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F ederal r eser ve b a n k o f Dallas DALLAS, TEXAS 75222 Circular No. 77-54 May 4, 1977 R E G U LA TIO N Z - - T R U T H - I N - L E N D I N G T O A L L B A N K S , O T H E R C R E D IT O R S , AN D O THERS CONCERNED IN T H E E L E V E N T H F E D E R A L RESERVE D IS T R IC T : T h e Board of G o v e rn o rs of the Fe d era l R e s e rv e System has issued an updated pam phlet on its R eg ulation Z ( T r u t h - i n - L e n d i n g ) as of M a rc h 23, 1977. T h e pa m p h let am ended e ffe c tiv e O cto b e r 28, 1975, and a ll amendments dated p r i o r to M a rc h 23, 1977, should be rem oved from y o u r b i n d e r and d e s tr o y e d . T h e Board has also issued two am endm ents to R egulation Z . T h e fi r s t am end m ent, e ffe c tiv e A p r i l 11, 1977, p e rm its the use of S pan ish r a th e r than E n g lis h language in T r u t h - i n - L e n d i n g d is c lo s u re s in the Commonwealth of Puerto R ico . E n g lish lan guage d is c lo s u re s must be p r o v id e d to custom ers if th e y so re q u e s t. T h e B o a rd 's action is based upon the fact th a t S pan is h is the tr a d itio n a l and p re d o m in a n t language used in P uerto R ic o . T h is am endm ent w ill p e r m it c r e d ito r s to p r o v id e m ore m eaningfu l d is c lo s u re s to custom ers in an e ffic ie n t and e ffe c tiv e m a n n e r. T h e second a m endm ent, e ffe c tiv e O cto b e r 10, 1977, r e q u ire s c r e d ito r s to make c e rta in a d d itio n a l d is c lo s u re s w h e n v a r ia b le in te re s t rate clauses a re used in c r e d i t tr a n s a c tio n s . It r e q u ir e s d is c lo s u re of the fact th a t the annual p e rc e n ta g e ra te is subject to in c re a se and the conditions u n d e r w h ic h an in c re a se may o c c u r , th e m a n n er in w h ic h an in c re a se w o uld be e ffe cted , a n d , in some c ases, inform ation on the effect of a rate in c re a s e on the p aym en t amounts a n d / o r m a tu r ity of the o b lig a tio n . A n y questions c o n c e rn in g R e g u latio n Z should be d ir e c te d to R ic h a r d B . West of o u r R egulations D e p a rtm e n t, E x t. 6171. A d d itio n a l copies of the re g u la tio n a n d / o r am endm ents w i ll be fu r n is h e d upon re q u es t to the S e c r e ta r y 's O ffice of th is B a n k , E x t. 6267. S in c e r e ly y o u r s , R o b e r t H . B o y k in F ir s t V ic e P re s id e n t E nclo sure Banks and others are encouraged to use the fo llo w in g t o ll-fr e e incoming WATS numbers in contacting this Bank: 1-8 0 0 -49 2 -4 40 3 (in tra s ta te ) and 1 -8 0 0 -52 7 -4 97 0 (in te rs ta te ). For c a lls placed lo c a lly , p le a s e use 651 p lus the extension referred to above. 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 AM EN D M EN T S TO R E G U L A T IO N Z f Effective A p ril 11, 1977, a n e w p a ra g ra p h w as a d d e d to §22 6 .6(a) as follows: S E C T IO N 226 .6 — G E N E R A L D IS C L O S U R E R E Q U IR E M E N T S (a) Disclosures; general rule.* * * A ll disclosures re q u ire d to be given by this P a rt shall be m a d e in th e E nglish la n g u a g e ex c e p t in the C o m m o n w e a lth o f P u e rto R ic o w h e re disclos ures m a y be m a d e in th e S p an ish la n g u ag e w ith E nglish la n g u a g e disclosures p ro v id e d u p o n th e c u sto m e r’s req u est, e ith e r in su b stitu tio n fo r th e S panish disclosures o r as ad d itio n a l in fo rm a tio n in a c c o rd a n c e w ith §22 6 .6(c). ♦ * * * * Effective O c to b e r 10, 1977, th e B o a rd a m e n d s R eg u latio n Z as follows: 1. S ection 226.8(b) w o u ld be a m e n d e d by th e ad d itio n o f su b p a ra g ra p h (8) as follows: S E C T IO N 226.8 — C R E D I T O T H E R T H A N O P E N E N D — S P E C I F IC D IS C L O S U R E S in terv als (including th o se o bligations p ro v id in g fo r “b allo o n ” p a y m e n ts) a n d th e in c rea se co u ld be effected by a n in c re ase in th e p e rio d ic p a y m e n t a m o u n t, a sta te m e n t o f th e estim a ted in crease in th e a m o u n t o f th e p a y m e n t c a u se d b y a h y p o th e tic al im m e d iate inc rease o f o n e q u a r te r o f o n e p e rce n ta g e p o in t, b ased u p o n th e n u m b e r o f sch ed u led p erio d ic p a y m e n ts an d o rig in al a m o u n t financed disclosed a t c o n su m m a tio n ; (iv) If th e o b lig atio n is re p a y a b le in su b stan tially e q u al in stalm en ts a t substantially e q u a l intervals (in c lu d in g th o se oblig atio n s p ro vid in g fo r “ b allo o n ” p a y m e n ts) an d th e in c rease could be effected b y an in crease in th e n u m b e r o f p erio d ic p a y m en ts, a sta te m e n t o f th e esti m a te d in c rease in th e n u m b e r o f p erio d ic p a y m e n ts cau sed by a h y p o th e tic a l im m ed ia te in cre ase o f o n e q u a rte r o f o n e p e rc e n ta g e p o in t, b ased u p o n th e p erio d ic p a y m e n t a m o u n t an d th e o rig in al a m o u n t fin an ced disclosed a t c o n su m m a tio n . A n y inc rease in th e a n n u a l p e rc en ta g e ra te w ithin th e c o n d itio n s o r lim itatio n s disclosed in a c c o rd a n c e w ith this p a ra g ra p h is a su b se q u en t (b) * * * o c c u rre n c e u n d e r § 2 2 6 .6 ( g ) a n d is n o t a refin a n c (8) If th e a n n u a l p e rc en ta g e ra te as disclosed ing u n d e r § 2 2 6 .8 (j ) . u n d e r § 2 2 6 .8 ( b ) (2 ) is p ro sp e ctiv ely subject to in T h e disclosures req u ire d u n d e r §226.8(b)(8)(iii) crease1011, th e follow ing ad d itio n a l disclosures shall a n d (iv) n eed be m a d e o nly in tran sa c tio n s in be m ade: w hich a secu rity in te re st is ta k e n in real p ro p e rty * * * * * (i) T h e fa c t th a t th e a n n u a l p e rc en ta g e ra te is su b ject to inc rease a n d th e c o n ditions u n d e r w hich su ch ra te m a y increase, including: (A) identification o f th e index, if a n y , w ith resp ect to w h ich such inc rease in a n n u a l p e rc e n ta g e ra te is tied; a n d (B) a ny lim ita tio n on su ch in crease; (ii) T h e m a nner(s) (such as a n inc rease in p a y m e n t am o u n ts, n u m b e r o f sch ed u le d p e ri odic p ay m en ts, o r in th e a m o u n t due a t m a tu r ity) in w h ic h any in c re a se in th e a n n u a l p e r c en tag e ra te m a y be effected; (iii) If th e obligation is re p a y a b le in su b sta n tially eq u al in stalm ents a t su b stantially eq u al u sed o r ex p ected to be u sed as th e c u sto m e r’s dw elling, a n d th e y n e e d n o t b e m a d e in tra n s actions p rim arily fo r ag ric u ltu ral p u rp o ses, tra n s a ctio n s in w h ich th e ob lig atio n is re p a y a b le in su b stan tially eq u al in stalm en ts w h ich d o n o t in c lu d e rep a y m en ts o f p rin cip al, o r tra n sa c tio n s in w h ic h disclosures a re m a d e p u rs u a n t to § 2 2 6.814. * * * * * 2. In te rp re ta tio n § 2 2 6.810, prev io u sly issued by th e B o ard , is resc in d e d effective O c to b e r 10, 1 977, in a sm u c h as th e a m e n d m e n t to § 2 2 6 .8(b) o f th e re g u la tio n m a k e s this in te rp re ta tio n u n n e c essary. t For this Regulation to be complete as amended October 10, 1977, retain: 1) Printed pamphlet as amended effective March 23, 1977; 2) This slip sheet. ioa p or ^ i s purpose, the phrase “prospectively subject to increase” does not apply to increases in the annual percentage rate upon such occurrences as default, acceleration, late payment, assumption or transfer o f prop erty. BO A R D OF GOVERNORS of t he F E D E R A L R ESER VE SYSTEM TRUTH IN LENDING R EG U LA TIO N Z (12 CFR 226) Effective July 1, 1969 Amended to March 23, 1977 CONTENTS REGULATION Z Sec. 226.1— Authority, Scope, Purpose, etc. . . . (a) Authority, scope, and purpose ................. (b) Administrative enforcement ...................... (c) Penalties and lia b ilitie s .................................. (d) Issuance of interpretations ........................ Sec. 226.2— Definitions and Rules of Construc tion .................................................................................. (a) Accepted credit card .................................... (b) Act ........................................................................ (c) Adequate notice .............................................. (d) Advertisement ................................................... (e) Agricultural purpose .................................... (f) Amount f i n a n c e d .............................................. (g) Annual percentage rate ............................... (h) Arrange for the extension of credit or for lease of personal p r o p e r t y ...................... (i) Billing c y c l e ........................................................ (j) Billing e r r o r ....................................................... (k) Board .................................................................... (I) Card issuer ....................................................... (m) Cardholder ........................................................ (n) Cash price .......................................................... (o) Comparative Index o f Credit C o s t (p) Consumer credit .............................................. (q) Credit ................................................................... (r) Credit card ....................................................... (s) Creditor ............................................................... (t) Credit s a l e .......................................................... (u) Customer .......................................................... (v) Dwelling ............................................................ (w) Finance charge ................................................ (x) Open end credit .............................................. (y) Organization ..................................................... (z) Period ................................................................. (aa) Periodic rate ..................................................... (bb) Person ................................................................. (cc) Proper written notification of a billing e r r o r ................................................................. (dd) Real property ................................................... (ee) Real property transaction ........................... (ff) Residence ............................................................ (gg) Security interest and security ................... (hh) State ...................................................................... (ii) Unauthorized use ......................................... (jj) Omission o f word “consumer” ................. (kk) Consummation o f tr a n s a c tio n ................... (II) Captions and c a t c h li n e s ................................ (mm) Consumer lease .............................................. (nn) L e s s e e ................................................................... (oo) L e s s o r ................................................................. (pp) Personal property ........................................... (qq) Realized v a l u e ................................................... (rr) Total lease obligation .................................. (ss) Value at consummation ............................. Sec. 226.3— Exempted Transactions ...................... (a) Business or governmental credit ............ (b) Certain transactions in security or com modities accounts ....................................... (c) Non-real property credit over $25,000. . (d) Certain public utility bills ........................... (e) Agricultural credit transactions ............... (f) Certain lease transactions ........................... Sec. 226.4— Determination o f Finance Charge . . (a) General rule ..................................................... (b) Itemized charges e x c l u d a b l e ...................... (c) Late payment, delinquency, default, and reinstatement charges ............................... Page 1 1 1 2 2 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 7 7 7 7 Page (d) Overdraft charges ........................................... 8 (e) Excludable charges, real property trans actions ............................................................ 8 (f) Prohibited offsets ............................................ 8 (g) Demand obligations .................................... 8 (h) Computation of insurance premiums . . . 8 (i) Discounts for payments in c a s h ........ 8 Sec. 226.5— Determination o f Annual Percentage Rate .................................................................................... 9 (a) General rule— open end credit accounts 9 (b) General rule— other credit ........................ 9 (c) Charts and tables ............................................ 10 (d) Minor irregularities ....................................... 11 (e) Approximation of annual percentage rate— other credit ....................................... 11 Sec. 226.6— General Disclosure Requirements . . (a) Disclosures; general rule ........................... (b) Inconsistent State requirements....... ........... (c) Additional information ............................... (d) Multiple creditors or lessors; joint dis closure ............................................................ (e) Multiple customers or lessees; disclosure to o n e ........................................................ 13 (f) Unknown information estimate.................. (g) Effect of subsequent o c c u r r e n c e ........ 14 (h) Overstatement ................................................... (i) Preservation and inspection of evidence o f compliance .............................................. (j) Leap year .......................................................... (k) Transition period ............................................ Sec. 226.7— Open End Credit Accounts— Specific Disclosures ....................................................................... (a) Opening new a c c o u n t ............................. 15 (b) Periodic statements r e q u i r e d ............... 17 (c) Location o f disclosures ............................... (d) Semiannual statement r e q u i r e d .......... 18 (e) Finance charge imposed at the time of transaction ..................................................... (f) Change in t e r m s ....................................... 20 (g) Prompt crediting of p a y m e n t s ............ 20 (h) Crediting and refunding excess payments (i) Open end credit accounts existing on October 28, 1975 ....................................... (j) Supplemental credit devices for use in open end credit a c c o u n t s ................. 21 (k) Identification o f tr a n sa c tio n s............... 21 Sec. 226.8— Credit Other Than Open End— Spe cific Disclosures ............................................................. (a) General rule ..................................................... (b) Disclosures in sale and nonsale credit . . (c) Credit sales ........................................................ (d) Loans and other nonsale credit...... ........... (e) Finance charge payable separately or withheld; required deposit balances . . (f) First lien to finance construction of dwelling .......................................................... 26 (g) Orders by mail or t e l e p h o n e .............. (h) Series of sales ................................................ (i) Advances under loan commitments . . . . (j) Refinancing, consolidating or increasing (k) Assumption o f an obligation ................... (1) Deferrals or extensions ............................... (m) Series o f single payment obligations . . . . (n) Periodic statements ....................................... 12 12 12 13 13 14 14 14 14 14 15 18 19 20 21 23 23 24 24 25 25 25 26 26 26 26 27 27 27 Page Discount for prompt payment o f sales transactions .................................................. 27 (p) Agricultural credit— information not de terminable ..................................................... 29 (q) Credit card accounts .................................... 29 (o) See. 226.9— Right to Rescind Certain Transac tions .................................................................................. (a) General rule ..................................................... (b) Notice o f opportunity to r e s c i n d (c) Delay o f performance .................................. (d) Effect of rescission ......................................... (e) Waiver of right o f r e s c i s s io n .................... (f) Joint ownership .............................................. (g) Exceptions to general r u l e ........................... (h) Time limit for unexpired right o f rescis sion ................................................................... Sec. 226.10— Advertising Credit and Lease Terms (a) General rule ..................................................... (b) Catalogs and multi-page advertisements (c) Advertising of open end c r e d i t ................. (d) Advertising o f credit other than open end ................................................................... (e) Advertising of F H A Section 235 fi nancing .......................................................... (f) Credit payable in more than four instal ments; no identified finance charge . . . (g) Advertising of consumer l e a s e s ................. (h) Multiple-item leases; merchandise tags . . Sec. 226.11— Comparative Index o f Credit Cost for Open End C r e d i t ................................................ (a) General rule ..................................................... (b) Computation o f Comparative Index of Credit Cost ................................................... (c) Form o f disclosure ....................................... Sec. 226.12— Exemption of Certain State Regu lated T r a n sa c tio n s....................................................... 29 29 29 30 30 30 31 31 31 31 31 31 32 32 32 33 33 33 33 33 33 34 34 Page (a) Exemption for State regulated trans actions ............................................................ (b) Procedures and criteria ............................... (c) Civil liability ..................................................... (d) Exemptions granted ....................................... 34 34 34 34 Sec. 226.13—Credit Card Transactions—Special Requirements ............................................................... 35 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (I) Issuance o f credit c a r d s ........................ 35 Conditions o f liability of cardholder . . . Other conditions of liability ...................... Notice to cardholders ................................. Notice to card issuer .................................. Action to enforce liability ........................ Effect on other applicable law or agree ment ................................................................. Business use o f credit c a r d s ................. 36 Right o f cardholder to assert claims or defenses against card issuer ................. Prohibition of offsets by card issuer . . . Prompt notification o f returns ................. Prohibited acts of card i s s u e r s ........ 37 Sec. 226.14—Billing Errors—Resolution Proce dure .................................................................................. (a) Correction o f billing e r r o r s ............................ (b) Minimum periodic payments and finance charges on disputed a m o u n t s .......... 38 (c) Automatic debit o f disputed amounts . . (d) Closing o f accounts ....................................... (e) Credit reports on amounts in dispute . . . (f) Forfeiture penalty ......................................... (g) Exceptions to general rule ........................ 35 35 35 35 35 36 36 37 37 37 37 39 39 39 40 40 Sec. 226.15—ConsumerLeasing ................................ 40 (a) General r eq u ir e m e n ts.............................. 40 (b) Specific disclosure requirements ............... 40 (c) Renegotiations or extensions ................... 41 T R U T H IN L E N D IN G A C T S T A T U T O R Y A P P E N D IX Page TITLE I—CONSUMER CREDIT COST DISCLOSURE Chapter 1—General Provisions § § § § § § § § § § § § 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. § 113. § 114. § 115. Short t i t l e .................................................. Findings and declaration o f purpose Definitions and rules of construction Exempted transactions ........................ R e g u la t io n s ................................................ Determination of finance charge . . Determination of annual percentage rate ............................................................ Administrative e n f o r c e m e n t Views o f other a g e n c i e s ..................... [Repealed.] Effect on other l a w s ............................. Criminal liability for willful and knowing violation ............................... Penalties inapplicable to govern mental agencies .................................... Reports by Board and Attorney G e n e r a l ..................................................... Liability of assignees .......................... § 42 42 42 44 44 44 § § 45 45 46 § 46 47 47 47 47 Chapter 2—Credit Transactions § 121. General requirement o f disclosure. Page § § § § § § § § § § 47 48 48 48 48 49 50 51 51 53 53 53 53 54 Chapter 3—Credit Advertising § § 47 122. Form o f disclosure; additional in formation ................................................ 123. Exemption for State-regulated trans actions ..................................................... 124. Effect o f subsequent occurrence . . 125. Right of rescission as to certain transactions ............................................ 126. Content of periodic statements . . 127. Open end consumer credit plans . . 128. Sales not under open end credit plans .......................................................... 129. Consumer loans not under open end credit p l a n s .............................................. 130. Civil liability .......................................... 131. Written acknowledgment as proof o f receipt ................................................ 132. Issuance o f credit c a r d s ..................... 133. Liability o f holder o f credit card. . 134. Fraudulent use of credit card . . . . 135. Business credit c a r d s ............................ 141. Catalogs and multiple-page adver tisements ................................................... 142. Advertising of downpayments and installments ............................................ 54 54 § § § § 143. Advertising o f open end credit plans 144. Advertising o f credit other than open end plans .................................... 145. Nonliability o f media ....................... 146. More-than-four-installment rule . . . Chapter 4— Credit Billing § 161. Correction of billing e r r o r s § 162. Regulation o f credit reports ........... § 163. Length of billing period .................. § 164. Prompt crediting o f payments . . . § 165. Crediting excess p a y m e n t s ................ § 166. Prompt notification o f returns . . . . § 167. Use o f cash discounts ....................... § 168. Prohibition o f tie-in services ............ § 169. Prohibition of offsets .......................... § 170. Rights o f credit card customers . . § 171. Relation to State laws ....................... Page 54 Page Chapter 5—Consumer Leases § § § 55 55 55 55 57 57 57 57 57 57 58 58 58 59 § § § 181. Definitions .............................................. 182. Consumer lease disclosures ............. 183. Lessee’s liability on expiration or termination o f lease ........................ 184. Consumer lease advertising ........... 185. Civil liability .......................................... 186. Relation to State laws ...................... 59 59 60 61 61 61 TITLE V—GENERAL PROVISIONS § 501. § 502. § 503. § 504. Severability ........................................... Captions and catchlines for refer ence only ................................................ Grammatical usages ........................ Effective dates .................................... 61 62 62 62 IN T E R P R E T A T IO N S O F R E G U L A T IO N Z Page Page Section of Regulation Z to Which Interpretation Relates I. Section 226.1—Authority, Scope, Purpose, Etc. § 226.101 § 226.102 U se o f “annual percentage rate” in oral communications ............... (Rescinded effective 6 /3 0 /7 6 ) § 226.503 § 226.504 63 § 226.506 II. Section 226.2—Definitions and Rules of Con struction § 226.201 § 226.202 § 226.203 Lay-away plans as extensions of credit ..................................................... Security interest— confessions of judgment— cognovit notes ............ Open end credit distinguished from other credit ............................. 63 § 226.302 Agricultural purposes— when ex empt from the R e g u l a t i o n Credit for business or com mer cial purposes— more than 4 fam ily units ................................................. § 226.601 64 § § 226.602 226.603 64 § § § 226.604 226.605 226.606 64 IV. Section 226.4—Determination of Finance Charge § 226.401 § 226.402 § 226.403 § 226.404 § 226.405 § 226.406 § 226.407 Service charges on accounts not paid within a given period o f time Term of insurance coverage . . . . Disclosure of cost o f property insurance when not obtainable from or through the creditor . . . . Premiums for vendor’s single in terest insurance required by cred itor .......................................................... Property insurance written in connection with a transaction— obtained from or through the creditor ................................................ Seller’s points and discounts un der Regulation Z ............................. Charges for membership in open end credit plan .................................. § 226.502 Use o f ranges or brackets to de termine periodic rate o f finance charge on open end accounts . . . Annual percentage rate on single add-on rate transactions ............... Overstatement o f annual percent age rate ................................................ (Rescinded effective 3 / 1 /7 4 ) Disclosures in transaction involv ing multiple c u s t o m e r s ................... Inconsistent State requirements . . (Rescinded effective 3 / 1 / 7 4 ) Modification o f semiannual state ments pursuant to State law . . . . VII. Section 226.7—Open End Credit counts—Specific Disclosures § 64 65 § § 65 § § 65 § 65 § 66 § 66 67 68 69 69 69 69 70 Ac 226.701 Periodic statements— finance charge resulting from more than one pe riodic rate ............................................ 226.702 (Revoked effective 6 / 1 / 7 3 ) 226.703 Finance charge based on average daily balance or daily balances in open end credit a c c o u n t s ............... 226.704 (Revoked effective 6 / 1 /7 3 ) 226.705 Open end credit— change in the method of determining the bal ance on which finance charges are computed .................................... 226.706 Open end credit— allocation of payments .............................................. 226.707 D i s c l o s u r e s — v a r ia b le p e r io d ic rates ........................................................ 226.708 Timing and modification of semi annual statements ............................. 70 70 71 71 72 72 VIII. Section 226.8—Credit Other Than Open End—Specific Disclosures V. Section 226.5—Determination of Annual Per centage Rate § 226.501 67 VI. Section 226.6—General Disclosure Require ments 63 III. Section 226.3—Exempted Transactions § 226.301 § 226.505 Minor irregularities — maximum irregular period limits ................... Treatment of “pick-up payment” in an instalment c o n t r a c t ............... Application of the minor irregu larities provisions in determining the amount of the finance charge Daily periodic rate; computation o f the annual percentage rate . . . § 66 § 67 226.801 Location of disclosures when con tract, security agreement, and evi dence o f transaction are combined in a single document ...................... 226.802 Disclosures on mail or telephone orders ................................................... 73 73 Page Page § 226.803 § 226.804 § 226.805 § 226.806 § 226.807 § 226.808 § 226.809 § 226.810 § 226.811 § 226.812 § 226.813 § 226.814 § 226.815 § 226.816 § 226.817 § 226.818 Disclosures when discounts apply for prompt payment ...................... Series of sales— content o f agree ment ........................................................ Series of sales as distinguished from refinancing, consolidating, or increasing ....................................... Deposit balances applied toward satisfaction o f customer’s obliga tion ........................................................ Assumption o f an obligation— disclosures ............................................ Disclosure o f amount o f scheduled payments .............................................. Disclosures for certain student loans ..................................................... Disclosures— variable interest rates Renewals o f notes ............................ Advances under open end real estate mortgages for agricultural purposes ................................................ Disclosures on multiple advance loans ..................................................... Premiums for insurance added to an existing b a l a n c e ........................... Disclosure for demand loans . . . . Mortgages with demand features Reduction in annual percentage rate .......................................................... Refund of unearned finance charge; prepayment penalty . . . . § 226.819 74 § 226.820 Prepaid finance charges; add-ons and discounts .................................... (Rescinded effective 8 / 6 /7 6 ) 81 74 74 74 75 75 IX. Section 226.9—Right to Transactions Rescind Certain § 226.901 Waiver o f security interests— effect on the right o f rescission ............ § 226.902 “Customers” and joint owners of property under the right o f rescis sion .......................................................... § 226.903 Refinancing and increasing— dis closures and effects on the right of r e s c i s s io n ......................................... 76 76 76 76 82 82 X. Section 226.10—Advertising Credit and Lease § 226.1001 Advertising o f credit terms in other than open end c r e d i t § 226.1002 Catalogs— tables or schedules of credit terms ......................................... 81 77 79 79 80 80 80 Terms 82 83 XV. Section 226.15—Consumer Leasing § 226.1501 Open-end or finance vehicle lease disclosure statement ........................ § 226.1502 Closed-end or net vehicle lease disclosure statement ........................ § 226.1503 Furniture lease disclosure state ment 85 89 92 APPENDICES Appendix A Appendix B Appendix C Page Questions and Answers ................... 94 Form of N otice of Right o f R e scission 107 Form of Notice of Billing Error Rights ................................................... 109 Appendix D Appendix E Page Sample Page from Annual Percent age Rate Tables ................................ 112 Federal Enforcement Agencies . . 113 REGULATION Z (12 C F R 226) Effective July 1, 1969 Amended to M arch 23, 1977 t TRUTH IN LENDING $ tain credit terms may not be advertised unless the creditor usually and customarily extends such terms. This P art also contains prohibitions against * (a) Authority, scope, and purpose. (1) This the issuance of unsolicited credit cards and limits P art comprises the regulations issued by the on the cardholder’s liability for unauthorized use Board of G overnors of the Federal Reserve Sys of a credit card. In addition, this P art is designed tem pursuant to Title I (Truth in Lending Act) to assist the customer to resolve credit billing dis and Title V (General Provisions) of the C o n putes in a fair and timely manner, to regulate sumer Credit Protection Act, as am ended (15 certain billing and credit card practices, and to U.S.C. § 1601 et seq.). Except as otherwise pro strengthen the legal rights of consumers. This vided herein, this Part, within the context of its P art is also designed to assure that lessees of related provisions, applies to all persons who are personal property are given meaningful disclo creditors, as defined in paragraph (s) of § 226.2, sures of lease terms, to delimit the ultimate lia and in the case of consumer leases, as defined in bility of lessees in leasing personal property and paragraph (mm) of § 226.2, to all persons who to require meaningful and accurate disclosures of are lessors, as defined in paragraph (oo) of lease terms in advertisements. N either the A ct nor § 226.2. this P art is intended to control charges for con (2) This Part implements the Act, the purpose sumer credit, or interfere with trade practices of which is to assure that every customer who except to the extent that such practices may be has need for consumer credit is given meaningful inconsistent with the purpose of the Act. inform ation with respect to the cost of that credit ** (b) Administrative enforcement. (1) As set which, in most cases, must be expressed in the forth more fully in section 108 of the Act, ad dollar am ount of finance charge, and as an an ministrative enforcement of the A ct and this Part nual percentage rate com puted on the unpaid with respect to certain creditors, credit card balance of the am ount financed. Other relevant issuers and lessors is assigned to the Comptroller credit inform ation must also be disclosed so that of the Currency, Board of Directors of the F ed the customer m ay readily com pare the various eral Deposit Insurance Corporation, Federal credit terms available to him from different H o m e Loan Bank Board (acting directly or sources and avoid the uninform ed use of credit. through the Federal Savings and Loan Insurance This Part also implements the provision of the Corporation), Administrator of the N ational Credit A ct under which a customer has a right in cer U nion Administration, Civil Aeronautics Board, tain circumstances to cancel a credit transaction Secretary of Agriculture, F arm Credit Adminis which involves a lien on his residence. Advertis tration, and Board of G overnors of the Federal ing of consumer credit and consumer lease terms Reserve System. must comply with specific requirements, and cer(2) Except to the extent that administrative enforcement is specifically committed to other authorities, compliance with the requirements imt The asterisks indicate those regulatory amendments S EC T IO N 226.1— A U T H O R IT Y , SCOPE, P U R PO SE , ETC. adopted since October 28, 1975. t This text corresponds to the Code of Federal Regu lations, Title 12, Chapter II, Part 226, cited as 12 CFR 226. The words “this Part,” as used herein, mean Regu lation Z. * Amended 3/23/77. ** Amended 3/23/77. § 226.1 posed under the A ct and this P art will be en forced by the Federal Trade Commission. * (c) Penalties and liabilities. Section 112 of the Act provides criminal liability for willful and knowing failure to comply with any requirement imposed under the Act and this Part. Section 134 provides for criminal liability for certain fraudu lent activities related to credit cards. Section 130 provides for civil liability in individual or class actions for any creditor or lessor who fails to comply with any requirement imposed under chapter 2, chapter 4 or chapter 5 of the A ct and the corresponding provisions of this Part. Section 130 also provides creditors or lessors a defense against civil and criminal liability under sections 130 and 112 for any act done or omitted in good faith in conformity with the provisions of this P art or any interpretation thereof by the Board, or with any interpretations o r approvals issued by a duly authorized official or employee of the Fed eral Reserve System, notwithstanding that after such act o r omission has occurred, such rule, reg ulation, interpretation or approval is amended, rescinded or otherwise determined to be invalid for any reason. Section 130 further provides that a multiple failure to disclose in connection with a single account or single consumer lease shall per mit but a single recovery. Section 115 provides for civil liability for an assignee of an original creditor or lessor where the original creditor or lessor has violated the disclosure requirements and such violation is apparent on the face of the in strument assigned, unless the assignment is invol untary. Section 185(b) provides for civil liability u nder section 130 fo r any lessor who fails to com ply with any requirement imposed u nder section 184 to any person who suffers actual damage from the violation. Pursuant to section 108 of the Act, violations of the Act or this P art constitute viola tions of other Federal laws which may provide further penalties. ** (d) Issuance of interpretations. (1) A ny re quest for formal Board interpretation or official staff interpretation of Regulation Z must be ad dressed to the Director of the Division of C on sumer Affairs, Board of G overnors of the Federal Reserve System, Washington, D.C. 20551. Each * Amended 7 /30/76 and 3/23/77. ** Added 7/30/76. R E G U L A T IO N Z request for interpretation must contain a complete statement, signed by the person making the re quest or a duly authorized agent, of all relevant facts of the transaction o r credit arrangement relating to the request. T rue copies of all pertinent documents must be submitted with the request. T he relevance of such documents must, however, be set forth in the request and the documents must not merely be incorporated by reference. T he request must contain an analysis of the bear ing of the facts on the issues and it must specify the pertinent provisions of the statute and regu lation. Within fifteen business days of receipt of the request, a substantive response will be sent to the person making the request or an acknowledg ment will be sent which sets a reasonable time within which a substantive response will be given. (2) Any request for reconsideration of an offi cial staff interpretation of Regulation Z must be addressed to the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551, within thirty days of the publication of such interpretation in the Federal Register. Each request for reconsideration must contain a state ment setting forth in full the reasons why the per son making the request believes reconsideration would be appropriate, and must specify and dis cuss the applicability of the relevant facts, statute and regulations. Within fifteen business days of receipt of such request for reconsideration, a response granting or denying the request will be sent to the person making the request, or an acknowledgment will be be sent which sets a reasonable time within which such response will be given. (3) Pursuant to section 130(f) of the Act, the Board has designated the Director and other offi cials of the Division of Consum er Affairs as officials “duly authorized” to issue, at their dis cretion, official staff interpretations of this Part. This designation shall not be interpreted to in clude authority to approve particular creditors’ forms in any manner. (4) The type of interpretation issued will be determined by the Board and the designated offi cials by the following criteria: (i) Official Board interpretations will be is sued upon those requests which involve poten tially controversial issues o f general applicability dealing with substantial ambiguities in this P art and which raise significant policy questions. R EG U L A T IO N Z § 226.2 (ii) Official staff interpretations will be issued upon those requests which, in the opinion of the designated officials, require clarification of tech nical ambiguities in this Part or which have no significant policy implications. (iii) Unofficial staff interpretations will be issued where the protection of section 130(f) of the Act is neither requested nor required, or where time strictures require a rapid response. son who cultivates, plants, propagates, or nurtures those agricultural products. “Agricultural prod ucts” includes agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products thereof, including processed and manufactured products, and any and all p rod ucts raised o r produced on farms and any pro cessed or manufactured products thereof. (f) “Amount financed” means the am ount of credit of which the customer will have the a c tu a l' SEC T IO N 226.2— D E F IN IT IO N S A N D use determined in accordance with paragraphs RU L E S O F C O N ST R U C T IO N (c)(7) and (d)(1) of § 226.8. (g) “Annual percentage rate” means the an F o r the purposes of this Part, unless the context nual percentage rate of finance charge determined indicates otherwise, the following definitions and in accordance with § 226.5. rules of construction apply: ** (h) “Arrange for the extension of credit or (a) “Accepted credit card” means any credit for lease of personal property” means to provide card which the cardholder has requested o r ap or offer to provide consumer credit or a lease plied for and received, or has signed, o r has which is or will be extended by another person used, or has authorized another person to use for under a business or other relationship pursuant to the purpose of obtaining money, property, labor, which the person arranging such credit or lease or services on credit. Any credit card issued in (1) Receives or will receive a fee, compensa renewal of, o r in substitution for, an accepted tion, or other consideration for such service, or credit card becomes an accepted credit card when (2) H as knowledge of the credit or lease terms received by the cardholder w hether such card is and participates in the preparation of the contract issued by the same or a successor card issuer. documents required in connection with the exten (b) “Act” refers to the T ruth in Lending Act sion of credit or the lease. (Title I of the Consumer Credit Protection Act). It does not include honoring a credit card or (c) “Adequate notice” means a printed notice similar device where no finance charge is imposed to a cardholder which sets forth the pertinent at the time of that transaction. facts clearly and conspicuously so that a person (i) “Billing cycle” means the time interval be against whom it is to operate could reasonably be tween regular periodic billing statement dates. expected to have noticed it and understood its Such intervals m ay be considered equal intervals meaning. of time unless a billing date varies more than 4 * (d) “Advertisement” means any commercial days from the regular date. message in any newspaper, magazine, leaflet, flyer (j) “Billing error” means: or catalog, on radio, television or public address (1) A reflection on or with a periodic state system, in direct mail literature or other printed ment of an extension of credit which (i) was not material on any interior or exterior sign or dis made to the customer, or (ii) was made to a per play, in any window display, in any pointson who did not have actual, implied, or appar of-transaction literature or price tag which is ent authority of the customer to use the account delivered or made available to a customer or and from which use the customer received no prospective customer or lessee or prospective benefit, or (iii) if made, was misidentified, insuf lessee in any m anner whatsoever. ficiently identified, or was not in the am ount (e) “Agricultural purpose” means a purpose indicated or on the date specified on o r with the related to the production, harvest, exhibition, periodic statement, or marketing, transportation, processing, or m an u (2) A reflection on a periodic statement of an facture of agricultural products by a natural p er extension of credit or indebtedness for which the * Amended 3/23/77. ** Amended 3/23/77. § 226.2 customer requests explanation or clarification, in cluding requests for copies of documentary evi dence of the indebtedness reflected thereon, or (3) A reflection on a periodic statement of an extension of credit for property or services not accepted by the customer o r his designee, or not delivered to the customer or his designee in ac cordance with any agreement made in connection with the transaction,1 or (4) A ny failure to properly reflect, on a pe riodic statement, a paym ent or other credit to the customer’s account, or (5) A computational error or similar error of an accounting nature made by the creditor on a periodic statement, including errors in computing finance charges, late payment charges, or other charges, or (6) A failure to mail or deliver a customer’s periodic statement to his current designated ad dress, if the creditor has received notification of any change of address at least 10 days prior to the closing date of the billing cycle for which the periodic statement was incorrectly mailed or de livered. (k) “Board” refers to the Board of Governors of the Federal Reserve System. (1) “Card issuer” means any person who issues a credit card, or the agent of such person with respect to such card. (m) “Cardholder” means any person to whom a credit card is issued fo r personal, family, house hold, agricultural, business, o r commercial p u r poses, or any person who has agreed with the card issuer to pay obligations arising from the is suance of a credit card to another person for such purposes. (n) “Cash price” means the price at which the creditor offers, in the ordinary course of business, to sell for cash the property or services which are the subject of a consumer credit transaction. It may include the cash price of accessories or ser vices related to the sale such as delivery, installa tion, alterations, modifications, and improvements, and may include taxes to the extent imposed on 'The delivery of property or services different from that described in any agreement, the delivery of the wrong quantity, late delivery, or delivery to the wrong location shall be considered to be a billing error subject to this paragraph, but any dispute with respect to the quality of property in the physical possession of the cus tomer or services performed for the customer shall not be considered to be a billing error under this paragraph. R E G U L A T IO N Z the cash sale, but shall not include any other charges of the types described in § 226.4. (o) “Comparative Index of Credit Cost” means the relative measure of the cost of credit under an open end credit account, computed in accord ance with § 226.11, and is the expression o f the “average effective annual percentage rate of re turn” and the “projected rate of return” which appear in section 127(a)(5) of the Act. (p) “Consumer credit” means credit offered or extended to a natural person, in which the money, property, or service which is the subject of the transaction is primarily for personal, fam ily, household, or agricultural purposes. “Con sumer loan” is one type of “consumer credit.” (q) “Credit” means the right granted by a creditor to a customer to defer payment of debt, incur debt and defer its payment, o r purchase property or services and defer payment therefor. (See also paragraph (jj) of this section.) (r) “Credit card” means any card, plate, cou pon book, or other single credit device existing for the purpose of being used from time to time upon presentation to obtain money, property, labor, or services on credit. (s) “Creditor” means a person who in the or dinary course of business regularly extends or ar ranges for the extension of consumer credit, or offers to extend or arrange for the extension of such credit, which is payable by agreement in more than four instalments, or for which the payment of a finance charge is o r may be re quired, whether in connection with loans, sales of property or services, or otherwise. F o r purposes of the requirements of §§ 2 2 6 .7 ( a ) ( 6 ) , (7 ), (8 ), and ( 9 ) ; 226.7(b) (1) (i), (ii), (iii), (ix), and ( x ) ; 2 2 6 .7 ( b ) ( 2 ) ; 2 2 6 .7 (c ), ( d ), (f), (g), (h), and (i); 226.13; and 226.14, the term “creditor” shall also include card issuers, whether o r not the payment of a finance charge is o r may be re quired. F o r purposes of the requirements of §§ 2 2 6 .4 (i) and 2 26.13(k) the term “creditor” shall include any person who honors a credit card. (t) “Credit sale” means any sale with respect to which consumer credit is extended or arranged by the seller. 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 o r in excess of the aggregate value of the property and services in volved and it is agreed that the bailee or lessee will become, or for no other or for a nominal R E G U L A T IO N Z consideration has the option to become, the owner of the property upon full compliance with his obligations under the contract. (u ) “Customer” means (1) a cardholder or (2) a natural person to whom consumer credit is offered or to whom it is or will be extended, and includes a comaker, endorser, guarantor, or sur ety for such natural person who is or may be ob ligated to repay the extension of consumer credit. (v) “Dwelling” means a residential-type struc ture which is real property and contains one or more family housing units, or a residential con dominium unit wherever situated. (w) “Finance charge” means the cost of credit determined in accordance with § 226.4. (x) “Open end credit” means consumer credit extended on an account pursuant to a plan under which (1) the creditor may permit the customer to make purchases or obtain loans, from time to time, directly from the creditor o r indirectly by use of a credit card, check, or other device, as the plan m ay provide; (2) the customer has the privilege of paying the balance in full o r in in stalments; and (3) a finance charge may be com puted by the creditor from time to time on an outstanding unpaid balance. F o r purposes of the requirements of §§ 2 2 6 .7 ( a ) ( 6 ) , ( 7 ), (8 ), and (9); 226.7(b)(l)(i), (ii), (iii), (ix), and (x); 226.7(b)(2); 226.7(c), (d), (f), (g), ( h ), and (i); 226.13( i ) , (j), and ( k ) ; and 226.14, the term includes consumer credit extended on an account by use of a credit card, w hether or not a finance charge may be imposed. T he term does not in clude negotiated advances under an open end real estate mortgage or a letter of credit. (y) “Organization” means a corporation, trust, estate, partnership, cooperative, association, gov ernment, or governmental subdivision, agency, or instrumentality. (z) “Period” means a day, week, month, or other subdivision of a year. (aa) “Periodic rate” means a percentage rate of finance charge which is or may be imposed by a creditor against a balance for a period. (See also § 226.5(a)(3).) (bb) “Person” means a natural person or an organization. (cc) “Proper written notification of a billing error” is any written notification (other than no tice on a paym ent medium o r other material ac companying the periodic statement if the creditor § 226.2 so stipulates in the disclosure required by § 226.7(a)(9), (d), and (i)) received at the ad dress disclosed under § 226.7(b)(l)(x) within 60 days of the first mailing or delivering to the cus tom er’s current designated address (as required in § 226.7(b)) of the periodic statement on which the disputed item(s) or amount(s) is reflected in which the customer (1) Sets forth or otherwise enables the credi tor to identify the nam e and account num ber (if any) of the customer, (2) Indicates the customer’s belief that the pe riodic statement contains a billing error and the suspected am ount o f such error, and (3 ) Sets forth the reasons for such belief, to the extent applicable or know n by the customer. (dd) “Real property” means property which is real property under the law of the State in which it is located. (ee) “Real property transaction” means an ex tension of credit in connection with which a se curity interest in real property is o r will be re tained or acquired. (ff) “Residence” means any real property in which the customer resides or expects to reside. T he term includes a parcel of land on which the customer resides or expects to reside. (gg) “Security interest” and “security” means any interest in property which secures paym ent or performance of an obligation. The terms in clude, but are not limited to, security interests under the Uniform Commercial Code, real p rop erty mortgages, deeds of trust, and other consen sual or confessed liens whether o r not recorded, mechanic’s, materialmen’s, artisan’s, and other similar liens, vendor’s liens in both real and per sonal property, the interest o f a seller in a con tract for the sale of real property, any lien on property arising by operation of law, and any