subsection, the terms “covered educational institution”, “private
educational lender”, and “private education loan” have the same meanings as in
section 1650 of Title 15.
Each private educational lender that has a preferred lender arrangement with a
covered educational institution shall annually, by a date determined by the Board, in
consultation with the Secretary of Education, provide to the covered educational
institution such information as the Board determines to include in the model form
developed under paragraph (5) for each type of private education loan that the
lender plans to offer to students attending the covered educational institution, or to
the families of such students, for the next award year (as that term is defined in
section 481 of the Higher Education Act of 1965).
(a) Disclosures
In addition to other disclosures required under this subchapter, for each mortgage
referred to in section 1602(aa) of this title, the creditor shall provide the following
disclosures in conspicuous type size:
(A) “You are not required to complete this agreement merely because you have
received these disclosures or have signed a loan application.”.
(B) “If you obtain this loan, the lender will have a mortgage on your home. You
could lose your home, and any money you have put into it, if you do not meet your
obligations under the loan.”.
In addition to the disclosures required under paragraph (1), the creditor shall
disclose--
(A) in the case of a credit transaction with a fixed rate of interest, the annual
percentage rate and the amount of the regular monthly payment; or
(B) in the case of any other credit transaction, the annual percentage rate of the
loan, the amount of the regular monthly payment, a statement that the interest rate
and monthly payment may increase, and the amount of the maximum monthly
payment, based on the maximum interest rate allowed pursuant to section 3806 of
Title 12.
(1) In general
The disclosures required by this section shall be given not less than 3 business days
prior to consummation of the transaction.
(A) In general
After providing the disclosures required by this section, a creditor may not change
the terms of the extension of credit if such changes make the disclosures inaccurate,
unless new disclosures are provided that meet the requirements of this section.
(I) the creditor provides to the consumer the new disclosures, in writing; and
(II) the creditor and consumer certify in writing that the new disclosures
were provided by telephone, by not later than 3 days prior to the date of
consummation of the transaction.
(3) Modifications
The Board may, if it finds that such action is necessary to permit homeowners to
meet bona fide personal financial emergencies, prescribe regulations authorizing the
modification or waiver of rights created under this subsection, to the extent and
under the circumstances set forth in those regulations.
(1) In general
(A) Limitation on terms
A mortgage referred to in section 1602(aa) of this title may not contain terms under
which a consumer must pay a prepayment penalty for paying all or part of the
principal before the date on which the principal is due.
(B) Construction
(2) Exception
(ii) the income and expenses of the consumer are verified by a financial
statement signed by the consumer, by a credit report, and in the case of
employment income, by payment records or by verification from the employer
of the consumer (which verification may be in the form of a copy of a pay
stub or other payment record supplied by the consumer);
(B) the penalty applies only to a prepayment made with amounts obtained by the
consumer by means other than a refinancing by the creditor under the mortgage, or
an affiliate of that creditor;
(C) the penalty does not apply after the end of the 5-year period beginning on the
date on which the mortgage is consummated; and
A mortgage referred to in section 1602(aa) of this title may not provide for an
interest rate applicable after default that is higher than the interest rate that applies
before default. If the date of maturity of a mortgage referred to in subsection [FN1]
1602(aa) of this title is accelerated due to default and the consumer is entitled to a
rebate of interest, that rebate shall be computed by any method that is not less
favorable than the actuarial method (as that term is defined in section 1615(d) of
this title).
(e) No balloon payments
A mortgage referred to in section 1602(aa) of this title having a term of less than 5
years may not include terms under which the aggregate amount of the regular
periodic payments would not fully amortize the outstanding principal balance.
A mortgage referred to in section 1602(aa) of this title may not include terms under
which the outstanding principal balance will increase at any time over the course of
the loan because the regular periodic payments do not cover the full amount of
interest due.
A mortgage referred to in section 1602(aa) of this title may not include terms under
which more than 2 periodic payments required under the loan are consolidated and
paid in advance from the loan proceeds provided to the consumer.
(1) in the form of an instrument that is payable to the consumer or jointly to the
consumer and the contractor; or
(2) at the election of the consumer, by a third party escrow agent in accordance
with terms established in a written agreement signed by the consumer, the creditor,
and the contractor before the date of payment.
Any mortgage that contains a provision prohibited by this section shall be deemed a
failure to deliver the material disclosures required under this subchapter, for the
purpose of section 1635 of this title.
For purposes of this section, the term “affiliate” has the same meaning as in section
1841(k) of Title 12.
(l) Discretionary regulatory authority of Board
(1) Exemptions
(B) will apply only to products that maintain and strengthen home ownership and
equity protection.
(2) Prohibitions
The Board, by regulation or order, shall prohibit acts or practices in connection with--
(A) mortgage loans that the Board finds to be unfair, deceptive, or designed to
evade the provisions of this section; and
(B) refinancing of mortgage loans that the Board finds to be associated with abusive
lending practices, or that are otherwise not in the interest of the borrower.
(a) In general
(1) owes any duty to maximize the net present value of the pooled mortgages in an
investment to all investors and parties having a direct or indirect interest in such
investment, not to any individual party or group of parties; and
(2) shall be deemed to act in the best interests of all such investors and parties if
the servicer agrees to or implements a modification or workout plan, including any
modification or refinancing undertaken pursuant to the HOPE for Homeowners Act of
2008, for a residential mortgage or a class of residential mortgages that constitute a
part or all of the pooled mortgages in such investment, provided that any mortgage
so modified meets the following criteria:
(B) The property securing such mortgage is occupied by the mortgagor of such
mortgage.
(C) The anticipated recovery on the principal outstanding obligation of the mortgage
under the modification or workout plan exceeds, on a net present value basis, the
anticipated recovery on the principal outstanding obligation of the mortgage through
foreclosure.
(b) Definition
As used in this section, the term “servicer” means the person responsible for
servicing of a loan (including the person who makes or holds a loan if such person
also services the loan).
