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R e se r v e Ba n k DALLAS, TEXAS of Dallas 75222 C i r c u l a r No. 75-182 December 12, 1975 A m e r ic a n R e v o lu tio n B ic e n te n n ia l INTERPRETATION OF REGULATION Z D is clo s u re of S in g le-C om p on e n t Finance C h a r g e s TO ALL BANKS, OTHER CREDITORS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Quoted below is the te xt of a statement is s u e d November 21, 1975, by the Board of G o v e rn o rs of the Federal R e s e r v e System: T h e Board of G o v e rn o rs of the Federal R e s e r v e System today is su e d the a tta c h e d in te r p r e ta tio n of its T r u t h - i n Lending re g u la tio n th a t a p p lie s to d i s c l o s u r e of finance c h a r g e s w hic h contain only one com ponent. In s u c h c a s e s , the c r e d i t o r n e ed not identify the sin g le component beyond th e d e s c r i p t i o n of " fin ance c h a r g e . " Where more th an one com ponent is in v o lv e d , h o w e v e r , c r e d itors must p r o v i d e the amount of eac h com ponent (su c h as in t e r e s t , c r e d i t r e p o r t fe e s, o r s e r v i c e c h a r g e s ) . P r in te d on the r e v e r s e of th is c i r c u l a r is a copy of the I n t e r p r e t a tion of Regulation Z. Additional copies will be f u r n i s h e d upon r e q u e s t to the S e c r e t a r y 's Office of this Bank. S i n c e r e ly y o u r s , T . W. P lant F i r s t V ic e P r e s id e n t This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM TRUTH IN LENDING INTERPRETATION OF REGULATION Z Disclosure of Single-Component Finance Charges This interpretation relates to the application of Regulation Z to credit transactions other than open end when the finance charge is composed of a single element. The interpretation provides that in such instances the creditor may disclose that single element under the term “finance charge” and there is no need to further identify or describe the ele ment. However, where there is m ore than one element comprising the finance charge, creditors are required under Regulation Z to describe each am ount included in the finance charge. SEC TIO N 226.820 — D ISC L O SU R E O F S IN G L E -C O M P O N E N T F IN A N C E C H A R G E S Sections 2 26 .8 (c) (8) (i) and 2 2 6 .8 (d ) (3 ) re quire the disclosure of the total am ount of the finance charge “with description of each am ount included,” except in the case of certain real p ro p erty transactions. The question arises w hether the nature of the finance charge must be described where only one type of charge, such as an interest charge, com prises the total finance charge. 11-21-75 The primary purpose of this disclosure require ment is to assure that all sums which constitute finance charges under § 226.4(a) are properly taken into account in determining the total finance charge. In addition, this inform ation per mits the custom er to make a more meaningful comparison of the finance charges and annual percentage rates available from various sources of consum er credit and to make an inform ed selection on this basis. A description of the am ounts in cluded in the finance charge is necessary to carry out the purposes of the Act only when the total charge includes more than one element. Therefore, where only a single type of charge comprises the finance charge, disclosure of the total dollar am ount of such charge, using the term “finance charge,” complies with the requirem ents of § § 226.8(c)(8)(i) and 226.8(d)(3), and there is no further requirem ent under those sections that the single type of charge be otherwise identified or described.