in terest in a lease when used to secure paym ent or performance o f an obligation. (hh) “State” means any State, the District of Columbia, the Commonwealth o f Puerto Rico, and any territory or possession of the United States. (ii) “Unauthorized use” means the use of a credit card by a person other than the cardholder (1) who does not have actual, implied, or ap parent authority for such use, and (2) from which the cardholder receives no benefit. § 226.3 * (jj) Unless the context indicates otherwise, “credit” shall be construed to mean “consumer credit,” “loan” to mean “consumer loan,” “trans action” to mean “consumer credit transaction,” and “lease” to mean “consumer lease.” * (kk) A transaction shall be considered con summated at the time a contractual relationship is created between a creditor and a customer or a lessor and lessee irrespective of the time of per formance of either party. (11) Captions and catchlines are intended solely as aids to convenient reference, and no inference as to the intent of any provision of this P art may be drawn from them. ** (mm) “Consumer lease” means a contract in the form of a bailment or lease for the use of personal property by a natural person primarily for personal, family or household purposes, for a period of time exceeding four months, for a total contractual obligation not exceeding $25,000, whether or not the lessee has the option to pu r chase o r otherwise become the owner of the prop erty at the expiration of the lease. It does not include a lease which meets the definition of a credit sale in § 226.2(t), nor does it include a lease for agricultural, business or commercial purposes or one made to an organization. ** (nn) “Lessee” means a natural person who leases under, or who is offered a consumer lease. ** (oo) “Lessor” means a person who in the ordinary course of business regularly leases, offers to lease or arranges for the leasing o f personal property under a consumer lease. * * (pp) “Personal property” means any property which is not real property under the law of the State where it is located at the time it is offered or made available for lease. ** (qq) “Realized value” means (1) the price re ceived by the lessor for the leased property at disposition, (2 ) the highest offer for disposition, or (3) the fair market value at the end of the lease term. ** (rr) “Total lease obligation” equals the total of (1) the scheduled periodic payments u nder the lease, (2) any nonrefundable cash paym ent re quired of the lessee or agreed upon by the lessor and lessee or any trade-in allowance made at con summation and (3) the estimated value of the leased property at the end of the lease term. * Amended 3 /2 3 /7 7 R E G U L A T IO N Z * *(ss) “Value at consummation” equals the cost to the lessor of the leased property including, if applicable, any increase or m arkup by the lessor prior to consummation. SEC TIO N 226.3— E X E M P T E D T R A N SA C T IO N S This Part does not apply to the following: (a) Business or governmental credit. Extensions of credit to organizations, including governments, or for business or commercial purposes, other than agricultural purposes. (b) Certain transactions in security or com modities accounts. Transactions in securities or commodities accounts with a broker-dealer regis tered with the Securities and Exchange Commis sion. (c) Non-real property credit over $25,000. Credit transactions, other than real property trans actions, in which the am ount financed11 exceeds $25,000, or in which the transaction is pursuant to an express written commitment by the creditor to extend credit in excess of $25,000. (d) Certain public utility bills. Transactions u nder public utility tariffs involving services pro vided through pipe, wire, or other connected facilities, if the charges for such public utility services, the charges for delayed payment, and any discount allowed for early paym ent are filed with, reviewed by, or regulated by an agency of the Federal Government, a State, or a political subdivision thereof. (e) Agricultural credit transactions. Credit transactions primarily for agricultural purposes, including real property transactions, in which the am ount financedlb exceeds $25,000 or in which the transaction is pursuant to an express written commitment by the creditor to extend credit in excess of $25,000. ** (f) Certain lease transactions. Lease trans actions of personal property which are incident to For this purpose, the amount financed is the amount which is required to be disclosed under § 226.8(c)(7), or (d)(1), as applicable, or would be so required if the transaction were subject to this Part. lb For this purpose, the amount financed is the amount which is required to be disclosed under § 226.8(c)(7), or (d)(1), as applicable, or would be so required if the transaction were subject to this Part. ** Added 3/23/77. R E G U L A T IO N Z § 226.4 the lease of real property and which provide that (1) the lessee has no liability for the value of the property at the end o f the lease term except for abnormal wear and tear, and (2) the lessee has no option to purchase the leased property. (6) Charges or premiums for insurance, writ ten in connection with4 any credit transaction, against loss of or damage to property o r against liability arising out of the ownership or use of property, unless a clear, conspicuous, and specific statement in writing is furnished by the creditor to the customer setting forth the cost of the in S EC T IO N 226.4— D E T E R M IN A T IO N OF surance if obtained from or through the creditor F IN A N C E C H A R G E and stating that the customer m ay choose the (a) General rule. Except as otherwise provided person through which the insurance is to be obtained.5 in this section, the am ount of the finance charge (7) Premium or other charge for any other in connection with any transaction shall be deter guarantee or insurance protecting the creditor mined as the sum of all charges, payable directly against the customer’s default or other credit loss. o r indirectly by the customer, and imposed di (8) Any charge imposed by a creditor upon rectly or indirectly by the creditor as an incident another creditor for purchasing or accepting an to or as a condition of the extension of credit, obligation of a customer if the customer is re whether paid or payable by the customer, the quired to pay any part of that charge in cash, as seller, o r any other person on behalf of the cus an addition to the obligation, or as a deduction tom er to the creditor or to a third party, including from the proceeds of the obligation. any of the following types of charges: (b) Itemized charges excludable. If itemized (1) Interest, time price differential, and any and disclosed to the customer, any charges of the am ount payable under a discount or other system following types need not be included in the of additional charges. finance charge: (2) Service, transaction, activity, or carrying (1) Fees and charges prescribed by law which charge.2 actually are or will be paid to public officials for (3) Loan fee, points, finder’s fee, or similar determining the existence of or for perfecting or charge. releasing or satisfying any security related to the (4) Fee for an appraisal, investigation, o r credit credit transaction. report. (2) T h e prem ium payable for any insurance (5) Charges or premiums for credit life, acci in lieu of perfecting any security interest other dent, health, or loss of income insurance, written wise required by the creditor in connection with in connection w ith3 any credit transaction unless the transaction, if the premium does not exceed (i) the insurance coverage is not required the fees and charges described in subparagraph by the creditor and this fact is clearly and con (1) of this paragraph which would otherwise be spicuously disclosed in writing to the customer: payable. and (3) Taxes not included in the cash price. (ii) any customer desiring such insurance (4) License, certificate of title, and registration coverage gives specifically dated and separately fees imposed by law. signed affirmative written indication of such de (c) Late payment, delinquency, default, and sire after receiving written disclosure to him of reinstatem ent charges. A late payment, delin the cost of such insurance. quency, default, reinstatement, or other such 2 These charges include any charges imposed by the creditor in connection with a checking account to the ex tent that such charges exceed any charges the customer is required to pay in connection with such an account when it is not being used to extend credit. 2 A policy of insurance owned by the customer, which is assigned to the creditor or otherwise made payable to the creditor to satisfy a requirement imposed by the creditor, is not insurance “written in connection with” a credit transaction if the policy was not purchased by the customer for the purpose of being used in connection with that extension of credit. * A policy of insurance owned by the customer, which is assigned to the creditor or otherwise made payable to the creditor to satisfy a requirement imposed by the creditor, is not insurance “written in connection with” a credit transaction if the policy was not purchased by the customer for the purpose of being used in connection with that extension of credit. 5 A creditor’s reservation or exercise of the right to re fuse to accept an insurer offered by the customer, for reasonable cause, does not require inclusion of the pre mium in the finance charge. § 226.4 charge is not a finance charge if imposed for ac tual unanticipated late payment, delinquency, default or other such occurrence. (d) Overdraft charges. A charge imposed by a bank for paying checks which overdraw or in crease an overdraft in a checking account is not a finance charge unless the paym ent of such checks and the imposition o f such finance charge were previously agreed upon in writing. (e) Excludable charges, real property transac tions. T he following charges in connection with any real property transaction, provided they are bona fide, reasonable in amount, and not for the purpose of circumvention or evasion of this Part, shall not be included in the finance charge with respect to that transaction: (1 ) Fees or premiums for title examination, abstract of title, title insurance, o r similar pur poses and for required related property surveys. (2) Fees for preparation of deeds, settlement statements, or other documents. (3) A mounts required to be placed or paid into an escrow o r trustee account for future pay ments of taxes, insurance, and water, sewer, and land rents. (4) Fees for notarizing deeds and other docu ments. (5) Appraisal fees. (6) Credit reports. (f) Prohibited offsets. Interest, dividends, or other income received or to be received by the customer on deposits or on investments in real or personal property in which a creditor holds a se curity interest shall not be deducted from the am ount of the finance charge or taken into con sideration in com puting the annual percentage rate. (g) Demand obligations. Obligations other than those debited to an open end credit account which are payable on demand shall be considered to have a maturity of one-half year for the pu r pose of com puting the am ount of the finance charge and the annual percentage rate, except that where such an obligation is alternatively pay able upon a stated maturity, the stated maturity shall be used fo r the purpose of such com puta tions. (h) Computation of insurance premiums. If any insurance premium is required to be included as a part of the finance charge, the am ount to be included shall be the premium for coverage ex R E G U L A T IO N Z tending over the period of time the creditor will require the customer to maintain such insurance. F o r this purpose, rates and classifications applica ble at the time the credit is extended shall be ap plied over the full time during which coverage is required, unless the creditor knows or has reason to know that other rates or classifications will be applicable, in which case such other rates o r clas sifications shall be used to the extent appropriate. (1) Discounts for payments in cash. (1) N ot withstanding any other provision of this section, a discount which a creditor offers, allows, o r other wise makes available for the purpose o f induc ing payments for a purchase by cash, check, or similar means rather than by use of an open end credit card account, whether or not a credit card is physically used, is not a finance charge, P ro vided that: (i) Such discount does not exceed 5 per cent when computed or expressed as a percentage of the tag, posted, or advertised price of the property or services which are the subject of the transaction, (ii) Such discount is available to all pro spective buyers, whether or not they are card holders, and such fact is clearly and conspicu ously disclosed by a sign or display posted at or near each public entrance to the seller’s place of business wherein such discount is offered, and at all locations within the place of business where a purchase may be paid for, and (iii) If an offer of property or services is advertised in any medium or if offers are invited or accepted through the mail, over the telephone, or by means other than personal contact between the customer and the creditor offering such a dis count, and if customers are allowed to pay by use of a credit card or its underlying account and such fact is disclosed in the advertisement, tele phone contact, or in other correspondence, the availability of a discount for payments in cash must be clearly and conspicuously disclosed in any advertisement for such offerings and, in any case, before the transaction has been completed by use of the credit card or its underlying ac count. (2) With respect to any such discount for cash which is greater than 5 per cent, the total am ount of such discount shall constitute a finance charge under § 226.4(a) to be disclosed in accordance with § 226.7(e). R E G U L A T IO N Z (3) The availability of any discount may be limited by the creditor offering such discount to certain types of property or services or to certain outlets maintained by that creditor provided that such limitations are clearly and conspicuously dis closed. (4) Notwithstanding anything contained in the foregoing paragraph to the contrary, any amount added to the tag, posted, or advertised price of property or services offered by a creditor which is imposed by such creditor as a condition or consequence of the use of the credit card with re spect to a transaction involving such property and services, shall be a finance charge subject to the requirements of this section and § 226.7(e). S EC T IO N 226.5— D E T E R M IN A T IO N OF A N N U A L PER CEN TA G E RATE (a) General rule— open end credit accounts. The annual percentage rates for open end credit accounts shall be com puted so as to permit disclosure with an accuracy at least to the nearest quarter of 1 per cent. Such rate or rates shall be determined in accordance with § 226.7(a)(4) for purposes of disclosure before opening an ac count, § 226.10(c)(4) for purposes of advertis ing, and in the following m anner for purposes of disclosure on periodic statements: (1) Where the finance charge is exclusively the product of the application of one or more pe riodic rates (i) by multiplying each periodic rate by the num ber of periods in a year; or (ii) at the creditor’s option, if the finance charge is the result of the application of two or more periodic rates, by dividing the total finance charge for the billing cycle by the sum of the balances to which the periodic rates were applied and multiplying the quotient (expressed as a per centage) by the num ber of billing cycles in a year. (2) Where the creditor imposes all periodic finance charges in amounts based on specified ranges or brackets o f balances, the periodic rate shall be determined by dividing the am ount of the finance charge for the period by the amount of the median balance within the range or bracket of balances to which it is applicable, and the annual percentage rate shall be determined by multiplying that periodic rate (expressed as a per § 226.5 centage) by the num ber of periods in a year. Such ranges or brackets of balances shall be sub ject to the limitations prescribed in subdivision (iv) of paragraph (c)(2) of this section. (3) W here the finance charge imposed during the billing cycle is or includes (i) any minimum, fixed, or other charge not due to the application of a periodic rate, other than a charge with respect to any specific trans action during the billing cycle, by dividing the total finance charge for the billing cycle by the am ount of the balance(s) to which applicable and multiplying the quotient (expressed as a per centage) by the num ber of billing cycles in a year; or (ii) any charge with respect to any specific transaction during the billing cycle (even if the total finance charge also includes any other mini mum , fixed, or other charge not due to the appli cation of a periodic rate), by dividing the total finance charge imposed during the billing cycle by the total of all balances and other amounts on which any finance charge was imposed during the billing cycle without duplication and multiplying the quotient (expressed as a percentage) by the num ber of billing cycles in a year,53 except that the annual percentage rate shall not be less than the largest rate determined by multiplying each periodic rate imposed during the billing cycle by the num ber of periods in a year; or (iii) any minimum, fixed, or other charge not due to the application of a periodic rate and the total finance charge imposed during the bill ing cycle does not exceed 50 cents for a monthly o r longer billing cycle, or the pro rata part of 50 cents for a billing cycle shorter than monthly, at the creditor’s option, by multiplying each applica ble periodic rate by the num ber of periods in a year, notwithstanding the provisions o f subdivi sions (i) and (ii) of this subparagraph. (b) General rule— other credit. Except as other wise provided in this section, the annual percent age rate applicable to any extension of credit, other than open end credit, shall be that nominal annual percentage rate determined as follows: (1) In accordance with the actuarial m ethod of computation so that it may be disclosed with an accuracy at least to the nearest quarter of 1 per cent. T he mathematical equation and technical 5a See p. 10 f o r f o o tn o te . § 226.5 R E G U L A T IO N Z instructions for determining the annual percentage rate in accordance with the requirements of this paragraph are set forth in Supplement I to Regu lation Z which is incorporated in this Part by reference. Supplement I to Regulation Z may be obtained from any Federal Reserve Bank or fro m the Board in Washington, D.C., 20551, upon written request. (2) A t the option of the creditor, by applica tion of the United States Rule so that it may be disclosed with an accuracy at least to the nearest quarter of 1 per cent. U nder this rule, the finance charge is computed on the unpaid balance for the actual time the balance remains unpaid and if the am ount of a payment is insufficient to pay the accumulated finance charge, the unpaid accum u lated finance charge continues to accumulate to be paid from the proceeds of subsequent pay ments and is not added to the amount financed. (c) Charts and tables. (1) The Regulation Z A nnual Percentage Rate Tables produced by the Board may be used to determine the annual per centage rate, and any such rate determined from these tables in accordance with instructions con tained therein will comply with the requirements of this section. Volume I contains table FR B —■ 100-M covering 1 to 60 monthly payments, table FR B — 200-M covering 61 to 120 monthly pay ments, table FRB— 300-M covering 121 to 480 monthly payments, and table F R B — 100-W cover ing 1 to 104 weekly payments. Volume I also con tains instructions for use of the tables in regular transactions and most irregular transactions which involve only odd first and final payments and odd first payment periods. Volume II contains factor tables and instructions for their use in connection with the tables in Volume I in the computation o f annual percentage rates in any type of irregu lar payment or payment period transaction and in transactions involving multiple advances. Each volume is available from the Board in Washing ton, D.C., 20551, and the Federal Reserve Banks. (2) Any chart or table other than the Board’s Regulation Z Annual Percentage Rate Tables also may be utilized for the purpose of determining the annual percentage rate provided: (i) It is prepared in accordance with the gen eral rule set forth in paragraph (b)(1) or (2) of this section; (ii) It bears the name and address of the per- 5“ In d e te r m in in g th e d e n o m i n a t o r o f the f r a c tio n u n d e r § 226.5(a)(3)(ii) n o a m o u n t will be u s e d m o r e th a n o n c e w h e n a d d in g th e s u m o f th e b a la n c e s to w hic h p e rio d ic r a te s a p p ly to th e s u m o f th e a m o u n t s f in a n c e d to w hic h specific tr a n s a c tio n c h a r g e s apply. I n e v ery case th e fu ll a m o u n t o f tr a n s a c tio n s t o w h ic h specific tra n s a c tio n c h a r g e s a p p ly s h all be in c lu d e d in th e d e n o m in a to r . O th e r b a la n c e s o r p a r ts o f b a la n c e s shall be in c lu d e d a c c o r d i n g to t h e m a n n e r o f d e te rm in in g th e b a la n c e to w h ic h a p e rio d ic r a t e is a p p lie d , a s illu s tra te d in th e fo llo w in g e x a m p le s o f a c c o u n ts o n m o n th ly billing cycles: rio d ic r a t e ap p lie s e x ce e d s the a m o u n ts o f specific tr a n s a c tio n s (su c h excess in th is case is $50), to ta lin g $150. As e x p la in e d in e x a m p le 1, th e a n n u a l p e r c e n t a g e ra te is 3 .5 % X 12 = 4 2 % . 1. P r e v io u s b a la n c e — n on e . A specific t r a n s a c tio n o f $100 o c c u r s o n first d a y of th e billing cycle. T h e a v e ra g e da ily b a la n c e is $100. A specific tr a n s a c tio n c h a r g e o f 3 % is a p p lic a b le to th e specific tra n s a c tio n . T h e p e rio d ic ra te is W i% a p p lic a b le t o th e a v e r a g e da ily b a la n c e . T h e n u m e r a t o r is th e a m o u n t o f th e fin a n c e c h a r g e , w h ic h is $4.50. T h e d e n o m i n a t o r is th e a m o u n t o f th e t r a n s a c tio n (w hich is $100), plus th e a m o u n t b y w h ic h the b a la n c e to w hic h th e p e rio d ic r a te a p p lie s e xceed s th e a m o u n t o f specific tr a n s a c tio n s (such excess in this c a s e is 0), to ta lin g $100. T h e a n n u a l p e r c e n t a g e ra te is th e q u o tie n t (w hich is 4 . 5 % ) m u ltip lie d b y 12 (th e n u m b e r o f m o n th s in a y e a r ), i.e., 5 4 % . 2. P r e v io u s b a la n c e — $100. A specific t r a n s a c tio n o f $100 o c c u r s a t m i d p o i n t of the billing cycle. T h e a v e r a g e daily b a la n c e is $150. A specific t r a n s a c tio n c h a r g e o f 3 % is a p p lic a b le to the specific tr a n s a c tio n . T h e p e rio d ic r a te is 1 1 4 % a p p lic a b le to th e a v e r a g e da ily b a la n c e . T h e n u m e r a t o r is the a m o u n t o f fin a n c e c h a r g e w h ic h is $5.25. T h e d e n o m i n a t o r is th e a m o u n t o f th e tr a n s a c tio n (w h ic h is $100), p lu s t h e a m o u n t b y w h ic h th e b a la n c e to w h ic h th e p e - 3. If, in e x a m p le 2, th e p e rio d ic r a te ap p lie s on ly to th e p re v io u s b a la n c e , the n u m e r a t o r is $4.50 a n d th e d e n o m i n a t o r is $200 (the a m o u n t o f th e tr a n s a c tio n , $100, p lu s th e b a la n c e to w h ic h o n ly th e p e rio d ic ra te is a p p li cable, th e $100 p re v io u s b a la n c e ). A s e x p la in e d in e x a m ple 1, th e a n n u a l p e r c e n t a g e r a t e is 2 . 2 5 % X 12 = 27% . 4. If, in e x a m p le 2, the p e rio d ic r a te a p p lie s o n ly to a n a d ju s t e d b a la n c e (p rev io u s b a la n c e less p a y m e n ts a n d c re d its ) a n d th e c u s t o m e r m a d e a p a y m e n t o f $50 a t m i d p o i n t o f hilling cycle, th e n u m e r a t o r is $3.75 a n d the d e n o m i n a t o r is $150 (the a m o u n t o f th e tr a n s a c tio n , $100, p lu s th e b a la n c e to w hic h on ly th e p e rio d ic r a te is a p p lic a b le , th e $50 a d ju s t e d b a la n c e ). A s e x p la in e d in e x a m p le 1, the a n n u a l p e r c e n t a g e ra te is 2 .5 % X 12 = 30% . 