(a) Individual or class action for damages; amount of award; factors determining amount of
award
Except as otherwise provided in this section, any creditor who fails to comply with
any requirement imposed under this part, including any requirement under section
1635 of this title, or part D or E of this subchapter with respect to any person is
liable to such person in an amount equal to the sum of--
(1) any actual damage sustained by such person as a result of the failure;
(2)(A) (i) in the case of an individual action twice the amount of any finance charge
in connection with the transaction, (ii) in the case of an individual action relating to a
consumer lease under part E of this subchapter, 25 per centum of the total amount
of monthly payments under the lease, except that the liability under this
subparagraph shall not be less than $100 nor greater than $1,000, or (iii) in the case
of an individual action relating to a credit transaction not under an open end credit
plan that is secured by real property or a dwelling, not less than $400 or greater
than $4,000; or
(B) in the case of a class action, such amount as the court may allow, except that as
to each member of the class no minimum recovery shall be applicable, and the total
recovery under this subparagraph in any class action or series of class actions arising
out of the same failure to comply by the same creditor shall not be more than the
lesser of $500,000 or 1 per centum of the net worth of the creditor;
(3) in the case of any successful action to enforce the foregoing liability or in any
action in which a person is determined to have a right of rescission under section
1635 of this title, the costs of the action, together with a reasonable attorney's fee
as determined by the court; and
(4) in the case of a failure to comply with any requirement under section 1639 of
this title, an amount equal to the sum of all finance charges and fees paid by the
consumer, unless the creditor demonstrates that the failure to comply is not
material.
In determining the amount of award in any class action, the court shall consider,
among other relevant factors, the amount of any actual damages awarded, the
frequency and persistence of failures of compliance by the creditor, the resources of
the creditor, the number of persons adversely affected, and the extent to which the
creditor's failure of compliance was intentional. In connection with the disclosures
referred to in subsections (a) and (b) of section 1637 of this title, a creditor shall
have a liability determined under paragraph (2) only for failing to comply with the
requirements of section 1635 of this title, section 1637(a) of this title, or of
paragraph (4), (5), (6), (7), (8), (9), or (10) of section 1637(b) of this title or for
failing to comply with disclosure requirements under State law for any term or item
which the Board has determined to be substantially the same in meaning under
section 1610(a)(2) of this title as any of the terms or items referred to in section
1637(a) of this title or any of those paragraphs of section 1637(b) of this title. In
connection with the disclosures referred to in subsection (c) or (d) of section 1637 of
this title, a card issuer shall have a liability under this section only to a cardholder
who pays a fee described in section 1637(c)(1)(A)(ii)(I) or section 1637(c)(4)(A)(i)
of this title or who uses the credit card or charge card. In connection with the
disclosures referred to in section 1638 of this title, a creditor shall have a liability
determined under paragraph (2) only for failing to comply with the requirements of
section 1635 of this title or of paragraph (2) (insofar as it requires a disclosure of the
“amount financed”), (3), (4), (5), (6), or (9) of section 1638(a) of this title, or
section 1638(b)(2)(C)(ii) of this title, or for failing to comply with disclosure
requirements under State law for any term which the Board has determined to be
substantially the same in meaning under section 1610(a)(2) of this title as any of the
terms referred to in any of those paragraphs of section 1638(a) of this title or section
1638(b)(2)(C)(ii) of this title. With respect to any failure to make disclosures
required under this part or part D or E of this subchapter, liability shall be imposed
only upon the creditor required to make disclosure, except as provided in section
1641 of this title.
A creditor or assignee has no liability under this section or section 1607 of this title
or section 1611 of this title for any failure to comply with any requirement imposed
under this part or part E of this subchapter, if within sixty days after discovering an
error, whether pursuant to a final written examination report or notice issued under
section 1607(e)(1) of this title or through the creditor's or assignee's own
procedures, and prior to the institution of an action under this section or the receipt
of written notice of the error from the obligor, the creditor or assignee notifies the
person concerned of the error and makes whatever adjustments in the appropriate
account are necessary to assure that the person will not be required to pay an
amount in excess of the charge actually disclosed, or the dollar equivalent of the
annual percentage rate actually disclosed, whichever is lower.
A creditor or assignee may not be held liable in any action brought under this section
or section 1635 of this title for a violation of this subchapter if the creditor or
assignee shows by a preponderance of evidence that the violation was not intentional
and resulted from a bona fide error notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error. Examples of a bona fide error include,
but are not limited to, clerical, calculation, computer malfunction and programing,
and printing errors, except that an error of legal judgment with respect to a person's
obligations under this subchapter is not a bona fide error.
(d) Liability in transaction or lease involving multiple obligors
When there are multiple obligors in a consumer credit transaction or consumer lease,
there shall be no more than one recovery of damages under subsection (a)(2) of this
section for a violation of this subchapter.
Any action under this section may be brought in any United States district court, or
in any other court of competent jurisdiction, within one year from the date of the
occurrence of the violation. This subsection does not bar a person from asserting a
violation of this subchapter in an action to collect the debt which was brought more
than one year from the date of the occurrence of the violation as a matter of defense
by recoupment or set-off in such action, except as otherwise provided by State law.
An action to enforce a violation of section 1639 of this title may also be brought by
the appropriate State attorney general in any appropriate United States district
court, or any other court of competent jurisdiction, not later than 3 years after the
date on which the violation occurs. The State attorney general shall provide prior
written notice of any such civil action to the Federal agency responsible for
enforcement under section 1607 of this title and shall provide the agency with a copy
of the complaint. If prior notice is not feasible, the State attorney general shall
provide notice to such agency immediately upon instituting the action. The Federal
agency may--
(A) remove the action to the appropriate United States district court, if it was not
originally brought there; and
(f) Good faith compliance with rule, regulation, or interpretation of Board or with
interpretation or approval of duly authorized official or employee of Federal Reserve System
No provision of this section, section 1607(b) of this title, section 1607(c) of this title,
section 1607(e) of this title, or section 1611 of this title imposing any liability shall
apply to any act done or omitted in good faith in conformity with any rule,
regulation, or interpretation thereof by the Board or in conformity with any
interpretation or approval by an official or employee of the Federal Reserve System
duly authorized by the Board to issue such interpretations or approvals under such
procedures as the Board may prescribe therefor, notwithstanding that after such act
or omission has occurred, such rule, regulation, interpretation, or approval is
amended, rescinded, or determined by judicial or other authority to be invalid for
any reason.
