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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.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102