5. P r e v io u s b a la n c e — $100. A specific tr a n s a c tio n (c h e c k ) o f $100 o c c u r s a t th e m id p o in t o f th e billing cycle. T h e a v e r a g e da ily b a la n c e is $150. T h e specific tra n s a c tio n c h a r g e is 25 c e n ts p e r c h e c k . T h e p e rio d ic ra te is 1 1 4 % a p p lie d to th e a v e ra g e d a ily b a la n c e . T h e n u m e r a t o r is the a m o u n t o f th e fin a n c e c h a r g e , w h ic h is $2.50 a n d in c lu d e s th e 25 c e n ts c h e c k c h a r g e a n d th e $2.25 re s u ltin g f r o m th e a p p lic a tio n o f th e p e rio d ic ra te . T h e d e n o m i n a t o r is th e fu ll a m o u n t o f the specific tra n s a c tio n (w h ic h is $100) p lu s th e a m o u n t b y w h ic h th e a v e r a g e da ily b a la n c e e x ce e d s the a m o u n t o f th e specific t r a n s a c tio n (w h ic h in this c a s e is $50), to ta lin g $150. A s e x p la in e d in e x a m p le 1, th e a n n u a l p e r c e n t a g e ra te w o u ld be 1 3 4 % X 12 = 2 0 % . R E G U L A T IO N Z son responsible for its production, an identifica tion number assigned to it by that person which shall be the same for each chart or table so pro duced with like numerical content and configura tion and, if prepared for use in connection with irregular transactions, an identification of the method of com putation (“Actuarial” or “U.S. Rule”); (iii) Except as provided in subdivision (iv) of this subparagraph, it permits determination of the annual percentage rate to the nearest one-quarter of 1 per cent for the range of rates covered by the chart or table; and (iv) If applicable to ranges or brackets of balances, it discloses the amount of the finance charge and the annual percentage rate on the median balance within each range or bracket of balances where a creditor imposes the same finance charge for all balances within a specified range or bracket of balances, and provided further that if the annual percentage rate determined on the median balance understates the annual per centage rate determined on the lowest balance in that range or bracket by more than 8 per cent of the rate on the lowest balance, then the annual percentage rate for that range or bracket shall be com puted upon any balance lower than the median balance within that range so that any understatement will not exceed 8 per cent of the rate on the lowest balance within that range or bracket of balances. (3) In the event an error in disclosure of the am ount of a finance charge or an annual percent age rate occurs because of a corresponding error in a chart or table acquired or produced in good faith by the creditor, that error in disclosure shall not, in itself, be considered a violation of this Part provided that upon discovery of the error, that creditor makes no further disclosure based on that chart or table and promptly notifies the Board or a Federal Reserve Bank in writing of the error and identifies the inaccurate chart or table by giving the name and address of the per son responsible for its production and its identi fication number. (d) Minor irregularities. In determining the annual percentage rate a creditor may, at his op tion, consider the payment irregularities set forth in this paragraph as if they were regular in am ount o r time, as applicable, provided that the transaction to which they relate is otherwise pay able in equal instalments scheduled at equal inter vals. § 226.5 (1) If the period from the date on which the finance charge begins to accrue and the date the final payment is due is not less than 3 months in the case of weekly payments, 6 months in the case of biweekly or semimonthly payments, or 1 year in the case of monthly payments, either or both of the following: (i) The am ount of 1 paym ent other than any downpayment is not more than 50 per cent greater nor 50 per cent less than the am ount of a regular payment; or (ii) The interval between the date on which the finance charge begins to accrue and the date the first payment is due is not less than 5 days for an obligation otherwise payable in weekly instal ments, not less than 10 days for an obligation otherwise payable in biweekly or semimonthly in stalments, or not less than 20 days for an obliga tion otherwise payable in monthly instalments. (2) If the period from the date on which the finance charge begins to accrue and the date the final payment is due is less than 3 months in the case of weekly payments, 6 months in the case of biweekly or semimonthly payments, or 1 year in the case o f monthly payments, either or both of the following: (i) The am ount of 1 paym ent other than any downpayment is not more than 25 per cent greater nor 25 per cent less than the am ount of a regular payment; or (ii) The interval between the date on which the finance charge begins to accrue and the date the first payment is due is not less than 6 days for an obligation otherwise payable in weekly instal ments, not less than 12 days for an obligation otherwise payable in biweekly or semimonthly in stalments, or not less than 25 days for an obliga tion otherwise payable in monthly instalments. (e) Approximation of annual percentage rate— other credit. In an exceptional instance when cir cumstances may leave a creditor with no alterna tive but to determine an annua] percentage rate applicable to an extension of credit other than open end credit by a method other than those pre scribed in paragraphs (b) or (c) of this section, the creditor may utilize the constant ratio method of com putation provided such use is limited to the exceptional instance and is not for the purpose of circumvention or evasion of the requirements of this Part. Any provision of State law authorizing or requiring the use of the constant ratio method or any method of computing a percentage rate other than those prescribed in paragraphs (b) and REGULATION Z § 226.6 (c) of this section does not justify failure of the creditor to comply with the provisions of those paragraphs, as applicable. SEC T IO N 226.6— G E N E R A L D ISCLO SU R E R E Q U IR E M E N T S (a) Disclosures; general rule. The disclosures required to be given by this P art shall be made clearly, conspicuously, in meaningful sequence, in accordance with the further requirements of this section, and at the time and in the terminology prescribed in applicable sections. Except with re spect to the requirements of § 226.10, where the terms “finance charge” and “annual percentage rate” are required to be used, they shall be printed more conspicuously than other terminol ogy required by this P art and all numerical am ounts and percentages shall be stated in figures and shall be printed in not less than the equiva lent of 10 point type, .075 inch com puter type, or elite size typewritten numerals, or shall be legibly handwritten. (b) Inconsistent State requirements. (1) With respect to the requirements of this Part, State law is inconsistent with the requirements of the Act and this Part, within the meaning of section 111 (a) of the Act to the extent that it: (i) Requires a creditor to make disclosures or take actions different from the requirements of this P art with respect to form, content, terminol ogy, or time of delivery; (ii) Requires disclosure of the am ount of the finance charge determined in any m anner other than that prescribed in § 226.4; or (iii) Requires disclosure of the annual per centage rate of the finance charge determined in any m anner other than that prescribed in § 226.5. (2)(i) A State law with respect to credit bill ing practices which is similar in nature, purpose, scope, intent, effect, or requisites to the provisions of sections 161 or 162, or both, of the Act is incon sistent with the A ct and this Part within the mean ing of section 171(a) of the Act, and is preempted, if it provides procedures or imposes rights or responsibilites upon either customers or creditors which are different from those required by sections 161 or 162, or both, of the Act and their imple menting provisions in this Part; except that, any such State law which allows a customer to make inquiry concerning an open end credit account and imposes upon the creditor an obligation to respond to such an inquiry after the time allowed in this Part for the customer to submit a proper written notification of a billing error shall not be p re empted as to any situation in which the time period for making a proper written notification of a billing error as provided in this P art has expired. (ii) A State law which is similar in nature, purpose, scope, intent, effect, or requisites to a sec tion of chapter 4 of the Act other than sections 161 or 162 is not inconsistent with the Act or this Part within the meaning of section 171(a) of the Act if the creditor can comply with the State law without violating this Part. If the creditor cannot comply with a State law without violating a pro vision of this P art which implements a section of chapter 4 of the Act other than sections 161 or 162, such State law is inconsistent with the re quirements of the Act and this P art within the meaning of section 171(a) of the Act and is pre empted. (iii) A State law which requires disclosure or notification to customers of provisions of State law which are inconsistent with chapter 4 of the Act and its implementing provisions in this Part within the meaning of section 171(a) of the Act is incon sistent with the Act and this Part within the mean ing of sections 111(a) and 171(a) of the Act, and the creditor shall not make such a disclosure or provide such a notice. W hen a creditor gives writ ten notice to a customer of the customer’s rights under any provision o f State law which would permit a customer to inquire concerning an open end credit account after the time period allowed in this Part for submission of a proper written notification of a billing error has expired, the creditor shall clearly and conspicuously set forth in the notice that reliance upon the longer time period available u nder State law may result in the customer losing important rights which could be preserved by acting more promptly under Federal law and that the State law provisions only become operative upon the expiration of the time period provided by this Part for submitting a proper writ ten notification of a billing error. If such a dis closure is made on the same side of a sheet of paper as the disclosures required by § 226.7(a), (d), and (i) of this Part, such State disclosures shall appear separately and below the disclosures re quired by § 226.7(a), (d), and (i) of this Part; the disclosures required by § 226.7(a), (d), and (i) REGULATION Z § 226.6 quired by this Part, but none shall be stated, shall be clearly and conspicuously identified by a utilized, or placed so as to mislead or confuse the heading indicating they are made in compliance customer or lessee or contradict, obscure, or detract with Federal law and the disclosures of State law attention from the information required by this shall appear separately and below a conspicuous Part to be disclosed. Any creditor or lessor who demarcation line. (iv) A State, through its Governor, Attorneyelects to make disclosures specified in any provi sion of State law which, under paragraph (b) of General, or other appropriate official having prim this section, is inconsistent with the requirements ary enforcement or interpretive responsibilities for of the Act and this Part may its credit billing practices law, may apply to the (1) M ake such inconsistent disclosures on a Board for a determination that the State law offers separate paper apart from the disclosures made greater protection to customers than a comparable pursuant to this Part, or provision(s) of chapter 4 of the A ct and its imple (2) Make such inconsistent disclosures on the menting provision(s) in this Part, or is otherwise same statement on which disclosures required by not inconsistent with chapter 4 of the Act and this this P art are made; provided: Part, or for a determination with respect to any (i) All disclosures required by this P art ap issues not clearly covered by § 226.6(b)(2)(i), (ii), pear separately and above any other disclosures, and (iii) as to the consistency or inconsistency of (ii) Disclosures required by this Part are iden a State law with chapter 4 of the Act or its im tified by a clear and conspicuous heading indicat plementing provisions in this Part. ing that they are made in compliance with Federal * (3)(i) A State law which is similar in nature, law, and purpose, scope, intent, effect or requisites to a sec (iii) All inconsistent disclosures appear sep tion of chapter 5 of the Act is not inconsistent arately and below a conspicuous demarcation line, with the Act or this P art within the meaning of and are identified by a clear and conspicuous section 186(a) of the Act if the lessor can comply heading indicating that the statements made there with the State law without violating this Part. If a after are inconsistent with the disclosure require lessor cannot comply with a State law without ments of the Federal T ruth in Lending Act or the violating a provision of this Part which implements Federal Consumer Leasing Act. a section o f chapter 5 of the Act, such State law ** (d) Multiple creditors or lessors; joint dis is inconsistent with the requirements of the Act closure. If there is more than one creditor or lessor and this Part within the meaning of section 186(a) in a transaction, each creditor or lessor shall be of the Act and is preempted. clearly identified and shall be responsible for m ak (ii) A State, through its G overnor, Attorney ing only those disclosures required by this P art General, or other appropriate official having prim which are within his knowledge and the purview of ary enforcement or interpretative responsibilities his relationship with the customer or lessee. If two for its consumer leasing law, may apply to the or more creditors or lessors make a joint dis Board for a determination that the State law offers closure, each creditor or lessor shall be clearly greater protection and benefit to lessees than a identified. The disclosures required under p ara comparable provision(s) of chapter 5 of the Act graphs (b) and (c) of § 226.8 shall be made by the and its implementing provision(s) in this Part, or seller if he extends or arranges for the extension is otherwise not inconsistent with chapter 5 of the of credit. Otherwise disclosures shall be made as Act and this Part, or for a determination with re required under paragraphs (b) and (d) of § 226.8 spect to any issues not clearly covered by or paragraph (b) of § 226.15. § 226.6(b)(3)(i) as to the consistency or incon ** (e) Multiple customers or lessees; disclosure sistency of a State law with chapter 5 of the Act to one. In any transaction other than a credit or its implementing provisions in this Part. transaction which may be rescinded under the pro ** (c) Additional information. At the creditor’s or lessor’s option, additional information or ex visions of § 226.9, if there is more than one cus planations may be supplied with any disclosure re tomer or lessee, the creditor or lessor need furnish * Added 3/23/77. ** Amended 3/23/77. § 226.6 REGULATION Z quirements imposed under this Part, other than a statement of disclosures required by this P art to advertising requirements under § 226.10, shall be only one of them other than an endorser, co preserved by the creditor or lessor for a period of maker, guarantor, o r a similar party. not less than 2 years after the date each disclosure * (f) Unknown information estimate. If at the is required to be made. Each creditor or lessor time disclosures must be made, an amount or shall, when directed by the appropriate adm in other item of information required to be disclosed, istrative enforcement authority designated in sec o r needed to determine a required disclosure, is tion 108 of the Act, permit that authority or its unknown or not available to the creditor or lessor duly authorized representative to inspect its rele and the creditor or lessor has made a reasonable vant records and evidence of compliance with effort to ascertain it, the creditor or lessor may use this Part. an estimated am ount or an approximation of the information, provided the estimate or approxima (j) Leap year. Any variance in the amount of tion is clearly identified as such, is reasonable, is any finance charge, payment, percentage rate, or based on the best information available to the other term required under this Part to be dis creditor or lessor and is not used for the purpose closed, or stated in any advertisement, which oc curs by reason of the addition of February 29 in of circumventing or evading the disclosure re quirements of this Part. each leap year, may be disregarded, and such term Notwithstanding the requirement of this p ara may be disclosed or stated without regard to such graph that the estimate be based on the best infor variance. mation available, a lessor is not precluded in a (k) Transition period. Any creditor who can purchase option lease from understating the esti demonstrate that he has taken bona fide steps, mated value of the leased property at the end of prior to October 28, 1975, to obtain printed forms the term in computing the total lease obligation as which are necessary to comply with the require required in § 226.15(b)(15)(i). ments of this Part may, until such forms are re * (g) Effect of subsequent occurrence. If infor ceived but in no event later than April 30, 1976, mation disclosed in accordance with this P art is utilize existing supplies of printed forms for the subsequently rendered inaccurate as the result of purpose of complying with the disclosure require any act, occurrence, or agreement subsequent to ments of this Part, provided that such forms are the delivery of the required disclosures, the in altered or supplemented as necessary to assure accuracy resulting therefrom does not constitute that all of the items of information the creditor is a violation of this Part.6 required to disclose to the customer are set forth (h) Overstatement. The disclosure of the clearly and conspicuously in every case except: am ount of the finance charge or a percentage (1) Where a creditor has, prior to October 28, which is greater than the am ount of the finance 1975, prepared the § 226.7(a) disclosures without charge or percentage required to be disclosed the notice and statement required by § 226.7(a)(9) under this Part does not in itself constitute a vio and dispersed them to remote locations, as in the lation of this Part: Provided, T hat the overstate case of mail order catalogs, the statement required ment is not for the purpose of circumvention or by § 226.7(a)(9) may be made separately from the evasion of disclosure requirements. other § 226.7(a) disclosures until April 30, 1976. * (i) Preservation and inspection of evidence of so long as the § 226.7(a)(9) statement is mailed or compliance. Evidence of compliance with the re delivered to the customer no later than the date the first payment is due. F o r the purpose of this paragraph the creditor may disregard the required “Such acts, occurrences, or agreements include the fail ure of the customer or lessee to perform his obligations notice in § 226.7(a)(9) until April 30, 1976; under the contract and such actions by the creditor or (2) W here a creditor’s forms must be adapted lessor as may be proper to protect his interests in such to comply with the disclosure requirements of circumstances. Such failure may result in the liability of the customer or lessee to pay delinquency charges, collec § 226.7(b)(l)(x), the creditor need not supplement tion costs, or expenses of the creditor or lessor for perfec or alter his forms if there is only one address listed tion or acquisition of any security interest or amounts advanced by the creditor or lessor on behalf of the cus on o r with the periodic statement. In the case tomer or lessee in connection with insurance, repairs to where a creditor has more than one address listed or preservation of collateral or leased property. on or with the periodic statement and the creditor * Amended 3/23/77. R E G U L A T IO N Z § 226.7 (2) The method of determining the balance upon which a finance charge may be imposed. (3) T he method of determining the amount of the finance charge, including the method of de termining any minimum, fixed, check service, transaction, activity, or similar charge, which may be 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 applica ble, and the corresponding annual percentage rate determined by multiplying the periodic rate by the number of periods in a year.6a (5) If the creditor so elects, the Comparative Index of Credit Cost in accordance with § 226.11. (6) The conditions under which any other charges may be imposed, and the method by which they will be determined. (7) The conditions under which the creditor may retain or acquire any security interest in any property to secure the payment o f any credit ex tended on the account, and a description or iden tification of the type of the interest or interests which may be so retained o r acquired. (8) The minimum periodic payment required. (9) The following notice: “N O T IC E : See ac companying statement for im portant information regarding your rights to dispute billing errors” and a separate statement containing substantially the following text,7 as applicable, written clearly and conspicuously, shall accompany the statement required by paragraph (a) of this section; or the following text without the preceding notice may SEC TIO N 226.7— O PE N E N D C R E D IT be included on the statement required by para A C C O U N T S — S PE C IFIC graph (a) of this section if disclosed clearly and D ISCLOSURES conspicuously; or the following text may be in (a) Opening new account. Before the first trans cluded on the reverse side of the statement re quired by paragraph (a) of this section with the action is made on any open end credit account, following notice on the face of the statement: the creditor shall disclose to the customer in a single written statement, which the customer may retain, in terminology consistent with the require ments of paragraph (b) of this section, each of ““ A creditor imposing minimum charges is not required the following items, to the extent applicable: to adjust the disclosure ot the range of balances to which (1) The conditions under which a finance each periodic rate would apply in order to reflect the range of the balances below which the minimum charge charge may be imposed, including an explanation applies. If a creditor does not impose a finance charge of the time period, if any, within which any credit when the outstanding balance is less than a certain amount, the creditor is not required to disclose that extended may be paid without incurring a finance fact or the balance below which no such charge will be charge, except that the creditor may, at his option imposed. 1Wherever the word “creditor” appears or is referred and without disclosure, refrain from imposing to in the statement, the creditor may substitute appropri such finance charge even though payment is re ate references, such as “company,” “bank,” “we” or a ceived after the termination of such time period. specific name. has not complied with the requirements of § 226.7(b)(l)(x), the creditor must accept as p rop erly received any proper written notification of a billing error at any of the addresses listed on or with the periodic statement. N ew forms which comply with the requirements of § 226.7(b)(l)(x) must be in use no later than April 30, 1976; (3) Where a creditor’s forms must be adapted to comply with the disclosure requirements of § 226.7(g), the creditor need not supplement or alter his forms; however, complying forms must be in use no later than April 30, 1976; (4) Where a creditor is disclosing inconsistent State law provisions within the meaning of section 171(a) of the A ct and § 226.6(b)(2) of this Part or is making disclosures not in compliance with § 226.6(b)(2)(iii) on or with the disclosure required by this Part, the creditor need not alter or sup plement his forms; however, complying forms must be in use no later than April 30, 1976; and (5) Where, because of operational limitations, a creditor is unable to comply with the disclo sure requirements in § 226.7(bXl)(i) and (ix), which require appropriate identification of credit balances, or with the disclosure requirement in § 226.7(b)(l)(iii), which requires the dates of pay ments and credits, the creditor need not supple ment or alter his forms; however, complying forms and procedures must be in use no later than April 30, 1976. § 226.7 REGULATION Z “NO T ICE : See reverse side for important infor mation regarding your rights to dispute billing errors.”: I n C ase A of E rrors or bout Y our I n q u ir ie s B il l The Federal Truth in Lending A c t requires prom pt correction o f billing mistakes. 1. I f you want to preserve yo ur rights under the A c t, here’s what to do if you think you r bill is wrong or if you need more information about an item on your bill: a. D o not write on the bill. On a separate sheet o f paper write [Alternate: Write on the bill or other sheet o f paper] (you m ay telephone your inquiry but doing so will not preserve your rights under this law) the following: i. Y ou r name and account num ber (if any). ii. A description o f the error and an expla nation (to the extent you can explain) w hy you believe it is an error. I f you only need more information, explain the item you are not sure about and, if you wish, ask for evidence o f the charge such as a copy o f the charge slip. D o not send in your copy o f a sales slip or other docum ent unless you have a duplicate copy fo r your records. iii. The dollar am ount o f the suspected error. iv. A n y other information (such as y o u t ad dress) which you think will help the creditor to identify you or the reason for your complaint or inquiry. b. Send yo u r billing error notice to the address on yo ur bill which is listed after the words: “Send Inquiries To:” or similar wording. [Alter nate: Send your billing error notice to: (creditor’s nam e and address)]. M ail it as soon as you can, but in any case, early enough to reach the creditor within 60 days after the bill was mailed to you. I f you have authorized your bank to automatically pay from yo ur checking or savings account any credit card bills fro m that bank, you can stop or reverse paym ent on any am ount you think is wrong by mailing your notice so the creditor receives it within 16 days after the bill was sent to you. However, you do not have to m eet this 16-day deadline to get the creditor claim. to investigate your billing error 2. The creditor m ust acknowledge all letters pointing out possible errors within 30 days o f re ceipt, unless the creditor is able to correct your bill during that 30 days. W ithin 90 days after re ceiving your letter, the creditor m ust either cor rect the error or explain why the creditor believes the bill was correct. Once the creditor has ex plained the bill, the creditor has no further obliga tion to you even though you still believe that there is an error, except as provided in paragraph 5 below. 3. A fte r the creditor has been notified, neither the creditor nor an attorney nor a collection agency may send you collection letters or take other collection action with respect to the am ount in dispute; but periodic statements may be sent to you, and the disputed am ount can be applied against your credit limit. Y o u cannot be threat ened with damage to your credit rating or sued for the am ount in question, nor can the disputed am ount be reported to a credit bureau or to other creditors as delinquent until the creditor has answered your inquiry. However, you remain obli gated to pay the parts o f your bill not in dispute. 