(h) Offset from amount owed to creditor or assignee; rights of defaulting consumer
A person may not take any action to offset any amount for which a creditor or
assignee is potentially liable to such person under subsection (a)(2) of this section
against any amount owed by such person, unless the amount of the creditor's or
assignee's liability under this subchapter has been determined by judgment of a
court of competent jurisdiction in an action of which such person was a party. This
subsection does not bar a consumer then in default on the obligation from asserting
a violation of this subchapter as an original action, or as a defense or counterclaim to
an action to collect amounts owed by the consumer brought by a person liable under
this subchapter.
(1) In general
During the period beginning on May 18, 1995, and ending on October 1, 1995, no
court may enter any order certifying any class in any action under this subchapter--
(A) which is brought in connection with any credit transaction not under an open end
credit plan which is secured by a first lien on real property or a dwelling and
constitutes a refinancing or consolidation of an existing extension of credit; and
(i) to include a charge actually incurred (in connection with the transaction)
in the finance charge disclosed pursuant to section 1638 of this title;
(ii) to properly make any other disclosure required under section 1638 of this
title as a result of the failure described in clause (i); or
(iii) to provide proper notice of rescission rights under section 1635(a) of this
title due to the selection by the creditor of the incorrect form from among the
model forms prescribed by the Board or from among forms based on such
model forms.
(A) described in clause (i) or (ii) of paragraph (1)(B), if the amount disclosed as the
finance charge results in an annual percentage rate that exceeds the tolerance
provided in section 1606(c) of this title; or
(B) described in paragraph (1)(B)(iii), if--
(i) no notice relating to rescission rights under section 1635(a) of this title
was provided in any form; or
(ii) proper notice was not provided for any reason other than the reason
described in such paragraph.
(a) Prerequisites
Except as otherwise specifically provided in this subchapter, any civil action for a
violation of this subchapter or proceeding under section 1607 of this title which may
be brought against a creditor may be maintained against any assignee of such
creditor only if the violation for which such action or proceeding is brought is
apparent on the face of the disclosure statement, except where the assignment was
involuntary. For the purpose of this section, a violation apparent on the face of the
disclosure statement includes, but is not limited to (1) a disclosure which can be
determined to be incomplete or inaccurate from the face of the disclosure statement
or other documents assigned, or (2) a disclosure which does not use the terms
required to be used by this subchapter.
Any consumer who has the right to rescind a transaction under section 1635 of this
title may rescind the transaction as against any assignee of the obligation.
(1) In general
Notwithstanding any other provision of law, relief provided as a result of any action
made permissible by paragraph (1) may not exceed--
(A) with respect to actions based upon a violation of this subchapter, the amount
specified in section 1640 of this title; and
(B) with respect to all other causes of action, the sum of--
(ii) the total amount paid by the consumer in connection with the
transaction.
(3) Offset
The amount of damages that may be awarded under paragraph (2)(B) shall be
reduced by the amount of any damages awarded under paragraph (2)(A).
(4) Notice
(e) Liability of assignee for consumer credit transactions secured by real property
(1) In general
Except as otherwise specifically provided in this subchapter, any civil action against a
creditor for a violation of this subchapter, and any proceeding under section 1607 of
this title against a creditor, with respect to a consumer credit transaction secured by
real property may be maintained against any assignee of such creditor only if--
(A) the violation for which such action or proceeding is brought is apparent on the
face of the disclosure statement provided in connection with such transaction
pursuant to this subchapter; and
For the purpose of this section, a violation is apparent on the face of the disclosure
statement if--
(A) the disclosure can be determined to be incomplete or inaccurate by a
comparison among the disclosure statement, any itemization of the amount
financed, the note, or any other disclosure of disbursement; or
(B) the disclosure statement does not use the terms or format required to be used
by this subchapter.
(1) In general
For purposes of this subsection, the term “servicer” has the same meaning as in
section 2605(i)(2) of Title 12.
(4) Applicability
(1) A cardholder shall be liable for the unauthorized use of a credit card only if--
(C) the card issuer gives adequate notice to the cardholder of the potential liability;
(D) the card issuer has provided the cardholder with a description of a means by
which the card issuer may be notified of loss or theft of the card, which description
may be provided on the face or reverse side of the statement required by section
1637(b) of this title or on a separate notice accompanying such statement;
(E) the unauthorized use occurs before the card issuer has been notified that an
unauthorized use of the credit card has occurred or may occur as the result of loss,
theft, or otherwise; and
(F) the card issuer has provided a method whereby the user of such card can be
identified as the person authorized to use it.
(2) For purposes of this section, a card issuer has been notified when such steps as
may be reasonably required in the ordinary course of business to provide the card
issuer with the pertinent information have been taken, whether or not any particular
officer, employee, or agent of the card issuer does in fact receive such information.
In any action by a card issuer to enforce liability for the use of a credit card, the
burden of proof is upon the card issuer to show that the use was authorized or, if the
use was unauthorized, then the burden of proof is upon the card issuer to show that
the conditions of liability for the unauthorized use of a credit card, as set forth in
subsection (a) of this section, have been met.
Nothing in this section imposes liability upon a cardholder for the unauthorized use of
a credit card in excess of his liability for such use under other applicable law or under
any agreement with the card issuer.
(a) Use, attempt or conspiracy to use card in transaction affecting interstate or foreign
commerce
(e) Receipt, concealment, etc., of tickets for interstate or foreign transportation obtained by
use of card
shall be fined not more than $10,000 or imprisoned not more than ten years, or
both.
The exemption provided by section 1603(1) of this title does not apply to the
provisions of sections 1642, 1643, and 1644 of this title, except that a card issuer
and a business or other organization which provides credit cards issued by the same
card issuer to ten or more of its employees may by contract agree as to liability of
the business or other organization with respect to unauthorized use of such credit
cards without regard to the provisions of section 1643 of this title, but in no case
may such business or other organization or card issuer impose liability upon any
employee with respect to unauthorized use of such a credit card except in
accordance with and subject to the limitations of section 1643 of this title.
The Board shall collect, publish, and disseminate to the public, on a demonstration
basis in a number of standard metropolitan statistical areas to be determined by the
Board, the annual percentage rates charged for representative types of nonsale
credit by creditors in such areas. For the purpose of this section, the Board is
authorized to require creditors in such areas to furnish information necessary for the
Board to collect, publish, and disseminate such information.
The Board shall collect, on a semiannual basis, credit card price and availability
information, including the information required to be disclosed under section 1637(c)
of this title, from a broad sample of financial institutions which offer credit card
services.
The broad sample of financial institutions required under paragraph (1) shall include-
-
(B) not less than 125 additional financial institutions selected by the Board in a
manner that ensures--
Each financial institution in the broad sample established pursuant to paragraph (2)
shall report the information to the Board in accordance with such regulations or
orders as the Board may prescribe.
(A) make the information collected pursuant to this subsection available to the
public upon request; and
(B) report such information semiannually to Congress.
(c) Implementation
In the case of extensions of credit under an open end consumer credit plan which are
subject to a variable rate and are secured by a consumer's principal dwelling, the
index or other rate of interest to which changes in the annual percentage rate are
related shall be based on an index or rate of interest which is publicly available and
is not under the control of the creditor.
A creditor may not unilaterally terminate any account under an open end consumer
credit plan under which extensions of credit are secured by a consumer's principal
dwelling and require the immediate repayment of any outstanding balance at such
time, except in the case of--
(2) failure by the consumer to meet the repayment terms of the agreement for any
outstanding balance; or
(3) any other action or failure to act by the consumer which adversely affects the
creditor's security for the account or any right of the creditor in such security.
(1) In general
No open end consumer credit plan under which extensions of credit are secured by a
consumer's principal dwelling may contain a provision which permits a creditor to
change unilaterally any term required to be disclosed under section 1637a(a) of this
title or any other term, except a change in insignificant terms such as the address of
the creditor for billing purposes.
(A) Change the index and margin applicable to extensions of credit under such plan
if the index used by the creditor is no longer available and the substitute index and
margin would result in a substantially similar interest rate.
(B) Prohibit additional extensions of credit or reduce the credit limit applicable to an
account under the plan during any period in which the value of the consumer's
principal dwelling which secures any outstanding balance is significantly less than the
original appraisal value of the dwelling.
(C) Prohibit additional extensions of credit or reduce the credit limit applicable to the
account during any period in which the creditor has reason to believe that the
consumer will be unable to comply with the repayment requirements of the account
due to a material change in the consumer's financial circumstances.
(D) Prohibit additional extensions of credit or reduce the credit limit applicable to the
account during any period in which the consumer is in default with respect to any
material obligation of the consumer under the agreement.
(E) Prohibit additional extensions of credit or reduce the credit limit applicable to the
account during any period in which--
(i) the creditor is precluded by government action from imposing the annual
percentage rate provided for in the account agreement; or
(ii) any government action is in effect which adversely affects the priority of
the creditor's security interest in the account to the extent that the value of
the creditor's secured interest in the property is less than 120 percent of the
amount of the credit limit applicable to the account.
Upon the request of the consumer and at the time an agreement is entered into by a
consumer to open an account under an open end consumer credit plan under which
extensions of credit are secured by the consumer's principal dwelling, the consumer
shall be given a list of the categories of contract obligations which are deemed by the
creditor to be material obligations of the consumer under the agreement for
purposes of paragraph (2)(D).
(A) In general
For purposes of paragraph (2)(F), a change shall be deemed to benefit the consumer
if the change is unequivocally beneficial to the borrower and the change is beneficial
through the entire term of the agreement.
(B) Board categorization
The Board may, by regulation, determine categories of changes that benefit the
consumer.
If any term or condition described in section 1637a(a) of this title which is disclosed
to a consumer in connection with an application to open an account under an open
end consumer credit plan described in such section (other than a variable feature of
the plan) changes before the account is opened, and if, as a result of such change,
the consumer elects not to enter into the plan agreement, the creditor shall refund
all fees paid by the consumer in connection with such application.
(1) In general
(a) In general
In addition to the disclosures required under this subchapter, for each reverse
mortgage, the creditor shall, not less than 3 days prior to consummation of the
transaction, disclose to the consumer in conspicuous type a good faith estimate of
the projected total cost of the mortgage to the consumer expressed as a table of
annual interest rates. Each annual interest rate shall be based on a projected total
future credit extension balance under a projected appreciation rate for the dwelling
and a term for the mortgage. The disclosure shall include--
(1) statements of the annual interest rates for not less than 3 projected appreciation
rates and not less than 3 credit transaction periods, as determined by the Board,
including--
(A) a short-term reverse mortgage;
(B) a term equaling the actuarial life expectancy of the consumer; and
(2) a statement that the consumer is not obligated to complete the reverse
mortgage transaction merely because the consumer has received the disclosure
required under this section or has signed an application for the reverse mortgage.
(1) any shared appreciation or equity that the lender will, by contract, be entitled to
receive;
(2) all costs and charges to the consumer, including the costs of any associated
annuity that the consumer elects or is required to purchase as part of the reverse
mortgage transaction;
(3) all payments to and for the benefit of the consumer, including, in the case in
which an associated annuity is purchased (whether or not required by the lender as a
condition of making the reverse mortgage), the annuity payments received by the
consumer and financed from the proceeds of the loan, instead of the proceeds used
to finance the annuity; and
(4) any limitation on the liability of the consumer under reverse mortgage
transactions (such as nonrecourse limits and equity conservation agreements).