4. I f it is determ ined that the creditor has made a m istake on yo ur bill, you will not have to pay any finance charges on any disputed amount. I f it turns out that the creditor has not made an error, you m ay have to pay finance charges on the amount in dispute, and you will have to m ake up any missed m inim um or required paym ents on the disputed amount. Unless you have agreed that your bill was correct, the creditor m ust send you a written notification o f what you owe; and if it is determined that the creditor did m ake a mistake in billing the disputed amount, you m ust be given the time to pay which you normally are given to pay undisputed am ounts before any more finance charges or late paym ent charges on the disputed am ount can be charged to you. 5. If the creditor’s explanation does not satisfy you and you notify the creditor in writing within 10 days after you receive his explanation that you still refuse to pay the disputed amount, the cred itor may report you to credit bureaus and other creditors and may pursue regular collection proce dures. But the creditor m ust also report that you think you do not owe the money, and the creditor m ust let you know to w hom such reports were REGULATION Z made. Once the matter has been settled between you and the creditor, the creditor m ust notify those to w hom the creditor reported you as delin quent o f the subsequent resolution. 6 . I f the creditor does not follow these rules, the creditor is not allowed to collect the first $50 of the disputed am ount and finance charges, even if the bill turns out to be correct. 7. I f you have a problem with property or serv ices purchased with a credit card, you m ay have the right not to pay the remaining am ount due on them, if you first try in good faith to return them or give the merchant a chance to correct the problem. There are two limitations on this right: a. Y o u m ust have bought them in your hom e State or if not within your hom e State within 100 miles o f your current mailing address; and b. The purchase price m ust have been more than $50. However, these limitations do not apply if the m erchant is owned or operated by the creditor, or if the creditor mailed you the advertisement for the property or services. *(b) Periodic statements required. (1) Except in the case of an account which the creditor deems to be uncollectible or with respect to which delinquency collection procedures have been instituted, the creditor of any open end credit account shall mail or deliver to the cus tomer, for each billing cycle at the end of which there is an outstanding undisputed debit or credit balance in excess of $1 in that account or with respect to which a finance charge is imposed, a statement or statements which the customer may retain, setting forth in accordance with paragraph (c) of this section each of the following items to the extent applicable: (i) The outstanding balance in the account at the beginning of the billing cycle, using the term “previous balance,” and in the case of a credit balance, an appropriate identification as such. (ii) The information required by § 226.7(k). (iii) The amounts and dates of crediting to the account during the billing cycle for payments, using the term “ payments,” and for other credits including returns, rebates of finance charges, and * Amended 8 /2 7 /7 6 . § 226.7 adjustments, using the term “credits,” and unless previously furnished a brief identification8 of each of the items included in such other credits, except that the date of crediting to the customer’s account need not be provided if a delay in crediting does not result in the imposition of any finance charges, late payment charges, or other charges for that billing cycle or a later billing cycle. (iv) The amount of any finance charge, using the term “finance charge,” debited to the account during the billing cycle, itemized and identified to show the amounts, if any, due to the application of periodic rates and the amount of any other charge included in the finance charge, such as a minimum, fixed, check service, trans action, activity, or similar charge,9 using appro priate descriptive terminology. (v) Each periodic rate, using the term “pe riodic rate” (or “rates”), that may be used to compute the finance charge (whether or not ap plied during the billing cycle), the range of bal ances to which it is applicable, and the corre sponding annual percentage rate determined by multiplying the periodic rate by the num ber of periods in a year. The words “corresponding an nual percentage rate,” “corresponding nominal annual percentage rate,” “nominal annual per centage rate,” or “annual percentage rate” (o r “rates” ) may be used to describe the correspond ing annual percentage rate. The requirements of § 226.6(a) of this P art with respect to disclosing the term “annual percentage rate” more conspicu ously than other required terminology shall not be applicable to the disclosure made under this paragraph, although such term (or words incor porating such term ) may, at the creditor’s option, be shown as conspicuously as the terminology required under (b)(l)(vi) of this paragraph. Where a minimum charge may be applicable to the account, the amount of such minimum charge shall be disclosed.9a s Identification may be made on an accompanying slip or by symbol relating to an identification list printed on the statement. ” These charges include any charges imposed by the creditor for the issuance, payment, or handling of checks, for account maintenance or otherwise, to the ex tent that such charges exceed any similar charges the customer is required to pay when an account is not being used to extend credit. A creditor imposing minimum charges is not required to adjust the disclosure of the range of balances to which (Continued on page 18) R E G U L A T IO N Z § 226.7 (vi) W hen a finance charge is imposed during the billing cycle, the annual percentage rate or rates determined under § 226.5(a) using the term “annual percentage rate” (o r “rates” ). (vii) If the creditor so elects, the Comparative Index of Credit Cost in accordance with § 226.11. (viii) The balance on which the finance charge was computed, and a statement of how that balance was determined. If the balance is de termined without first deducting all credits during the billing cycle, that fact and the am ount of such credits shall also be disclosed. (ix) The closing date of the billing cycle and the outstanding balance in the account on that date, using the term “new balance,” and in the case of a credit balance, appropriately identi fied as such, accompanied by the statement of the date by which, or the period within which, if any, payment must be made to avoid additional finance charges, except that the creditor may, at his option and without disclosure, impose no such additional finance charges if payment is received after such date or termination of such period. (x) An address to be used by the creditor for the purpose of receiving billing inquiries from customers. Such address shall be preceded by the caption “Send Inquiries T o :”, o r other similar language indicating that the address is the proper location to send such inquiries. (2) If the terms of the open end credit plan provide a time period within which the customer may repay any portion of the new balance with out incurring an additional finance charge, late paym ent charge, or other charge, no such charge may be imposed with respect to any portion of such new balance unless the periodic statement disclosing the new balance is mailed or delivered to the customer at least 14 days prior to the date specified in the statement as being the date by which payment of the new balance must be made in order to avoid the imposition of that finance charge or late payment charge, except that such time limitation shall not apply in any case where each periodic rate would apply in order to reflect the range of the balances below which the minimum charge applies. If a creditor does not impose a finance charge when the outstanding balance is less than a certain amount, the creditor is not required to disclose that fact or the balance below which no such charge will be imposed. the creditor has been prevented, delayed, or hin dered in mailing or delivering the periodic state ment within such time limit because of an act of God, war, civil disorder, natural disaster, or strike. *(c) Location of disclosures. The disclosures required by paragraph (b) of this section shall be made on the face of the periodic statement, e x cept that, at the creditor’s option: (1) The information required to be disclosed under paragraph (b)(1)(h) of this section and item ization of the amounts and dates required to be disclosed under paragraph (b)(l)(iii) of this section and of the amount of any finance charge required to be disclosed under paragraph (b)(l)(iv) of this section may be made on the reverse side of the periodic statement or on a separate accompanying statement(s), provided that the totals of the re spective debits and credits under each of those paragraphs are disclosed on the face of the pe riodic statement. (2) The disclosures required under paragraph (b)(l)(v) and (b)( 1)(viii) of this section, except the disclosure of the balance on which the finance charge was computed, may be made on the re verse side of the periodic statement or on the face of a single supplemental statement which shall accompany the periodic statement. (3) The disclosure required by paragraph (b)(l)(x) of this section may be made on the reverse side of the periodic statement. (4) If the creditor exercises any of the options provided under this paragraph, the face of the periodic statement shall contain one of the follow ing notices, as applicable: “N OTICE: See reverse side for important inform ation” or “ N OTICE: See accompanying statement(s) for important in form ation” or “ N OTICE: See reverse side and accompanying statement(s) for important infor mation,” and the disclosures shall not be separated so as to confuse or mislead the customer or to obscure or detract attention from the information required to be disclosed. (d) Semiannual statement required. (1) The creditor shall mail or deliver during two billing cycles per year to each customer entitled to re ceive a periodic statement under § 226.7(b) for such billing cycle, the statement required by * Amended 8/2 7 /7 6 . § 226.7 REGULATION Z § 226.7(a)(9), written clearly and conspicuously either on one or both sides of a separate page or on one or both sides of the periodic statement re quired by paragraph (b) of this section. (2) The timing of the mailing o r delivery of such semiannual statements shall be not less than 5 no r more than 7 months after the month in which the last preceding such statement was mailed or delivered, Provided that: (i) T he creditor shall select at least 2 billing cycles in any 12 m onth calendar period fo r the mailing or delivery of such statements; and (ii) T he first semiannual statement to any new customer may be mailed or delivered to that customer during the next regularly scheduled mailing or delivery of semiannual statements in which he is entitled to receive a semiannual state ment under paragraph (d)(1) o f this section. (3) If the creditor chooses to alter the cycle of mailing or delivering semiannual statements, the creditor may mail or deliver the semiannual statement less than 5 months after the last pre ceding such statement was mailed or delivered, provided that the creditor mails or delivers at least 3 such statements in the next 12 m onths computed from the month in which the last p re ceding semiannual statement was mailed or deliv ered. (4) Nothing in this section shall be construed to prohibit a creditor from mailing or delivering the statement required by this section more fre quently than semiannually. (5) As an alternative to the requirements of paragraph (d)(1) of this section, the creditor may mail or deliver, on o r with each periodic statement required under paragraph (b)(1) of this section, substantially the following statement and, if applicable, the periodic statement must contain one of the notices provided for in paragraph (c)(4) of this section, provided that the creditor must promptly but in no event later than 30 days, mail or deliver to a customer the statement required by § 226.7(a)(9) at any time upon a customer’s re quest and also upon receipt of each billing error notice mailed o r delivered to the creditor by a customer: I n C ase A of E rrors or bout I n q u ir ie s Y o u r B il l Send your inquiry in writing [at creditor’s op tion: on a separate sheet] so that the creditor re ceives it within 60 days after the bill was mailed to you. Y ou r written inquiry m ust include: 1. Y o u r nam e and account num ber (if any); 2. A description o f the error and w hy (to the extent you can explain) you believe it is an error; and 3. T he dollar am o un t o f the suspected error. I f you have authorized yo ur creditor to auto matically pay yo u r bill fro m yo u r checking or savings account, you can stop or reverse paym ent on any am ount you think is wrong by mailing you r notice so that the creditor receives it within 16 days after the bill was sent to you. Y o u remain obligated to pay the parts o f your bill not in dispute, but you do not have to pay any am ount in dispute during the time the credi tor is resolving the dispute. D uring that sam e time, the creditor m ay not take any action to col lect disputed am ounts or report disputed am ounts as delinquent. I f you have a problem with property or serv ices purchased with a credit card, you m ay have the right not to pay the remaining am ount due on them if you first try in good faith to return them or give the m erchant a chance to correct the problem. There are two limitations on this right: 1. Y o u must have bought them in your home State or, if not within your home State, within 100 miles o f your current mailing address; and 2. The purchase price m ust have been more than $50. H ow ever, these limitations do not apply if the merchant is ow ned or operated by the creditor, or if the creditor mailed you the advertisement for the property or services. This is a sum m ary o f yo u r rights; a full state m ent o f your rights and the creditor’s responsibil ities under the Federal Fair Credit Billing A c t will be sent to you both upon request and in response to a billing error notice. (e) Finance charge imposed at the time of transaction. (1) Any creditor, other than the credi tor of the open end credit account, who imposes a finance charge not excepted by § 226.4(i) Dis counts for paym ents in cash, at the time of h o n oring a customer’s credit card, shall m ake the disclosures required under paragraphs (b)(2) and (d) of § 226.8 Credit other than open end— spe cific disclosures, at the time of that transaction, and the annual percentage rate to be disclosed shall be determined by dividing the am ount o f the §226.7 REGULATION Z not be retained by the customer, reasonable re quirements with respect to the form, amount, manner, location, and time for receipt of p ay 12. (2) T he creditor of the open end credit account ments, except that: (i) If no particular hour of the day has been shall not separately consider any charge imposed clearly specified by the creditor as the time by under this paragraph for purposes of the dis which payment must be received by the creditor closure requirements of paragraphs (a) and (b) of in order to obtain crediting to the customer’s this section. account as of that date, payments received prior (f) Change in terms. N o t later than 15 days to the close of business on that day must be cred prior to the beginning date of the billing cycle in which any change is to be made in the terms pre ited as of that date; (ii) If no location(s) has been clearly speci viously disclosed to the customer of an open end fied as the location(s) at which payment may be credit account, the creditor shall mail or deliver a made, then payment at any location where the written disclosure of such change to each cus creditor conducts business shall be credited as of tom er required to be furnished a statement under the date such payment is presented; and paragraph (b) of this section. Such disclosure shall (iii) If no particular m anner of paym ent has be mailed o r delivered to each other customer who subsequently activates his account not later been clearly specified, then payment by check, cash, money order, bank draft or other similar than the date of mailing or delivery of the next required billing statement on his account. H o w instrument in properly negotiable form shall con ever, if the periodic rate or rates, or any mini stitute proper manner of payment. (3) If the creditor accepts payment at loca mum , fixed, check service, transaction, activity, tions other than those specified under paragraph o r similar charge is increased, the creditor shall (g)(2)(ii) of this section, the creditor shall credit mail o r deliver a written disclosure of such in the customer’s account promptly (in no case later crease to each customer at least 15 days prior to than 5 days from the date of receipt), provided the beginning date of the billing cycle in which the increase is imposed on his account. N o notice that the possibility of such delay is clearly dis closed to the customer on the periodic statement is necessary if the only change is a reduction in or on accompanying material that need not be the minimum periodic payment, periodic rate or rates, or in any minimum, fixed, check service, retained by the customer. transaction, activity, o r similar charge applicable (4) Payments need not be credited as of the date of receipt (but in any case must be credited to the account. promptly) if a delay in crediting does not result in (g) Prompt crediting of payments. Regard the imposition of any finance charges, late pay less of the date of actual posting o f a payment to ment charges, or other charges for that billing an account, such payment shall be credited to the cycle or a later billing cycle. customer’s account as of the date such payment (5) If, because of operational limitations, the is received by the creditor, and no finance charge, creditor is unable to credit a payment made on late payment charge, or other charge shall be im posed with respect to the am ount of such payment an average daily balance or daily balance account which is properly received by the creditor on or as of the date of receipt and there was a “ pre before the time indicated by the creditor as neces vious balance” in the account for the billing cycle sary to avoid imposition thereof, Provided that: in which such payment was received, or the ac (1) If a creditor fails to post the customer’s count is one in which the terms do not provide a payment in time to avoid the imposition of finance time period within which the customer m ay repay charges, late payment charges, or other charges, any portion of the new balance without incurring the creditor shall adjust the customer’s account so an additional finance charge, late payment charge, that the finance charges, late payment charges, or or other charge, a creditor may credit such p ay other charges are credited to the account during ment promptly (in no case later than 5 days from the customer’s next billing cycle. the date of receipt) until October 28, 1976. (2) F o r the purposes of paragraph (g) of this (h) Crediting and refunding excess payments. section the creditor may specify on the periodic (1) Whenever a customer mails or delivers pay statement or on accompanying material that need ment to the creditor in excess of the new balfinance charge by the am ount financed and multi plying the quotient (expressed as a percentage) by REGULATION Z ance (as provided in § 226.7(b)(l)(ix)) to which the payment is to be applied, the creditor shall: (i) Credit the customer’s account with the total amount of the payment as specified in p ara graph (g) of this section, or (ii) Credit the customer’s account with an am ount equal to the total new balance as speci fied in paragraph (g) of this section and promptly (in no case later than 5 business days from the creditor’s receipt of the payment) refund the excess amount. (2) Notwithstanding the provisions of p ara graph (h)(1) of this section, if the customer re quests in writing a refund of any excess payments, a creditor shall refund any such excess payments, of $1 or more, promptly (in no case later than 5 business days from receipt of the customer’s request). (3) After crediting a customer’s account with the total am ount of a payment under paragraph (h)(l)(i) of this section, a creditor may refund any excess payment o f any amount, whether or not requested by the customer. (i) Open end credit accounts existing on Oc tober 28, 1975. In the case of any open end credit account in existence and in which a balance of more than $1 is outstanding at or after the closing date of the creditor’s first full billing cycle after October 28, 1975, and which account is deemed to be collectible and with respect to which delin quency collection procedures have not been insti tuted, the items described in paragraph (a) of this section, to the extent applicable and not previ ously required to be disclosed to the customer, shall be disclosed in the form prescribed in p ara graph (a) of this section, and mailed or delivered to the customer not later than the time of mailing or delivery of the periodic statement required under paragraph (b) of this section for that billing cycle. * (j) Supplemental credit devices for use in open end credit accounts. If, subsequent to 30 days after delivering the disclosures required under paragraph (a) of this section, a creditor of an open end credit account mails or delivers, other than as a renewal o r resupply, a blank check, payee designated check, blank draft or order or other similar credit device other than a credit card, to an existing customer or cardholder * Added 1 /1 /7 6 . § 226.7 for use in connection with such account, such device shalf be accompanied by a single written statement setting forth clearly and conspicuously those disclosures of paragraph (a) of this section which specifically relate to the use of such device. Such disclosure statement shall either be limited to the disclosures of paragraphs (a)(1), (2), (3), and (4) of this section or contain all disclosures required of such paragraph with the pertinent disclosures clearly and conspicuously referenced on or accompanying that disclosure statement. Such disclosure statement shall not appear on any promotional material mailed or delivered at the same time. T he requirements of this paragraph shall not be applicable to checks to be used in conjunction with a checking account even though such checks may also activate a cash advance under an open end credit account. ** (k) Identification of transactions. (1) Each ex tension of credit for which an actual copy of the document evidencing the credit transaction (which does not include a so-called “facsimile d raft”) accompanies the periodic statement on which the transaction is first reflected shall be identified by disclosing on the periodic statement, o r on accom panying statement(s) or document(s), the am ount of the transaction and, at the creditor’s option, either the date of the transaction o r the date the transaction is debited to the customer’s account. (2) Each extension of credit for which an actual copy of the document evidencing the credit trans action does not accompany the periodic statement shall be identified by disclosing on or with the periodic statement on which that credit transac tion is first reflected at least: (i) F o r transactions in which the creditor and the seller are the same person or related persons,9b the am ount of the transaction, the date on which ”b For purposes of § 226.7(k) a person is not related to the creditor simply because the person and the creditor have an agreement or contract pursuant to which the person is authorized to honor the creditor's credit card under the terms specified in the agreement or con tract. Franchised or licensed sellers of a creditor's product shall be considered to be related to the creditor for pur poses of § 226.7(k). Sellers who assign or sell open end customer sales accounts to a creditor or arrange for such credit under an open end credit plan which allows the customer to use the credit only in transactions with that seller shall be considered related to the creditor for purposes of § 226.7(k). ** Added 8/27/76. § 226.7 REGULATION Z the transaction took place,90 and a brief identifica (ii) A description of the transaction, which tion9'1 of any property or services purchased or an characterizes it as a cash advance, loan, overdraft identifying num ber or symbol reasonably unique loan, or other designation as appropriate, and for that transaction with that creditor which ap which includes the amount of the transaction and pears on the docum ent evidencing the transaction the date of the transaction90 or the date which given to the customer; provided, that, if the cred appears on the document or instrument evidencing the transaction (if the customer signed the docu itor discloses such an identifying num ber or sym bol, the absence of the identification of the ment or instrument). property or services otherwise required must be (4) If, despite the maintenance of procedures treated as a billing error under §§ 226.2(j) and reasonably adapted to procure the information 226.14 and as an erroneous billing under § 226.14 required by §§ 226.7(k)(l), (2), and (3) such infor (b) if the customer submits a proper written notice mation is unavailable to the creditor, the date of of a billing error relating to such absence, and debiting the amount to the account shall be sub stituted for the date otherwise required (except the creditor must provide documentary evidence that the date of debiting need not be provided if of the transaction to the customer free of charge an actual copy of the document evidencing the whether or not the customer requests it. (ii) F o r transactions in which the seller and transaction is provided with the periodic state ment) and the creditor shall disclose as much of the creditor are not the same person or related the other required information as is available and persons, the amount of the transaction, the date omit any information which is not available, pro on which the transaction