For any closed end consumer credit transaction that is secured by real property or a
dwelling, that is subject to this subchapter, and that is consummated before
September 30, 1995, a creditor or any assignee of a creditor shall have no civil,
administrative, or criminal liability under this subchapter for, and a consumer shall
have no extended rescission rights under section 1635(f) of this title with respect to-
-
(C) fees and amounts referred to in the 3rd sentence of section 1605(a) of this title;
or
(D) borrower-paid mortgage broker fees referred to in section 1605(a)(6) of this
title;
(2) the form of written notice used by the creditor to inform the obligor of the rights
of the obligor under section 1635 of this title if the creditor provided the obligor with
a properly dated form of written notice published and adopted by the Board or a
comparable written notice, and otherwise complied with all the requirements of this
section regarding notice; or
(3) any disclosure relating to the finance charge imposed with respect to the
transaction if the amount or percentage actually disclosed--
(A) may be treated as accurate for purposes of this subchapter if the amount
disclosed as the finance charge does not vary from the actual finance charge by
more than $200;
(B) may, under section 1605(f)(2) of this title, be treated as accurate for purposes
of section 1635 of this title; or
(C) is greater than the amount or percentage required to be disclosed under this
subchapter.
(b) Exceptions
(1) any individual action or counterclaim brought under this subchapter which was
filed before June 1, 1995;
(2) any class action brought under this subchapter for which a final order certifying
a class was entered before January 1, 1995;
(3) the named individual plaintiffs in any class action brought under this subchapter
which was filed before June 1, 1995; or
(4) any consumer credit transaction with respect to which a timely notice of
rescission was sent to the creditor before June 1, 1995.
§ 1650. Preventing unfair and deceptive private educational lending practices and
eliminating conflicts of interest
(a) Definitions
(A)(i) means any gratuity, favor, discount, entertainment, hospitality, loan, or other
item having more than a de minimis monetary value, including services,
transportation, lodging, or meals, whether provided in kind, by purchase of a ticket,
payment in advance, or reimbursement after the expense has been incurred; and
(I) the item is provided with the knowledge and acquiescence of the officer,
employee, or agent; and
(II) the officer, employee, or agent has reason to believe the item was
provided because of the official position of the officer, employee, or agent;
and
(I) applications for private education loans or private education loan volume;
(II) applications or loan volume for any loan made, insured, or guaranteed
under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.);
or
(III) the purchase of a product or service of a specific private educational
lender;
(3) the term “institution of higher education” has the same meaning as in section
102 of the Higher Education Act of 1965 (20 U.S.C. 1002);
(4) the term “postsecondary educational expenses” means any of the expenses that
are included as part of the cost of attendance of a student, as defined under section
472 of the Higher Education Act of 1965 (20 U.S.C. 1087)
(5) the term “preferred lender arrangement” has the same meaning as in section
151 of the Higher Education Act of 1965 [20 U.S.C.A. § 1019];
(B) a Federal credit union, as defined in section 1752 of Title 12 that solicits, makes,
or extends private education loans; and
(C) any other person engaged in the business of soliciting, making, or extending
private education loans;
(B) does not include an extension of credit under an open end consumer credit plan,
a reverse mortgage transaction, a residential mortgage transaction, or any other
loan that is secured by real property or a dwelling; and
(8) the term “revenue sharing” means an arrangement between a covered
educational institution and a private educational lender under which--
(A) a private educational lender provides or issues private education loans with
respect to students attending the covered educational institution;
(C) the private educational lender pays a fee or provides other material benefits,
including profit sharing, to the covered educational institution in connection with the
private education loans provided to students attending the covered educational
institution or a borrower acting on behalf of a student.
(1) offer or provide any gift to a covered educational institution in exchange for any
advantage or consideration provided to such private educational lender related to its
private education loan activities; or
Any person who is employed in the financial aid office of a covered educational
institution, or who otherwise has responsibilities with respect to private education
loans or other financial aid of the institution, and who serves on an advisory board,
commission, or group established by a private educational lender or group of such
lenders shall be prohibited from receiving anything of value from the private
educational lender or group of lenders. Nothing in this subsection prohibits the
reimbursement of reasonable expenses incurred by an employee of a covered
educational institution as part of their service on an advisory board, commission, or
group described in this subsection.
It shall be unlawful for any private educational lender to impose a fee or penalty on a
borrower for early repayment or prepayment of any private education loan.
For the purposes of this part, a catalog or other multiple-page advertisement shall be
considered a single advertisement if it clearly and conspicuously displays a credit
terms table on which the information required to be stated under this part is clearly
set forth.
§ 1662. Advertising of downpayments and installments
(1) that a specific periodic consumer credit amount or installment amount can be
arranged, unless the creditor usually and customarily arranges credit payments or
installments for that period and in that amount.
(2) In any case in which periodic rates may be used to compute the finance charge,
the periodic rates expressed as annual percentage rates.
(3) Any other term that the Board may by regulation require to be disclosed.
Except as provided in subsection (b) of this section, this section applies to any
advertisement to aid, promote, or assist directly or indirectly any consumer credit
sale, loan, or other extension of credit subject to the provisions of this subchapter,
other than an open end credit plan.
If any advertisement to which this section applies states the rate of a finance charge,
the advertisement shall state the rate of that charge expressed as an annual
percentage rate.
(3) The rate of the finance charge expressed as an annual percentage rate.
Each advertisement to which this section applies that relates to a consumer credit
transaction that is secured by the principal dwelling of a consumer in which the
extension of credit may exceed the fair market value of the dwelling, and which
advertisement is disseminated in paper form to the public or through the internet, as
opposed to by radio or television, shall clearly and conspicuously State that--
(1) the interest on the portion of the credit extension that is greater than the fair
market value of the dwelling is not tax deductible for Federal income tax purposes;
and
(2) the consumer should consult a tax adviser for further information regarding the
deductibility of interest and charges.
There is no liability under this part on the part of any owner or personnel, as such, of
any medium in which an advertisement appears or through which it is disseminated.
In responding orally to any inquiry about the cost of credit, a creditor, regardless of
the method used to compute finance charges, shall state rates only in terms of the
annual percentage rate, except that in the case of an open end credit plan, the
periodic rate also may be stated and, in the case of an other than open end credit
plan where a major component of the finance charge consists of interest computed
at a simple annual rate, the simple annual rate also may be stated. The Board may,
by regulation, modify the requirements of this section or provide an exception from
this section for a transaction or class of transactions for which the creditor cannot
determine in advance the applicable annual percentage rate.
(a) In general
Any loan fee the amount of which is determined as a percentage of the credit limit
applicable to an account under the plan and an estimate of the aggregate amount of
other fees for opening the account, based on the creditor's experience with the plan
and stated as a single amount or as a reasonable range.
In any case in which periodic rates may be used to compute the finance charge, the
periodic rates expressed as an annual percentage rate.
The highest annual percentage rate which may be imposed under the plan.
(1) In general
(A) the interest on the portion of the credit extension that is greater than the fair
market value of the dwelling is not tax deductible for Federal income tax purposes;
and
(B) the consumer should consult a tax adviser for further information regarding the
deductibility of interest and charges.
(1) In general
The annual percentage rate required to be disclosed under the paragraph (1) rate
must be current as of a reasonable time given the media involved.
Any advertisement to which paragraph (1) applies shall also state the period of time
during which the initial annual percentage rate referred to in such paragraph will be
in effect.
For purposes of this section and section 1637a of this title, the term “balloon
payment” means, with respect to any open end consumer credit plan under which
extensions of credit are secured by the consumer's principal dwelling, any repayment
option under which--
(1) the account holder is required to repay the entire amount of any outstanding
balance as of a specified date or at the end of a specified period of time, as
determined in accordance with the terms of the agreement pursuant to which such
credit is extended; and
(2) the aggregate amount of the minimum periodic payments required would not
fully amortize such outstanding balance by such date or at the end of such period.
(a) Written notice by obligor to creditor; time for and contents of notice; procedure upon
receipt of notice by creditor
If a creditor, within sixty days after having transmitted to an obligor a statement of
the obligor's account in connection with an extension of consumer credit, receives at
the address disclosed under section 1637(b)(10) of this title a written notice (other
than notice on a payment stub or other payment medium supplied by the creditor if
the creditor so stipulates with the disclosure required under section 1637(a)(7) of
this title) from the obligor in which the obligor--
(1) sets forth or otherwise enables the creditor to identify the name and account
number (if any) of the obligor,
(2) indicates the obligor's belief that the statement contains a billing error and the
amount of such billing error, and
(3) sets forth the reasons for the obligor's belief (to the extent applicable) that the
statement contains a billing error,
the creditor shall, unless the obligor has, after giving such written notice and before
the expiration of the time limits herein specified, agreed that the statement was
correct--
(A) not later than thirty days after the receipt of the notice, send a written
acknowledgment thereof to the obligor, unless the action required in subparagraph
(B) is taken within such thirty-day period, and
(B) not later than two complete billing cycles of the creditor (in no event later than
ninety days) after the receipt of the notice and prior to taking any action to collect
the amount, or any part thereof, indicated by the obligor under paragraph (2) either-
-
(i) make appropriate corrections in the account of the obligor, including the
crediting of any finance charges on amounts erroneously billed, and transmit
to the obligor a notification of such corrections and the creditor's explanation
of any change in the amount indicated by the obligor under paragraph (2)
and, if any such change is made and the obligor so requests, copies of
documentary evidence of the obligor's indebtedness; or
After complying with the provisions of this subsection with respect to an alleged
billing error, a creditor has no further responsibility under this section if the obligor
continues to make substantially the same allegation with respect to such error.
(b) Billing error
For the purpose of this section, a “billing error” consists of any of the following:
(1) A reflection on a statement of an extension of credit which was not made to the
obligor or, if made, was not in the amount reflected on such statement.
(4) The creditor's failure to reflect properly on a statement a payment made by the
obligor or a credit issued to the obligor.
(6) Failure to transmit the statement required under section 1637(b) of this title to
the last address of the obligor which has been disclosed to the creditor, unless that
address was furnished less than twenty days before the end of the billing cycle for
which the statement is required.
(c) Action by creditor to collect amount or any part thereof regarded by obligor to be a
billing error
For the purposes of this section, “action to collect the amount, or any part thereof,
indicated by an obligor under paragraph (2)” does not include the sending of
statements of account, which may include finance charges on amounts in dispute, to
the obligor following written notice from the obligor as specified under subsection (a)
of this section, if--
(1) the obligor's account is not restricted or closed because of the failure of the
obligor to pay the amount indicated under paragraph (2) of subsection (a) of this
section, and
(2) the creditor indicates the payment of such amount is not required pending the
creditor's compliance with this section.
(d) Restricting or closing by creditor of account regarded by obligor to contain a billing error
Any creditor who fails to comply with the requirements of this section or section
1666a of this title forfeits any right to collect from the obligor the amount indicated
by the obligor under paragraph (2) of subsection (a) of this section, and any finance
charges thereon, except that the amount required to be forfeited under this
subsection may not exceed $50.
(a) Reports by creditor on obligor's failure to pay amount regarded as billing error
After receiving a notice from an obligor as provided in section 1666(a) of this title, a
creditor or his agent may not directly or indirectly threaten to report to any person
adversely on the obligor's credit rating or credit standing because of the obligor's
failure to pay the amount indicated by the obligor under section 1666(a)(2) of this
title, and such amount may not be reported as delinquent to any third party until the
creditor has met the requirements of section 1666 of this title and has allowed the
obligor the same number of days (not less than ten) thereafter to make payment as
is provided under the credit agreement with the obligor for the payment of
undisputed amounts.
If a creditor receives a further written notice from an obligor that an amount is still in
dispute within the time allowed for payment under subsection (a) of this section, a
creditor may not report to any third party that the amount of the obligor is
delinquent because the obligor has failed to pay an amount which he has indicated
under section 1666(a)(2) of this title, unless the creditor also reports that the
amount is in dispute and, at the same time, notifies the obligor of the name and
address of each party to whom the creditor is reporting information concerning the
delinquency.