took place, and the vided, that, if the customer submits a proper seller’s name and the address (city and State or written notification of a billing error relating to foreign country, using understandable and gen the absence of the primarily required date or erally accepted abbreviations if the creditor de other information, such absence shall be treated sires) where the transaction took place. (3) Notwithstanding the provisions of §§ 226.7 as a billing error under §§ 226.2(j) and 226.14 and as an erroneous billing under § 226.14(b) (k)(l) and 226.7(k)(2), transactions involving and, unless previously furnished with a periodic nonsale credit, such as a cash advance or an over statement, docum entary evidence of the trans draft or other checking plan transactions, shall be action must be furnished whether or not the cus identified on or with the periodic statement upon which the transaction is first reflected by p ro tomer requests it, within the time period allowed viding at least: in § 226.14 for resolution of a billing error, with (i) A n actual copy of the document evidenc charge to the customer. out ing the transaction which shows the amount of (5) In any case in which a transaction occurs the transaction and either the date of the trans other than in a State: (i) The creditor may disclose the date of action, the date the transaction was debited to the customer’s account, or the date placed on debiting the amount of the transaction to the the document or instrument by the customer (if open end credit account in place of any other date the customer signed the document or instrument); required elsewhere in § 226.7(k); and or (ii) The provisions of § 226.7(k)(4) shall ap ply and the creditor need not maintain procedures reasonably adapted to procure the information 90 With respect to transactions which are not billed in otherwise required by § 226.7(k). full on any single statement but for which precomputed instalments are billed periodically, the date the transac (6) In complying with the disclosure require tion takes place for purposes of § 226.7(k) shall be ments of §§ 226.7(k )(l), (2), (3), or (4): deemed to be the date on which the amount is debited to the customer’s account. (i) The creditor may rely upon and disclose " For purposes of § 226.7(k), designations such as d the information supplied by the seller with respect “merchandise” or “miscellaneous” shall not be considered sufficient identification of property or services, but a reference to a department in a sales establishment which accurately conveys the identification of the type(s) of property or services which are available in such depart ment shall be sufficient under this paragraph. Identifica tion may be made on an accompanying slip or by symbol relating to an identification list printed on the statement. In cases in which an amount is debited to a cus tomer’s open end credit account under an overdraft check ing plan, the date of debiting the open end credit account shall be considered the date of the transaction for pur poses of this paragraph. R E G U L A T IO N Z to the date and amount of transactions for which the creditor and the seller are not the same person or related persons. (ii) With regard to disclosing the seller’s ad dress where the transaction took place for pu r poses of § 226.7(k)(2)(ii), the creditor may omit the address or provide an address or other suit able designation which, in the creditor’s opinion, will assist the customer in identifying the trans action or in relating the transaction, as reflected, to a document(s) evidencing the transaction pre viously furnished when no meaningful address is readily available because the transaction took place at a location which is not fixed (for example, aboard a public conveyance), or in the customer’s hom e (in which case “customer’s hom e” or a sim ilar description is sufficient) or because the trans action was the result of a mail or telephone order (in which case “telephone order,” “mail order,” or similar description is sufficient); provided that any such disclosure made or omitted shall not be for the purpose of circumvention or evasion of this Part. (iii) With regard to disclosing the seller’s name for purposes of § 226.7(k)(2)(ii), disclosure of a seller’s name which appears on the document evidencing the transaction (or a more complete spelling of such a name if the nam e is alphabeti cally abbreviated on the document evidencing the transaction) is sufficient for purposes of § 226.7 (k)(2)(ii). (7)(i) As an alternative to the provisions of §§ 226.7(k)(l) through 226.7(k)(5), from Octo ber 28, 1976, until October 28, 1977: (A ) the creditor may disclose the date of debiting the am ount of the transaction to the customer’s account for the date of the transaction or the date placed on the document evidencing a credit tran s action if, due to operational limitations, either such date is unavailable to the creditor for pu r poses of billing; and the creditor may disclose an identifying num ber or symbol which appears on the document evidencing the credit transaction given to or used by the customer at the time of or in connection with the credit transaction in place of the seller’s name and address or description of the property or services purchased if, due to op erational limitations, such information is unavail able to the creditor for purposes of billing; or (B) the creditor may identify the transaction by dis closing such information as is reasonably available and treating the absence of the information re § 226.8 quired by §§ 226.7(k)(l), (2), o r (3), as applicable, as a billing error, as provided in §§ 226.2(j) and 226.14. If a customer submits a proper written notification of a billing error relating to the absence of such information and the information was, in fact, not disclosed as required by §§ 226.7 (k)(l), (2), o r (3), as applicable, the transaction shall be treated as an erroneous billing under § 226.14(b) and docum entary evidence of the transaction must be furnished w hether or not the customer requests it (despite the provisions of §§ 226.2(j) and 226.14(a)(2)), within the time period allowed in § 226.14 fo r resolution of a billing error, without charge to the customer. (ii) T h e effective date of §§ 226.7(k)(l) through 226.7(k)(7)(i), inclusive, is October 28, 1976. Until October 28, 1976, the creditor shall disclose the date of each extension of credit or the date such extension of credit is debited to the account during the billing cycle, the am ount of such extension of credit and, unless previously furnished, a brief identification9' of any goods or services purchased or the extension of credit. SEC TIO N 226.8— C R E D IT O T H E R T H A N O P E N E N D — S PE C IFIC DISCLOSURES *(a) General rule. Any creditor when extend ing credit other than open end credit shall, in accordance with § 226.6 and to the extent applicable, make the disclosures required by this section with respect to any transaction consum mated on or after July 1, 1969. Except as other wise provided in this section, such disclosures shall be made before the transaction is consummated. At the time disclosures are made, the creditor shall furnish the customer with a duplicate o f the instrument or a statement by which the required disclosures are made and on which the creditor is identified. All of the disclosures shall be made together on either (1 ) T he note or other instrum ent evidencing the obligation on the same side of the page and above or adjacent to the place for the customer’s signature; or ”r Identification may be made on an accompanying slip or by symbol relating to an identification list printed on the statement. * Amended 1/21/76. § 226.8 (2) One side of a separate statement which identifies the transaction. (b) Disclosures in sale and nonsale credit. In any transaction subject to this section, the follow ing items, as applicable, shall be disclosed: (1 ) The date on which the finance charge be gins to accrue if different from the date of the transaction. (2 ) T he finance charge expressed as an annual percentage rate, using the term “ annual percent age rate,” except in the case of a finance charge (i) which does not exceed $5 and is appli cable to an am ount financed not exceeding $75, or (ii) which does not exceed $7.50 and is ap plicable to an am ount financed exceeding $75. A creditor may not divide an extension of credit into two or more transactions to avoid the disclo sure of an annual percentage rate, nor m ay any other percentage rate be disclosed if none is stated in reliance upon subdivisions (i) or (ii) of this subparagraph. (3) The number, amount, and due dates or periods of payments scheduled to repay the in debtedness and, except in the case of a loan se cured by a first lien or equivalent security interest on a dwelling made to finance the purchase of that dwelling and except in the case of a sale of a dwelling, the sum of such payments using the term “total of payments.” 10 If any payment is more than twice the am ount of an otherwise reg ularly scheduled equal payment, the creditor shall identify the am ount of such paym ent by the term “ balloon paym ent” and shall state the conditions, if any, under which that paym ent may be refi nanced if not paid when due. (4 ) T he amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments. (5 ) A description or identification of the type of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates or, if such property is not identifiable, an expla 10 T he disclosures required by this sentence need not be m ad e with respect to interim student loans m ade pur suant to federally insured student loan program s under Public Law 89-329, Title IV Part B of the Higher E d u cation Act of 1965, as amended. REGULATION Z nation of the m anner in which the creditor retains or may acquire a security interest in such prop erty which the creditor is unable to identify. In any such case where a clear identification of such property cannot properly be made on the disclo sure statement due to the length of such identifi cation, the note, other instrument evidencing the obligation, or separate disclosure statement shall contain reference to a separate pledge agreement, or a financing statement, mortgage, deed of trust, or similar document evidencing the security inter est, a copy of which shall be furnished to the customer by the creditor as promptly as practic able. If after-acquired property will be subject to the security interest, dr if other or future indebt edness is or may be secured by any such prop erty, this fact shall be clearly set forth in con junction with the description or identification of the type of security interest held, retained or ac quired. (6 ) A description of any penalty charge that may be imposed by the creditor or his assignee for prepayment of the principal of the obligation (such as a real estate mortgage) with an explana tion of the method of computation of such pen alty and the conditions under which it may be imposed. (7) Identification of the method of com put ing any unearned portion of the finance charge in the event of prepayment in full of an obligation which includes precomputed finance charges and a statement of the am ount or method of com pu tation of any charge that may be deducted from the am ount of any rebate of such unearned finance charge that will be credited to an obliga tion o r refunded to the customer. If the credit contract does not provide for any rebate of u n earned finance charges upon prepayment in full, this fact shall be disclosed. (c) Credit sales. In the case of a credit sale, in addition to the items required to be disclosed under paragraph (b ) of this section, the follow ing items, as applicable, shall be disclosed: ( I ) The cash price of the property or service purchased, using the term “cash price.” (2) T he am ount of the downpayment item ized, as applicable, as downpayment in money, using the term “cash dow npayment,” downpay ment in property, using the term “trade-in,” and the sum, using the term “total downpayment.” (3 ) The difference between the amounts de scribed in subparagraphs (1 ) and (2 ) of this REGULATION Z § 226.8 paragraph, using the term “unpaid balance of ** (3) Except in the case of a loan secured by a cash price.” first lien or equivalent security interest on a (4 ) All other charges, individually itemized, dwelling and made to finance the purchase of which are included in the am ount financed but that dwelling, the total am ount of the finance which are not part of the finance charge. charge,11 using the term “finance charge,” and where the total charge consists of two or more (5) T h e sum of the amounts determined types of charges, a description of the am ount of under subparagraphs (3) and (4) of this para graph, using the term “unpaid balance.” each type. e) Finance charge payable separately or with (6) Any amounts required to be deducted held; required deposit balances. The following under paragraph (e) of this section using, as ap amounts shall be disclosed and deducted in a plicable, the terms “prepaid finance charge” and credit sale in accordance with paragraph (c)(6) “required deposit balance,” and, if both are appli of this section, and in other extensions of credit cable, the total of such items using the term shall be excluded from the am ount disclosed “total prepaid finance charge and required de under paragraph (d)(1) of this section, and shall posit balance.” be disclosed in accordance with paragraph (d)(2) (7 ) The difference between the amounts deter mined under subparagraphs (5 ) and (6) of this of this section: (1) Any finance charge paid separately, in paragraph, using the term “am ount financed.” cash or otherwise, directly or indirectly to the (8) Except in the case of a sale of a dwelling: creditor or with the creditor’s knowledge to a n *(i) The total am ount of the finance charge, other person, or withheld by the creditor from using the term “finance charge,” and where the the proceeds of the credit extended.12 total charge consists of two or more types of (2) Any deposit balance or any investment charges, a description of the am ount of each type, and which the creditor requires the customer to make, (ii) The sum of the amounts determinedmaintain, or increase in a specified amount or proportion as a condition to the extension of under subparagraphs (1), (4), and (8)(i) of this credit except: paragraph, using the term “deferred payment (i) An escrow account under paragraph price.” (d) L o a n s and oth er n o n sa le credit. In the (e)(3) of § 226.4, (ii) A deposit balance which will be wholly case of a loan or extension of credit which is not applied toward satisfaction of the customer’s obli a credit sale, in addition to the items required to gation in the transaction, be disclosed under paragraph (b) of this section, (iii) A deposit balance or investment which the following items, as applicable, shall be dis was in existence prior to the extension of credit closed: and which is offered by the customer as security (1 ) The am ount of credit, excluding items set for that extension of credit, and forth in paragraph (e) of this section, which will (iv) A deposit balance or investment which be paid to the customer or for his account or to was acquired or established from the proceeds of another person on his behalf, including all an extension of credit made for that purpose upon charges, individually itemized, which are included written request of the customer. in the am ount of credit extended but which are (f) First lien to finance construction of dwell not part of the finance charge, using the term ing. In any case where a first lien or equivalent “am ount financed.” security interest in real property is retained or ac(2 ) Any am ount referred to in paragraph (e) of this section required to be excluded from the am ount in subparagraph (1) of this paragraph, using, as applicable, the terms “prepaid finance " The disclosure required by this subparagraph need charge” and “required deposit balance,” and, if not be m ade with respect to interim student loans made pu rsu ant to federally insured student loan program s both are applicable, the total of such items using under Public Law 89-329, Title IV Part B of the Higher the term “ total prepaid finance charge and re Education Act o f 1965, as amended. quired deposit balance.” 1 Finance charges deducted or excluded as provided by 2 * A m ended 8 /6 /7 6 . this parag rap h shall, nevertheless, be included in deter mining the finance charge under § 226.4. § 226.8 quired by a creditor in connection with the financing of the initial construction of a dwelling, or in connection with a loan to satisfy that con struction loan and provide perm anent financing of that dwelling, whether or not the customer previously owned the land on which that dwelling is to be constructed, such security interest shall be considered a first lien against that dwelling to finance the purchase of that dwelling. (g) Orders by mail or telephone. If a creditor receives a purchase order or a request for an ex tension of credit by mail, telephone, or written communication without personal solicitation, the disclosures required under this section may be made any time not later than the date the first payment is due, provided: (1) In the case of credit sales, the cash price, the downpayment, the finance charge, the de ferred payment price, the annual percentage rate, and the number, frequency, and am ount of pay ments are set forth in or are determinable from the creditor’s catalog or other printed material distributed to the public; or (2) In the case of loans or other extensions of credit, the amount of the loan, the finance charge, the total scheduled payments, the n u m ber, frequency, and amount of payments, and the annual percentage rate for representative amounts or ranges of credit are set forth in or are deter minable from the creditor’s printed material dis tributed to the public, in the contract of loan, or in other printed material delivered or made avail able to the customer. (h ) Series of sales. If a credit sale is one of a series of transactions made pursuant to an agree ment providing for the addition of the amount financed plus the finance charge for the current sale to an existing outstanding balance, then the disclosures required under this section for the current sale may be made at any time not later than the date the first payment for that sale is due, provided: (1) T he customer has approved in writing both the annual percentage rate or rates and the method of treating any unearned finance charge on an existing outstanding balance in computing the finance charge or charges; and (2 ) T he creditor retains no security interest in any property as to which he has received pay ments aggregating the am ount of the sale price including any finance charges attributable thereto. REGULATION Z F o r the purposes of this subparagraph, in the case of items purchased on different dates, the first purchased shall be deemed first paid for, and in the case of items purchased on the same date, the lowest priced shall be deemed first paid for. (i) Advances under loan commitments. If a loan is one of a series of advances made p u r suant to a written agreement under which a cred itor is or may be committed to extend credit to a customer up to a specified amount, and the cus tomer has approved in writing the annual p er centage rate or rates, the method of computing the finance charge or charges, and any other terms, the agreement shall be considered a single trans action, and the disclosures required under this section at the creditor’s option need be made only at the time the agreement is executed. (j) Refinancing, consolidating, or increasing. If any existing extension of credit is refinanced, or two or more existing extensions of credit are con solidated, or an existing obligation is increased, such transaction shall be considered a new trans action subject to the disclosure requirements of this Part. F o r the purpose of such disclosure, any unearned portion of the finance charge which is not credited to the existing obligation shall be added to the new finance charge and shall not be included in the new amount financed. Any in crease in an existing obligation to reimburse the creditor for undertaking the customer’s obligation in perfecting, protecting or preserving the secu rity shall not be considered a new transaction subject to this Part. Any advance for agricultural purposes made under an open end real estate mortgage or similar lien shall not be considered a new transaction subject to the disclosure require ments of this section, provided: (1 ) The maturity of the advance does not ex ceed 2 years; (2 ) N o increase is made in the annual per centage rate previously disclosed; and (3 ) All disclosures required by this P art were made at the time the security interest was ac quired by the creditor or at any time prior to the first advance made on or following the effective date of this Part. (k) Assumption of an obligation. Any creditor who accepts a subsequent customer as an obligor under an existing obligation shall make the dis closures required by this Part to that customer before he becomes so obligated. If the obligation REGULATION Z § 226.8 so assumed is secured by a first lien or equivalent security interest on a dwelling, and the assump tion is made for the subsequent customer to ac quire that dwelling, that obligation shall be con sidered a loan made to finance the purchase of that dwelling. (1) Deferrals or extensions. In the case o f an obligation other than an obligation upon which the amount of the finance charge is determined by the application of a percentage rate to the un paid balance, if the creditor imposes a charge or fee for deferral o r extension, the creditor shall disclose to the customer (1 ) The am ount deferred or extended; (2 ) The date to which, or the time period for which payment is deferred or extended; and (3) The amount of the charge or fee for the deferral or extension. (m ) Series of single payment obligations. Any extension of credit involving a series of single payment obligations shall be considered a single transaction subject to the disclosure requirements of this Part. (n ) Periodic statements. (1) If a creditor transmits a periodic billing s ta te m e n t13 other than a delinquency notice, payment coupon book, or payment passbook, or a statement, billing, or ad vice relating exclusively to amounts to be paid by the customer as escrows for payment of taxes, insurance, and water, sewer, and land rents, it shall be in a form which the customer may retain and shall set f o r th : (i) The annual percentage rate or rates u n less exempted by § 226.8(b)(2), and (ii) The date by which, or the period, if any, within which payment must be made in order to avoid late payment or delinquency charges. (2) If the creditor is required to send a pe riodic statement under paragraph (q) of this sec tion, the requirements of § 226.7(b)(l)(i), (ii), (iii), (ix), and (x), and § 226.7(b)(2) shall be met, as applicable, in addition to the disclosures required by this paragraph. (o) Discount for prompt payment of sales transactions. (1) F or the purposes of this para graph, a “transaction subject to § 226.8(o)’’ is a credit sale transaction which is not exempt under § 226.3 and which is subject to a discount for payment on or before a specified date (e.g., 2 % discount if paid within 10 days) or to a charge for delaying payment after a specified date (e.g. $98 cash, $100 if paid in 30 days). Both such a discount and such a charge are referred to in this paragraph as a “discount.” In the case of any transaction subject to § 226.8(o), notwithstanding the provisions of the last sentence of paragraph (a) of this section, the creditor shall disclose on the invoice or other evidence of such sale, as ap plicable: (i) The date of the sale or invoice. (ii) The rate of discount, the date by which o r period within which the discount may be taken, and the date by which or period within which the full am ount of the obligation is due and payable. (For example, “2 % / 1 0 days, net 30 days” ; or “$1 per t o n / 10 days, net 30 days.” ) (iii) The information required under § 226.8 (b)(4) and (5). (iv) T he amount of the discount, designated as a “finance charge,” using that term. (v) If the discount shown for prompt pay ment exceeds 5% of the obligation to which the discount relates, the “annual percentage rate,” using that term, computed in accordance with subparagraph (2 ) of this paragraph, but subject to the exceptions provided under § 226.8(b)(2). (2 ) For the purposes of subparagraph (l)(v) of this paragraph, the annual percentage rate shall be determined by dividing the am ount of the finance charge by the least amount payable in satisfaction of the obligation and multiplying the quotient (expressed as a percentage) by a fra c tion in which the num erator is 12, and the de nominator is the number of whole months (but not less than 1) between the first day of the monthly billing cycle in which the transaction is consummated and the first day of the monthly billing cycle in which the obligation becomes due.13a 13 Any statement, notice, or reminder of paym ent due o n any transaction payable in instalments which is mailed o r delivered periodically to the customer in a d vance o f the due dale of the instalment shall be a pe riodic billing statem ent for the purpose of this para graph. l:'“ F o r example, a $1,000 purchase o f feed subject to terms o f 6 % / 1 0 days, net 30 days (o r 6 % / 1 0 days, net E.O.M.; or 6 % / 1 0 days, net 10th of the following m onth; or 6 % / 2 0 days, net 30 days; or 6 % / 3 0 days, net 30 days; o r 6% discount for cash, net 30 days) results (Continued on page 28) REGULATION Z § 2 2 6 .8 (3) In a transaction with multiple discount rates (e.g., 6 % / 1 0 days, 4 % / 2 0 days, net 30 days), the largest discount shall be used for purposes of disclosing the am ount of the finance charge under subparagraph (1 ) (iv) of this para graph and the annual percentage rate under sub paragraph (1) ( v) of this paragraph.131’ (4 ) In order to determine the applicability of subparagraph (1) (v) of this paragraph and to facilitate disclosure of an annual percentage rate, if the amount of the discount for prompt payment is related, pursuant to usual business practice, to weight, quantity, or other physical measure (e.g., $1 per ton or 10 per gallon) rather than ex pressed as a percentage of discount, that discount may be converted to an approximate discount rate and, under subparagraph (2 ) of this para graph, a reasonably accurate approximation of the annual percentage rate by using approximate or projected prices per physical unit determined on the basis of past experience, current inform a tion, or projected analysis.131 (5) If by its terms a transaction subject to § 226.8(o) is payable in a single payment and no finance charge other than a discount is or may be imposed, and such discount is not utilized for the purpose of circumvention or evasion of disclosure requirements, the disclosure required by subpara graph (1 ) of this paragraph shall constitute co m pliance with the requirements of § 226.8 and under § 226.9(a) shall constitute “all other m ate rial disclosures required under this P art.” (6) If a transaction subject to § 226.8 (o ) is debited to an open end credit account, disclosures shall be made as specified in paragraph (1 ) of in a finance charge of $60, a least am o u n t payable of $940, and an annual percentage rate of 76.56%, which may be rou n d ed to 76.50% or 76Vi% . T erm s of 6 % / 2 0 days, net Septem ber 29 applied to an April purchase, as suming a calendar m onth billing cycle, result in an a n nual percentage rate of 15.31% (i.e., 6 /9 4 X 12/5) which may be rounded to 15.25% or 1514%. In this example the 29 days in Septem ber are ignored and the den o m ina tor (5) is determined by the num ber of whole m onths in the period. F o r example, terms of 6 % / 1 0 days, 4 % / 2 0 days, net 30 days would be treated like terms o f 6 % / 1 0 days, net 30 days, which would represent an annual percentage rate of 76'/2%. 