Subsection (a) of this section does not apply in any case where a creditor has been
prevented, delayed, or hindered in making timely mailing or delivery of such periodic
statement within the time period specified in such subsection because of an act of
God, war, natural disaster, strike, or other excusable or justifiable cause, as
determined under regulations of the Board.
Payments received from an obligor under an open end consumer credit plan by the
creditor shall be posted promptly to the obligor's account as specified in regulations
of the Board. Such regulations shall prevent a finance charge from being imposed on
any obligor if the creditor has received the obligor's payment in readily identifiable
form in the amount, manner, location, and time indicated by the creditor to avoid the
imposition thereof.
(A) credit the amount of the credit balance to the consumer's account;
(B) refund any part of the amount of the remaining credit balance, upon request of
the consumer; and
(C) make a good faith effort to refund to the consumer by cash, check, or money
order any part of the amount of the credit balance remaining in the account for more
than six months, except that no further action is required in any case in which the
consumer's current location is not known by the creditor and cannot be traced
through the consumer's last known address or telephone number.
With respect to any sales transaction where a credit card has been used to obtain
credit, where the seller is a person other than the card issuer, and where the seller
accepts or allows a return of the goods or forgiveness of a debit for services which
were the subject of such sale, the seller shall promptly transmit to the credit card
issuer, a credit statement with respect thereto and the credit card issuer shall credit
the account of the obligor for the amount of the transaction.
With respect to credit card which may be used for extensions of credit in sales
transactions in which the seller is a person other than the card issuer, the card issuer
may not, by contract, or otherwise, prohibit any such seller from offering a discount
to a cardholder to induce the cardholder to pay by cash, check, or similar means
rather than use a credit card.
With respect to any sales transaction, any discount from the regular price offered by
the seller for the purpose of inducing payment by cash, checks, or other means not
involving the use of an open-end credit plan or a credit card shall not constitute a
finance charge as determined under section 1605 of this title if such discount is
offered to all prospective buyers and its availability is disclosed clearly and
conspicuously.
Notwithstanding any agreement to the contrary, a card issuer may not require a
seller, as a condition to participating in a credit card plan, to open an account with or
procure any other service from the card issuer or its subsidiary or agent.
A card issuer may not take any action to offset a cardholder's indebtedness arising in
connection with a consumer credit transaction under the relevant credit card plan
against funds of the cardholder held on deposit with the card issuer unless--
(1) such action was previously authorized in writing by the cardholder in accordance
with a credit plan whereby the cardholder agrees periodically to pay debts incurred in
his open end credit account by permitting the card issuer periodically to deduct all or
a portion of such debt from the cardholder's deposit account, and
(2) such action with respect to any outstanding disputed amount not be taken by
the card issuer upon request of the cardholder.
In the case of any credit card account in existence on the effective date of this
section, the previous written authorization referred to in clause (1) shall not be
required until the date (after such effective date) when such account is renewed, but
in no case later than one year after such effective date. Such written authorization
shall be deemed to exist if the card issuer has previously notified the cardholder that
the use of his credit card account will subject any funds which the card issuer holds
in deposit accounts of such cardholder to offset against any amounts due and
payable on his credit card account which have not been paid in accordance with the
terms of the agreement between the card issuer and the cardholder.
This section does not alter or affect the right under State law of a card issuer to
attach or otherwise levy upon funds of a cardholder held on deposit with the card
issuer if that remedy is constitutionally available to creditors generally.
§ 1666i. Assertion by cardholder against card issuer of claims and defenses arising
out of credit card transaction; prerequisites; limitation on amount of claims or
defenses
Subject to the limitation contained in subsection (b) of this section, a card issuer who
has issued a credit card to a cardholder pursuant to an open end consumer credit
plan shall be subject to all claims (other than tort claims) and defenses arising out of
any transaction in which the credit card is used as a method of payment or extension
of credit if (1) the obligor has made a good faith attempt to obtain satisfactory
resolution of a disagreement or problem relative to the transaction from the person
honoring the credit card; (2) the amount of the initial transaction exceeds $50; and
(3) the place where the initial transaction occurred was in the same State as the
mailing address previously provided by the cardholder or was within 100 miles from
such address, except that the limitations set forth in clauses (2) and (3) with respect
to an obligor's right to assert claims and defenses against a card issuer shall not be
applicable to any transaction in which the person honoring the credit card (A) is the
same person as the card issuer, (B) is controlled by the card issuer, (C) is under
direct or indirect common control with the card issuer, (D) is a franchised dealer in
the card issuer's products or services, or (E) has obtained the order for such
transaction through a mail solicitation made by or participated in by the card issuer
in which the cardholder is solicited to enter into such transaction by using the credit
card issued by the card issuer.
The amount of claims or defenses asserted by the cardholder may not exceed the
amount of credit outstanding with respect to such transaction at the time the
cardholder first notifies the card issuer or the person honoring the credit card of such
claim or defense. For the purpose of determining the amount of credit outstanding in
the preceding sentence, payments and credits to the cardholder's account are
deemed to have been applied, in the order indicated, to the payment of: (1) late
charges in the order of their entry to the account; (2) finance charges in order of
their entry to the account; and (3) debits to the account other than those set forth
above, in the order in which each debit entry to the account was made.
This part does not annul, alter, or affect, or exempt any person subject to the
provisions of this part from complying with, the laws of any State with respect to
credit billing practices, except to the extent that those laws are inconsistent with any
provision of this part, and then only to the extent of the inconsistency. The Board is
authorized to determine whether such inconsistencies exist. The Board may not
determine that any State law is inconsistent with any provision of this part if the
Board determines that such law gives greater protection to the consumer.
The Board shall by regulation exempt from the requirements of this part any class of
credit transactions within any State if it determines that under the law of that State
that class of transactions is subject to requirements substantially similar to those
imposed under this part or that such law gives greater protection to the consumer,
and that there is adequate provision for enforcement.