1JC F o r example, if terms of $3 discount per ton./10 days, net 30 days are oll'ered on fertilizer that is ex pected to sell in a range o f about $48 to $52 per ton, the annual percentage rate could be approxim ated for preprinting as if it were 6% (i.e., $3 on $50)/10 days, net 30 days, that is, 7614%. this section and also as specified in § 226.7. The full amount of the obligation including the amount of the discount may be debited to the open end credit account, under § 226.7(b)(l)(ii), and the am ount of any finance charge representing the discount need not be added to any other finance charge for the purpose of computing and disclos ing the total amount of finance charge and the annual percentage rate under § 226.5(a) and § 226.7.1M (7) If a transaction subject to § 226.8(o) is not debited to an open end credit account, but either is subject to an additional finance charge or is payable by its terms in more than one payment, disclosures shall be made as specified in subpara graph (1) of this paragraph and also as specified in paragraphs (b) and (c) of this section. In such a case, if the transaction is payable in more than one payment, the amount of the discount shall be deducted for the purpose of computing and dis closing the cash price under paragraph (c)(1) of this section and shall be added to any other finance charge for the purpose of computing and dis closing the am ount of the finance charge under paragraph (c)(8)(i) of this section and the annual percentage rate under paragraph (b)(2) of this sec tion.131 If the transaction is payable in a single payment, the discount may be disregarded in co m puting and disclosing such cash price, finance charge, and annual percentage rate.1,r (8) Notwithstanding the provisions of the sec ond sentence of paragraph (a) of this section, the disclosures required under subparagraph (1) of this paragraph made on the invoice or other evi dence of the sale may be delivered subsequent to consummation of the transaction. (9) Amended paragraph (o) of § 226.8 shall 1 i F o r e x a m p le , if a $1,000 s ale o n t e r m s o f 2 % / 1 0 ::< da y s, net 30 day s, is d e b ite d to a n o p e n e n d a c c o u n t o n w hic h 1 % p e r m o n t h is c h a r g e d , the p e r io d ic s t a t e m e n t u n d e r § 2 2 6 . 7 ( b ) ( a s s u m i n g n o o t h e r t r a n s a c tio n s in the a c c o u n t ) w o u ld s h o w a p re v io u s b a l a n c e o f $1,000, a fin a n c e c h a r g e o f $10, a n d a n a n n u a l p e rc e n t a g e ra te o f 12% . ,:l*'F o r e x a m p le , if a $1,000 sale on t e r m s o f 2 % / 1 0 da y s, n e t 30 d a y s is s u b je c t to a n a d d - o n fina n c e c h a r g e o f $1 00 a n d is p a y a b l e in in s ta lm e n ts, the d is clo su re s u n d e r § 2 2 6 . 8 ( b ) a n d ( c ) w o u ld i n c lu d e a cash pric e o f $ 9 8 0 a n d a fin a n c e c h a r g e o f $120. 1 1 F o r e x a m p le , if a $1, 000 s ale o n A u g u s t 2 n o t :1 u n d e r a n o p e n e n d a c c o u n t is su bjec t to te rm s o f 2 % / 1 0 d ay s, net 30 days, t h e r e a f te r 8 % per a n n u m until D e c e m b e r 1, the d is c lo su re s u n d e r § 2 2 6 . 8 ( b ) a n d ( c ) w o u ld in c lu d e a c a s h pric e o f $1,000, a fin a n c e c h a r g e of $19.95, a n d a n a n n u a l p e rc e n t a g e ra te o f 8 .0 0 % . REGULATION Z become effective August 11, 1969, but until March 1, 1970, any creditor may at his option use any printed forms which were prepared before such effective date in accordance with paragraph (o) of § 226.8 in effect at the time of such preparation. (p) Agricultural credit— information not de terminable. (1 ) In any transaction subject to this section, if the am ount or date of any advance or payment in connection with an extension of credit for agricultural purposes under a written agree ment is to be determined by production, seasonal needs, or similar operational factors, and is not determinable at the time of execution of the agreement, disclosures may be made at the creditor's option in accordance with this p ara graph, provided the use of this paragraph is not for the purpose of circumvention or evasion of this Part. (2) If a creditor elects to make disclosures under this paragraph, he shall disclose the follow ing items in accordance with § 226.8(a), which shall constitute compliance with the requirements of § 226.8, and under § 226.9(a) shall constitute “all other material disclosures required under this Part": (i) The method of computing the amount of the finance charge including an identification of each component thereof in accordance with § 226.4; (ii) Any item required to be disclosed under § 226.8(b)(3) which is determinable at the time the disclosures are required to be made under this paragraph; (iii) The disclosures, as applicable, required under § 226.8(b)(4), (5), (6), and (7) and the items described in § 226.8(e)(1) and (2); and (iv) The disclosures, as applicable, required under § 226.8(o)(l), (2), (3), (4), (5), (8), and (9). (3) Disclosures made pursuant to subparagraph (2)(i), (ii), and (iii) of this paragraph need be made only on the agreement or on a separate statement as specified in § 226.8(a). (4) If a creditor making disclosures pursuant to this paragraph transmits a periodic billing state ment of the type described in paragraph (n) of § 226.8, such statement shall be in a form which the customer may retain and shall set forth the date by which, or the period, if any, within which payment must be made in order to avoid late payment or delinquency charges. (q) Credit card accounts. In addition to the requirements of this section, consumer credit other § 2 2 6 .9 than open end which is extended on an account by use of a credit card shall also be subject to the requirements of §§ 226.7(a)(6), (7), (8), and (9); 226.7(b)(l)(i), (ii), (iii), (ix), and (x); 226.7(b)(2); 226.7(c), (d), (g), (h), and (i); 226.13(i), (j), and (k); and 226.14. SECTIO N 226.9— R IG H T TO RESCIND C E R T A IN TR A N SA C T IO N S (a) General rule. Except as otherwise p ro vided in this section, in the case of any credit transaction in which a security interest is or will be retained or acquired in any real property which is used or is expected to be used as the principal residence of the customer, the customer shall have the right to rescind that transaction until midnight of the third business d a y 14 follow ing the date of consummation of that transaction or the date of delivery of the disclosures required under this section and all other material disclo sures required under this Part, whichever is later, by notifying the creditor by mail, telegram, or other writing of his intention to do so. Notifica tion by mail shall be considered given at the time mailed; notification by telegram shall be consid ered given at the time filed for transmission; and notification by other writing shall be considered given at the time delivered to the creditor’s desig nated place of business. (b) Notice of opportunity to rescind. W hen ever a customer has the right to rescind a trans action under paragraph (a) of this section, the creditor shall give notice of that fact to the cus tomer by furnishing the customer with two copies of the notice set out below, one of which may be used by the customer to cancel the transaction. Such notice shall be printed in capital and lower case letters of not less than 12 point bold-faced type on one side of a separate statement which identifies the transaction to which it relates. Such statement shall also set forth the entire paragraph (d) of this section, “Effect of rescission.” If such paragraph appears on the reverse side of the " F o r the purpose o f this section, a business day is any calendar day except Sunday and those legal public holidays specified in Section 61 0 3 (a) o f Title 5 of the U nited States C od e (N ew Y ear’s Day, W ashington’s Birthday, M em orial D ay, Independence Day, L ab o r Day, C olum bus Day, Veterans Day, Thanksgiving D ay and Christm as D ay ). § 226.9 statement, the face of the statement shall state: “See reverse side for im portant information about your right of rescission.” Before furnishing copies of the notice to the customer, the creditor shall complete both copies with the name of the credi tor, the address of the creditor’s place of business, the date of consummation of the transaction, and the date, not earlier than the third business day following the date of the transaction, by which the customer may give notice of cancellation. W here the real property on which the security interest may arise does not include a dwelling, the creditor may substitute the words “the p rop erty you are purchasing” for “your home,” or “lot” for “home,” where these words appear in the notice. REGULATION Z ing actions until after the rescission period has expired and he has reasonably satisfied himself that the customer has not exercised his right of rescission: (1) Disburse any money other than in escrow; (2) Make any physical changes in the prop erty of the customer; (3 ) Perform any work or service for the cus tomer; or (4 ) Make any deliveries to the residence of the customer if the creditor has retained or will acquire a security interest other than one arising by operation of law. (d ) Effect of rescission. When a customer ex ercises his right to rescind under paragraph (a) of this section, he is not liable for any finance or other charge, and any security interest becomes Notice to customer required by Federal law: void upon such a rescission. Within 10 days after You have entered into a transaction on receipt of a notice of rescission, the creditor shall _______(date) which may result in a lien, return to the customer any money or property mortgage, or other security interest on your home. given as earnest money, downpayment, or other You have a legal right under Federal law to can wise, and shall take any action necessary or ap cel this transaction, if you desire to do so, without propriate to reflect the termination of any secu any penalty or obligation within three business rity interest created under the transaction. If the days from the above date or any later date on creditor has delivered any property to the cus which all material disclosures required under the tomer, the customer may retain possession of it. Truth in Lending Act have been given to you. Upon the performance of the creditor’s obliga If you so cancel the transaction, any lien, mort tions under this section, the customer shall tender gage, or other security interest on your home the property to the creditor, except that if return arising from this transaction is automatically void. of the property in kind would be impracticable or You are also entitled to receive a refund of any inequitable, the customer shall tender its reasona downpayment or other consideration if you can ble value. Tender shall be made at the location cel. If you decide to cancel this transaction, you of the property or at the residence of the cus may do so by notifying tomer, at the option of the customer. If the credi (Name of creditor) tor does not take possession of the property within 10 days after tender by the customer, at (Address of creditor’s place of business) by ownership of the property vests in the customer mail or telegram sent not later than midnight of without obligation on his part to pay for it. __ (date) . You may also use any (e) Waiver of right of rescission. A customer other form of written notice identifying the trans may modify or waive his right to rescind a trans action if it is delivered to the above address not action subject to the provisions of this section later than that time. This notice may be used for provided: that purpose by dating and signing below. I hereby cancel this transaction. (1 ) The extension of credit is needed in order to meet a bona fide immediate personal financial (date) (customer’s signature) emergency of the customer; (c) Delay of performance. Except as pro (2 ) The customer has determined that a delay vided in paragraph (e) of this section, the credi of 3 business days in performance of the credi tor in any transaction subject to this section, tor’s obligation under the transaction will jeop other than an extension of credit primarily for ardize the welfare, health or safety of natural agricultural purposes, shall not perform, or cause persons or endanger property which the customer or permit the performance of, any of the follow owns or for which he is responsible; and REGULATION Z § 226.10 (3) The customer furnishes the creditor with a (5) Any transaction in which an agency of a separate dated and signed personal statement de State is the creditor. scribing the situation requiring immediate remedy (h) Time limit for unexpired right of rescis and modifying or waiving his right of rescission. sion. In the event the creditor fails to deliver to The use of printed forms for this purpose is pro the customer the disclosures required by this sec hibited. tion or the other material disclosures required by (f) Joint ownership. F or the purpose of this this Part, a customer’s right to rescind a transac section, “custom er” shall include two or more tion pursuant to this section shall expire the ear customers where joint ownership is involved, and lier of (1) three years after the date of consum the following shall apply: mation of the transaction, or (2) the date the (1) The right of rescission of the transaction customer transfers all his interest, both equitable may be exercised by any one of them, in which and legal, in the property. case the effect of rescission in accordance with paragraph (d) of this section applies to all of SEC TIO N 226.10— A D V E R T ISIN G them; and C R E D IT A N D LEASE T E R M S (2) Any waiver of the right of rescission pro vided in paragraph (e) of this section is invalid * (a) General rule. unless signed by all of them. (1) N o advertisement to aid, promote, or as (g) Exceptions to general rule. This section sist directly or indirectly any extension of credit does not apply to: may state (1) The creation, retention, or assumption of (i) T hat a specific amount of credit or in a first lien or equivalent security interest to stalment amount can be arranged unless the cred finance the acquisition of a dwelling in which the itor usually and customarily arranges or will customer resides or expects to reside. arrange credit amounts or instalments for that (2 ) A security interest which is a first lien re period and in that amount; or tained or acquired by a creditor in connection (ii) That no downpayment or that a speci with the financing of the initial construction of fied downpayment will be accepted in connection the residence of the customer, or in connection with any extension of credit, unless the creditor with a loan committed prior to completion of the usually and customarily accepts or will accept construction of that residence to satisfy that con downpayments in that amount. struction loan and provide permanent financing (2) No advertisement to aid, promote, o r as of that residence, whether or not the customer sist directly or indirectly any consumer lease may previously owned the land on which that resi state that a specific lease of any property at spe dence is to be constructed. cific am ounts or terms is available unless the (3 ) Any lien by reason of its subordination at lessor usually and customarily leases or will lease any time subsequent to its creation, if that lien such property at those amounts or terms. was exempt from the provisions of this section * (b) Catalogs and multi-page advertisements. If when it was originally created. a catalog or other multiple-page advertisement (4 ) Any advance for agricultural purposes sets forth or gives information in sufficient detail made pursuant to either: to permit determination of the disclosures re (i) Paragraph (j) of § 226.8 under an open quired by this section in a table or schedule of end real estate mortgage or similar lien, provided credit or lease terms, such catalog or multiplethe disclosure required under paragraph (b) of page advertisement shall be considered a single this section was made at the time the security in advertisement provided: terest was acquired by the creditor or at any time (1) The table or schedule and the disclosures prior to the first advance made on or following made therein are set forth clearly and conspicu the effective date of this Part, or ously; and (ii) Paragraph (p) of § 226.8 under a writ (2) Any statement of credit or lease terms ap ten agreement, provided the disclosure required pearing in any place other than in that table or under paragraph (b ) of this section was made at the time the written agreement was executed by the customer. * A m en d ed 3 /2 3 /7 7 . § 226.10 schedule of credit or lease terms clearly and con spicuously refers to the page or pages on which that table or schedule appears, unless that state ment discloses all of the credit or lease terms required to be stated under this section. F o r the purpose of this subparagraph, cash price is not a credit term. (c) Advertising of open end credit. N o ad vertisement to aid, promote, or assist directly o r indirectly the extension of open end credit may set forth any of the terms described in paragraph (a) of § 226.7, the Comparative Index of Credit Cost, o r that a specified downpayment or pe riodic payment is required (either in dollars or as a percentage), the period of repayment or any of the following items, unless it also clearly and conspicuously sets forth all the following items in terminology prescribed under paragraph (b) of § 226.7: (1) An explanation of the time period, if any, within which any credit extended may be paid without incurring a finance charge; (2) The method of determining the balance upon which a finance charge may be imposed; (3) T he method of determining the am ount of the finance charge, including the determination of any minimum, fixed, check service, transaction, activity, or similar charge, which may be imposed as a finance charge; and (4) W here one or more periodic rates may be used to compute the finance charge, each corre sponding annual percentage rate determined by multiplying the periodic rate by the num ber of periods in a year and, where there is more than one corresponding annual percentage rate, the range of balances to which each is applicable.15 (d) Advertising of credit other than open end. N o advertisement to aid, promote, or assist directly or indirectly any credit sale including the sale of residential real estate, loan, or other ex tension of credit, other than open end credit, sub ject to the provisions of this Part, shall state (1) The rate of the finance charge except as 1 A creditor imposing m inimum charges is not required 5 to adjust the disclosure o f the range of balances to which each rate would apply in order to reflect the range o f the balances below which the m inim um charge applies. If a creditor does not impose a finance charge when the outstanding balance is less than a certain am ount, the creditor is not required to disclose that fact o r the balance below which no such charge will be im posed. REGULATION Z an “annual percentage rate,” using that term. N o other rate of finance charge may be stated, ex cept that: (i) Where the total finance charge includes, as a component, interest computed at a simple annual rate, the simple annual rate may be stated in conjunction with, but not more conspicuously than, the annual percentage rate, or (ii) W here the finance charge is computed solely by the application of a periodic rate to an unpaid balance, the periodic rate may be stated in conjunction with, but not more conspicuously than, the annual percentage rate. (2) That no downpayment is required, or the am ount of the downpayment or of any instalment payment required (either in dollars or as a per centage), the dollar amount of any finance charge, the number of instalments or the period of repayment, or that there is no charge for credit, unless it also clearly and conspicuously sets forth all of the following items in terminol ogy prescribed under § 226.8: (i) T he cash price or the amount of the loan, as applicable. (ii) In a credit sale, the am ount of the downpayment required or that no downpayment is required, as applicable. (iii) The number, amount, and due dates or period of payments scheduled to repay the in debtedness if the credit is extended. (iv) The amount of the finance charge ex pressed as an annual percentage rate. The exemp tions from disclosure of an annual percentage rate permitted in paragraph (b)(2) of § 226.8 shall not apply to this subdivision. (v) Except in the case of the sale of a dwelling or a loan secured by a first lien on a dwelling to purchase that dwelling, the deferred payment price in a credit sale, or the total of payments in a loan or other extension of credit which is not a credit sale, as applicable. (e) Advertising of FHA Section 235 financ ing. Any advertisement to aid, promote, or assist directly or indirectly the sale of residential real estate under Title II, Section 235, of the National Housing Act (12 U.S.C. 1715z) shall clearly identify those credit terms which apply to the as sistance program and, except as provided in this paragraph, comply with the provisions of p ara graph (d) of this section. N o such advertisement shall state: (1) T he am ount of any paym ent scheduled to REGULATION Z repay the indebtedness without stating the family size and income level applicable to that amount. (2) Any rate of a finance charge, or the am ount of the finance charge, expressed as an annual percentage rate based on the assistance. T he annual percentage rate exclusive of the as sistance may be stated, but is not required. (f) Credit payable in more than four instal ments; no identified finance charge. A ny adver tisement to aid, promote, or assist directly or indirectly an extension of consumer credit repay able by agreement in more than four instalments shall, unless a specific finance charge is or may be imposed, state clearly and conspicuously: “The cost of credit is included in the price quoted for the goods and services.” * (g) Advertising of consumer leases. N o adver tisement to aid, promote, or assist directly o r in directly any consumer lease shall state the amount of any payment, the number of required pay ments, or that any or no downpayment or other payment is required at consummation of the lease unless the advertisement also states clearly and conspicuously each of the following items of in formation as applicable: (1) T hat the transaction advertised is a lease. (2) The total amount of any payment such as a security deposit or capitalized cost reduction re quired at the consummation of the lease, or that no such payments are required. (3) The number, amounts, due dates or periods of scheduled payments, and the total of such pay ments under the lease. (4) A statement of whether or not the lessee has the option to purchase the lease property and at what price and time. T he method of deter mining the price may be substituted for disclosure of the price. (5) A statement of the am ount or method of determining the am ount of any liabilities the lease imposes upon the lessee at the end of the term and a statement that the lessee shall be liable for the difference, if any, between the estimated value of the lease property and its realized value at the end of the lease term, if the lessee has such liability. * (h) Multiple item leases; merchandise tags. If a merchandise tag for an item normally included in a multiple item lease sets forth information * Added 3 /2 3 /7 7 . § 226.11 which would require additional disclosures under § 226.10(g), such merchandise tag need not con tain such additional disclosures, provided it clearly and conspicuously refers to a sign or display which is prominently posted in the lessor’s show room. Such sign or display shall contain a table or schedule of those items of information to be dis closed under § 226.10(g). SEC TIO N 226.1 1— C O M P A R A T IV E IN D E X O F C R E D IT COST F O R O P E N E N D C R E D IT (a) General rule. Any creditor who elects to disclose the Comparative Index of Credit Cost on open end credit accounts (1) Shall compute the Comparative Index of Credit Cost in accordance with paragraph (b) of this section; (2) Shall recompute the Comparative Index of Credit Cost in accordance with paragraph (b) of this section based upon any new open end credit account terms to be adopted and shall dis close the new Comparative Index of Credit