(c) Finance charge or other charge for credit for sales transactions involving cash discounts
Notwithstanding any other provisions of this subchapter, any discount offered under
section 1666f(b) of this title shall not be considered a finance charge or other charge
for credit under the usury laws of any State or under the laws of any State relating
to disclosure of information in connection with credit transactions, or relating to the
types, amounts or rates of charges, or to any element or elements of charges
permissible under such laws in connection with the extension or use of credit.
§ 1667. Definitions
(1) The term “consumer lease” means a contract in the form of a lease or bailment
for the use of personal property by a natural person for a period of time exceeding
four months, and for a total contractual obligation not exceeding $25,000, primarily
for personal, family, or household purposes, whether or not the lessee has the option
to purchase or otherwise become the owner of the property at the expiration of the
lease, except that such term shall not include any credit sale as defined in section
1602(g) of this title. Such term does not include a lease for agricultural, business, or
commercial purposes, or to a government or governmental agency or
instrumentality, or to an organization.
(2) The term “lessee” means a natural person who leases or is offered a consumer
lease.
(3) The term “lessor” means a person who is regularly engaged in leasing, offering
to lease, or arranging to lease under a consumer lease.
(4) The term “personal property” means any property which is not real property
under the laws of the State where situated at the time offered or otherwise made
available for lease.
(5) The terms “security” and “security interest” mean any interest in property which
secures payment or performance of an obligation.
Each lessor shall give a lessee prior to the consummation of the lease a dated written
statement on which the lessor and lessee are identified setting out accurately and in
a clear and conspicuous manner the following information with respect to that lease,
as applicable:
(2) The amount of any payment by the lessee required at the inception of the lease;
(3) The amount paid or payable by the lessee for official fees, registration,
certificate of title, or license fees or taxes;
(4) The amount of other charges payable by the lessee not included in the periodic
payments, a description of the charges and that the lessee shall be liable for the
differential, if any, between the anticipated fair market value of the leased property
and its appraised actual value at the termination of the lease, if the lessee has such
liability;
(6) A statement identifying all express warranties and guarantees made by the
manufacturer or lessor with respect to the leased property, and identifying the party
responsible for maintaining or servicing the leased property together with a
description of the responsibility;
(7) A brief description of insurance provided or paid for by the lessor or required of
the lessee, including the types and amounts of the coverages and costs;
(9) The number, amount, and due dates or periods of payments under the lease and
the total amount of such periodic payments;
(10) Where the lease provides that the lessee shall be liable for the anticipated fair
market value of the property on expiration of the lease, the fair market value of the
property at the inception of the lease, the aggregate cost of the lease on expiration,
and the differential between them; and
(11) A statement of the conditions under which the lessee or lessor may terminate
the lease prior to the end of the term and the amount or method of determining any
penalty or other charge for delinquency, default, late payments, or early termination.
The disclosures required under this section may be made in the lease contract to be
signed by the lessee. The Board may provide by regulation that any portion of the
information required to be disclosed under this section may be given in the form of
estimates where the lessor is not in a position to know exact information.
(a) Estimated residual value of property as basis; presumptions; action by lessor for excess
liability; mutually agreeable final adjustment
If a lease has a residual value provision at the termination of the lease, the lessee
may obtain at his expense, a professional appraisal of the leased property by an
independent third party agreed to by both parties. Such appraisal shall be final and
binding on the parties.
(a) In general
If an advertisement for a consumer lease includes a statement of the amount of any
payment or a statement that any or no initial payment is required, the advertisement
shall clearly and conspicuously state, as applicable--
(2) the total amount of any initial payments required on or before consummation of
the lease or delivery of the property, whichever is later;
(5) with respect to a lease in which the liability of the consumer at the end of the
lease term is based on the anticipated residual value of the property, that an extra
charge may be imposed at the end of the lease term.
(1) In general
(A) states the information required by paragraphs (1) and (2) of subsection (a) of
this section;
(B) states the number, amounts, due dates or periods of scheduled payments, and
the total of such payments under the lease;
(C) includes--
(ii) the name and dates of any publication referred to in clause (i)(II); and
(D) includes any other information which the Board determines necessary to carry
out this part.
(A) In general
(i) establish such a toll-free telephone number not later than the date on
which the advertisement including the referral is broadcast;
(ii) maintain such telephone number for a period of not less than 10 days,
beginning on the date of any such broadcast; and
(iii) provide the information required under subsection (a) of this section with
respect to the lease to any person who calls such number.
Nothing in this subsection shall affect the requirements of Federal law as such
requirements apply to advertisement by any medium other than radio broadcast.
Any lessor who fails to comply with any requirement imposed under section 1667a or
1667b of this title with respect to any person is liable to such person as provided in
section 1640 of this title.
Any lessor who fails to comply with any requirement imposed under section 1667c of
this title with respect to any person who suffers actual damage from the violation is
liable to such person as provided in section 1640 of this title. For the purposes of this
section, the term “creditor” as used in sections 1640 and 1641 of this title shall
include a lessor as defined in this part.
Notwithstanding section 1640(e) of this title, any action under this section may be
brought in any United States district court or in any other court of competent
jurisdiction. Such actions alleging a failure to disclose or otherwise comply with the
requirements of this part shall be brought within one year of the termination of the
lease agreement.
(a) This part does not annul, alter, or affect, or exempt any person subject to the
provisions of this part from complying with, the laws of any State with respect to
consumer leases, except to the extent that those laws are inconsistent with any
provision of this part, and then only to the extent of the inconsistency. The Board is
authorized to determine whether such inconsistencies exist. The Board may not
determine that any State law is inconsistent with any provision of this part if the
Board determines that such law gives greater protection and benefit to the
consumer.
(b) The Board shall by regulation exempt from the requirements of this part any
class of lease transactions within any State if it determines that under the law of that
State that class of transactions is subject to requirements substantially similar to
those imposed under this part or that such law gives greater protection and benefit
to the consumer, and that there is adequate provision for enforcement.
§ 1667f. Regulations
(1) In general
The Board shall prescribe regulations to update and clarify the requirements and
definitions applicable to lease disclosures and contracts, and any other issues
specifically related to consumer leasing, to the extent that the Board determines
such action to be necessary--