Cost in accordance with paragraph (c)(2) of this sec tion concurrently with the notice required under paragraph (f) of § 226.7; (3) Shall, when making such disclosure under the provisions of paragraphs (a)(5) and (b)(l)(vii) of § 226.7, make the disclosure to all open end credit account customers; and (4) Shall not utilize such disclosure so as to mislead or confuse the customer or contradict, obscure, or detract attention from the required disclosures. (b) Computation of Comparative Index of Credit Cost. The Comparative Index of Credit Cost fo r each open end credit plan shall be com puted by applying the creditor’s terms of that plan to the following hypothetical factors: (1) A single transaction in the am ount of $100 is debited on the first day of a billing cycle to an open end credit account having no previous balance. (2) T he creditor imposes all finance charges including periodic, fixed, minimum or other charges applicable to such account in amounts and on dates consistent with his policy of impos ing such charges upon open end credit accounts. (3) The exact am ount of the required mini m u m periodic paym ent is paid on the last day of REGULATION Z §226.12 each subsequent and successive billing cycle until the am ount of the single transaction, together with applicable finance charges, is paid in full. (4) T he Comparative Index of Credit Cost shall be expressed and disclosed as a percentage accurate to the nearest quarter of 1 per cent and shall be determined by dividing the total amount of the finance charges imposed by the sum of the daily balances and multiplying the quotient so ob tained (expressed as a percentage) by 365. (c) Form of disclosure. Any creditor who elects to disclose the Comparative Index of Credit Cost shall: ‘ (1) Make the disclosure in the form of the fol lowing statement: “O ur Comparative Index of Credit Cost under the terms of our open end credit account plan is ___% per year, computed on the basis of a single transaction of $100 deb ited on the first day of a billing cycle to an ac count having no previous balance, and paid in re quired minimum consecutive instalments on the last day of each succeeding billing cycle until the transaction and all finance charges are paid in full. T he actual percentage cost of credit on your account may be higher or lower depending on the dates and amounts of charges and payments.” (2) Disclose any newly com puted Comparative Index of Credit Cost in the form of the state ment prescribed in subparagraph (1 ) of this para graph, except that the statement shall be preceded by the words “Effective as of (date) ,” and the words “will be” shall be substituted for the word “is” in the second line of the statement. posed under chapter 2 or chapter 4 of the Act, or both, or under chapter 5. and the correspond ing provisions of this Part; or in the case of chapter 4. the consumer is afforded greater pro tection than is afforded under chapter 4 of the Act, or in the case of chapter 5, the lessee is afforded greater protection and benefit than is afforded under chapter 5 of the Act, and (2) There is adequate provision for enforce ment. ** (b) Procedures and criteria. The procedures and criteria under which any State may apply for the determination provided for in paragraph (a) of this section are set forth in Supplement II to Regulation Z with respect to disclosure and re scission requirements (sections 121-131 of chapter 2). Supplement IV with respect to the prohibition of the issuance of unsolicited credit cards and the liability of the cardholder for unauthorized use of a credit card (sections 132-133 of chapter 2), in Supplement V with respect to fair credit billing requirements (sections 161-171 of chapter 4) and in Supplement VI with respect to consumer leasing (sections 181-186 of chapter 5). (c) Civil liability. In order to assure that the concurrent jurisdiction of Federal and State courts created in section 130(e) of the Act shall continue to have substantive provisions to which such jurisdiction shall apply, and generally to aid in implementing the Act with respect to any class of transactions exempted pursuant to paragraph (a) of this section and Supplement II, the Board pursuant to sections 105 and 123 hereby prescribes that: (1) N o such exemptions shall be deemed to extend to the civil liability provisions of sections SEC TIO N 226.12— E X E M P T IO N OF 130 and 131; and C E R T A IN STA TE R E G U L A T E D (2) After an exemption has been granted, the T R A N SA C T IO N S disclosure requirements of the applicable State * (a) Exemption for State regulated transactions. law shall constitute the disclosure requirements of this Act. except to the extent that such State law In accordance with the provisions of Supplements imposes disclosure requirements not imposed by II, IV. V, and VI to Regulation Z, any State may this Act. Information required under such State make application to the Board for exemption of law with the exception of those provisions which any class of transactions within the State from impose disclosure requirements not imposed by the requirements of chapters 2, 4 o r 5 of the Act this Act shall, accordingly, constitute the “infor and the corresponding provisions of this Part, mation required under this chapter” (chapter 2 Provided that: (1) The Board determines that under the law of the Act) for the purpose of section 130(a). of that State, that class of transactions is subject (d) Exemptions granted. Exemptions granted to requirements substantially similar to those im by the Board to particular classes of credit trans * A m en d ed 3 /2 3 /7 7 . ** A m ended 3 /23 /7 7 . REGULATION Z actions within specified States are set forth in Supplement 111 to Regulation Z. SECTIO N 226.13— C R E D IT C A R D T R A N S A C T IO N S — SPECIA L R E Q U IR E M E N T S (a) Issuance of credit cards. Regardless of whether a credit card is to be used for personal, family, household, agricultural, business, or com mercial purposes, no credit card shall be issued to any person except: (1) In response to a request or application therefor, or (2) As a renewal of, or in substitution for, an accepted credit card whether such card is issued by the same or a successor card issuer. (b) Conditions of liability of cardholder. A cardholder shall be liable for unauthorized use of each credit card issued only if (1) The credit card is an accepted credit card; (2) Such liability does not exceed the lesser of $50 or the am ount of money, property, labor, o r services obtained by such use prior to notification of the card issuer pursuant to paragraph (e) of this section; (3) The card issuer has given adequate notice to the cardholder o f his potential liability on the credit card or within 2 years preceding the un authorized use; and (4) The card issuer has provided the card holder with an addressed notification requiring no postage to be paid by the cardholder which may be mailed by the cardholder in the event o f the loss, theft, or possible unauthorized use of the credit card. (c) Other conditions of liability. In addition to the conditions of liability in paragraph (b) of this section, no cardholder shall be liable for the unauthorized use of any credit card which was issued after January 24, 1971, and, regardless of the date of its issuance, after January 24, 1972, no cardholder shall be liable for the unauthorized use of any credit card, unless the card issuer has provided a method whereby the user of such card can be identified as the person authorized to use it, such as by signature, photograph, o r finger print on the credit card or by electronic or m e chanical confirmation. (d) Notice to cardholder. The notice to card holder pursuant to paragraph (b)(3) of this sec § 226.13 tion may be given by printing the notice on the credit card, or by any other means reasonably assuring the receipt thereof by the cardholder. An acceptable form of notice must state that lia bility shall not exceed $50 (or any lesser amount), that notice of loss, theft, o r possible unauthorized use may be given orally or in writing, and the name and address of the party to receive the notice. It may include any additional information which is not inconsistent with the provisions of this section. An example of an acceptable notice is as follows: “You may be liable for the unauthorized use of your credit card [or other tertn which describes the credit device]. You will not be liable fo r u nau thorized use which occurs after you notify [name o j card issuer or his designee] at [address] orally or in writing of loss, theft, or possible unauthor ized use. In any case liability shall not exceed [insert $50 or any lesser am ount under other applicable law or under any agreement with the cardholder].’’ (e) Notice to card issuer. For the purposes of this section, a cardholder notifies a card issuer by taking such steps as may be reasonably required in the ordinary course of business to provide the card issuer with the pertinent information with respect to loss, theft, or possible unauthorized use of any credit card, whether or not any particular officer, employee, o r agent of the card issuer does, in fact, receive such notice or information. Irrespective of the form of notice provided under paragraph (b)(4) of this section, at the option of the cardholder, notice may be given to the card issuer or his designee in person or by telephone or by letter, telegram, radiogram, cablegram, or other written communication which sets forth the pertinent information. Notice by mail, telegram, radiogram, cablegram, or other written com muni cation shall be considered given at the time of re ceipt or, whether or not received, at the expiration of the time ordinarily required for transmission, whichever is earlier. (f) Action to enforce liability. 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 paragraphs (b) and (c) of this section, have been met. § 226.13 (g) Effect on other applicable law or agree ment. 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 agree ment with the card issuer. (h) Business use of credit cards. If 10 or more credit cards are issued by one card issuer fo r use by the employees of a single business or other organization, nothing in this section prohib its the card issuer from agreeing by contract with such business o r other organization as to liability fo r unauthorized use of any such credit cards w ithout regard to the provisions of this section, but in no case may any business or other organi zation or card issuer impose liability on any employee of such business or other organization with respect to unauthorized use of such credit card except in accordance with and subject to the other liability limitations of this section. (i) Right of cardholder to assert claims or defenses against card issuer. (1) When a person who provides property or services fails to satis factorily resolve a dispute as to property or serv ices purchased by use of a credit card in connec tion with a consumer credit transaction, the cardholder may assert all claims (other than tort claims) and defenses arising out of the transac tion and relating to such failure against the card issuer, and the cardholder may withhold payment up to the amount of credit outstanding with re spect to the property or services which gave rise to the dispute and any finance charges, late pay ment charges, or other charges imposed on that amount if: (i) The cardholder has made a good faith attempt to obtain satisfactory resolution of the disagreement or problem relating to the transac tion from the person honoring the credit card; (ii) T he amount of credit extended by the card issuer to the cardholder to obtain the p r o p erty or services which resulted in the assertion of the claim(s) or defense(s) by the cardholder ex ceeds $ 5 0 ; and (iii) The initial transaction which gave rise to the assertion of the claim(s) or defense(s) by the cardholder occurred in the same State as the cardholder’s current designated address or, if not within the State of the cardholder’s address, within 100 miles from such address, except that the limitations stated in paragraphs (ii) and (iii) of this section shall not apply when the person honoring the credit card: REGULATION Z (A) Is the same person as the card is suer, or (B) Is controlled, directly or indirectly, by the card issuer, or (C) Is under the direct or indirect con trol of a third person who also directly or indi rectly controls the card issuer, or (D) Controls, directly or indirectly, the card issuer, or (E) Is a franchised dealer in the card is suer’s products or services, or (F) H as obtained the order for the trans action, relative to which the claim(s) o r defense(s) is asserted, 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. Simply honoring or indicating that a person honors a particular credit card is not any of the relationships described in paragraphs (A) through (F) for the purpose of removing the dollar and distance limitations. (2) The amount of the claim(s) or defense(s) assertable by the cardholder under this section may not exceed the amount of credit outstanding with respect to the transaction which gave rise to the assertion of the claim(s) or defense(s) at the time the cardholder first notifies the card issuer or the person honoring the credit card for such transaction of the existence of such claim(s) or defense(s). F o r purposes of determining the amount of credit outstanding with respect to such transactions as provided in the preceding sen tence, payments and other credits to the card holder’s account will be deemed to have been ap plied in the order indicated to the paym ent of: (i) Late charges in the order of entry to the account, (ii) Finance charges in the order of entry to the account, (iii) Any other debits in the order in which each debit entry was made to the account, and (iv) When more than one item is included in a single extension of credit, credits are to be distributed pro rata according to prices and appli cable taxes. (3) This section does not apply to cash ad vances obtained with a credit card when the ad vance is unrelated to any specific credit sale item. *(4) If the cardholder refuses to pay the * A m en ded 8 /2 7 /7 6 . REGULATION Z am ount of credit outstanding with respect to the property or services which gave rise to the claim(s) or defense(s) under this section, the creditor may not report to any person that particular amount as delinquent until the dispute is settled or judg ment is rendered.15a (j) Prohibition of offsets by card issuer. (1) A card issuer may not take any action to offset a cardholder’s indebtedness arising in connection with a consumer credit transaction under the rel evant credit card plan against funds of the card holder held on deposit with the card issuer unless a court o rd e r10 is obtained. (2) The prohibition in paragraph (j)(l) of this section does not apply to credit card plans in which the cardholder authorizes the card issuer as a method of payment to periodically deduct all or a portion of the cardholder's credit card debt from his deposit account with the card issuer (subject to the limitations in § 226.14(c)), Pro vided that: (i) Such automatic debit was previously au thorized in writing by the cardholder, or (ii) With respect to such automatic debit accounts in existence on October 28, 1975, the card issuer has given notice of the provisions of paragraph (j) of this section to such accounts prior to renewal of the authorization (in no case later than October 28, 1976). (k) Prompt notification of returns. (1) When any creditor other than the card issuer accepts the return of property or forgives a debt for serv ices which is to be reflected as a credit to the customer’s open end credit card account, he shall promptly (in no case later than 7 business days from the date the return is accepted) transmit a statement with respect thereto to the card issuer through the normal channels established by the card issuer for the transmittal of such statements. (2) Upon receipt of a credit statement, the card issuer shall credit the customer’s account promptly (in no case later than 3 business days from receipt of the refund statement) with the amount of the refund. '',a Nothing in this parag rap h prohibits a creditor from reporting the disputed am o u n t o r account as being in dispute. 1 This p arag rap h does not alter or affect the right of a 0 card issuer acting u nder State law to attach or otherwise levy u po n funds o f a card h older held on deposit with the card issuer if that remedy is constitutionally available to creditors generally. § 226.14 (3) If it is a creditor’s (other than a card is suer) policy to give cash refunds to cash custom ers, he must also give credit or cash refunds to credit card customers, unless he clearly and con spicuously discloses that he does not give credit or cash refunds for returns at the time the trans action is consummated. Nothing in this section shall be construed to require that a creditor give refunds for returns nor shall it be construed to prohibit refunds in kind. (1) Prohibited acts of card issuers. (1) N o card issuer may, by contract or otherwise: (i) Prohibit any person from offering any cash discounts to all customers of such person, including cardholder customers, to induce such customers to pay by cash, check, o r similar means rather than by use of a credit card or its u nder lying account for the purchase of property or services, or (ii) Require any person who honors the card issuer’s credit card to open or maintain a deposit account or procure any other service not essential to the operation of the credit card plan from the card issuer, its subsidiary, agent, or any other person, as a condition of participation in a credit card plan. (2) Within 30 days of the effective date of these regulations, any card issuer with existing contracts which include either one or both of the restrictive clauses prohibited in paragraph (1) shall inform all parties to the contract that such provisions are inapplicable and no longer enforce able. SECTION 226.14— BIL L IN G ERRORS— R E S O LU T IO N P R O C E D U R E (a) Correction of billing errors. A fter the creditor receives proper written notification of a billing error, unless the customer has subsequently agreed that the periodic statement is correct, the creditor shall: (1) Not later than 30 days after receipt of such notification, mail or deliver written acknowledg ment thereof to the customer’s current designated address, unless the appropriate actions in para graph (2) of this section are taken within such 30 day period; and (2) Resolve the dispute not later than 2 com plete billing cycles (in no event more than 90 days) from the date of receipt of the notice of billing error and prior to any action by the creditor § 226.14 to collect17 any portion of the amount(s) indicated by the customer as being a billing error or any finance charges, late paym ent charges, or other charges computed on such disputed amount(s) by: (i) Correcting the customer’s account in the full am ount indicated by the customer to have been erroneously billed in accordance with para graph (b)(2) of this section and mailing or deliver ing to the customer a written notification of cor rections;18 or (ii) Correcting the customer’s account by a differing amount from that indicated by the cus tom er as being erroneously billed in accordance with paragraph (b)(2) of this section and mailing or delivering to the customer an explanation of the change(s), accompanied by copies of docum en tary evidence of the customer’s indebtedness if such evidence is requested by the customer; or (iii) Mailing or delivering a written expla nation or clarification to the customer, after having conducted a reasonable investigation, set ting forth, to the extent applicable, the reasons why the creditor believes the amount(s) was cor rectly shown on the periodic statement and, if the customer so requests, furnishing copies of documentary evidence of the customer’s indebted ness with respect to the alleged billing error(s). In any case where the customer alleges that the periodic statement reflects property or services not delivered to the customer or his designee in accordance with any agreement made in connec tion with the transaction giving rise to the dis puted amount, a creditor may not construe such am ount to be correctly shown on the periodic statement unless the creditor determines, upon reasonable investigation, that such property or services were actually delivered, mailed, or other wise sent to the customer or his designee and provides the customer with a written statement explaining such determination. In any case where 17 If, despite the establishment by the creditor of proce dures reasonably adapted to assure compliance with this paragraph, the creditor or his agent, within 2 business days after receiving proper written notification o f a bill ing error pursu ant to this section, inadvertently takes ac tion to collect in contravention of this paragraph, such inadvertent action to collect will n o t be considered in violation of this paragraph. 18 A notice on a subsequent billing statem ent clearly identifying any am o un t credited to the custom er’s ac count in response to a proper written notification o f a billing e rro r is one type o f a proper transmittal of a w ritten notification o f corrections. REGULATION Z the customer alleges that an amount of a transac tion reflected on the periodic statement is incor rect because the person honoring the credit card has made an incorrect report to the card issuer of the am ount which should have been charged, the card issuer may not construe such am ount to be correctly reflected on the periodic statement unless the creditor determines, upon reasonable investigation, that the correct amount is shown on the periodic statement and provides the cus tom er with a written statement explaining such determination. After complying with the provisions of this section with respect to an alleged billing error, a creditor has no further responsibility under this section if the customer continues to make sub stantially the same allegation with respect to such error. (b) Minimum periodic payments and finance charges on disputed amounts. (1) When a mini mum periodic payment is permitted, the customer may withhold that portion of the minimum pe riodic payment which the customer believes is related to the amount in dispute. When the disputed amount is only a part of the total amount of an item, the customer remains obligated to pay the am ount not in dispute, and any minimum periodic payment and finance charges, late pay ment charges, or other charges may be collected on the undisputed amount. If, at the completion of the error resolution procedure, it is determined that the customer owes some or all of the disputed amount, the creditor may require payment of any minimum periodic payment amounts which the customer did not pay because of the dispute. The creditor may not, however, accelerate the custom er’s entire debt solely because the customer has exercised rights provided by the Act or this Part. (2) With respect to an erroneous billing, the creditor must credit the customer’s account in any am ount the customer does not owe, plus any finance charges, late payment charges, or other charges imposed as a result of the erroneous bill ing. An erroneous billing by a creditor includes, but is not limited to, a misidentification, insuffi cient identification, or incorrect date of a transac tion; a mailing of the periodic statement to other than the current designated address; improper crediting of payments or other credits; com puta tion errors; or a billing for property or services not accepted or delivered in accordance with any agreement; as well as mistakes in dollar amounts. REGULATION Z (3) After or upon completion of the dispute resolution procedure prescribed by § 226.14(a): (i) If the initial periodic statement is deter mined to be without error with regard to the dis puted item, the creditor shall promptly mail or deliver to the customer written notification of the amount owed with regard to the disputed item, unless such notification is not required by p ara graph (a) of this section, or (ii) If the initial periodic statement is deter mined to be in error with regard to the disputed item and the creditor normally allows a period for the customer to pay such an item without in curring additional finance charges, late payment charges, or other charges, the creditor shall mail or deliver to the customer written notification of the total am ount which the customer owes with regard to the disputed item and shall allow the customer the same num ber of days thereafter as he customarily or by credit agreement allows, whichever is longer (in no case less than 10 days), for the customer to pay undisputed amounts in accordance with § 226.7(b)(2), or (iii) If the initial periodic statement is deter mined to be in error with regard to the disputed item and the creditor normally does not allow a period for the customer to pay such an item with out incurring additional finance charges, late p ay ment charges, or other charges, the creditor shall promptly mail or deliver to the customer a notice of the total am ount which the customer owes with regard to the disputed item. (4) Nothing in this section shall be construed to prohibit the mailing or delivery of periodic statements, which include disputed amounts, to the customer, provided that the creditor indicates on the face of the periodic statement that pay ment of the am ount in dispute is not required pending the creditor’s compliance with the provi sions of this section. (5) N othing in this section shall prohibit any action by a creditor to collect any amount which has not been indicated by the customer to contain a billing error. (c) Automatic debit of disputed amounts. (1) In the case of credit card plans where the card holder has agreed to permit the card issuer to periodically pay the cardholder’s indebtedness by deducting the appropriate amount from the card holder’s deposit account held by the card issuer, if the card issuer receives a proper written notifi cation of a billing error within 16 days from the date of mailing or delivery of the periodic state § 226.14 ment on which the suspected billing error first appears, the card issuer shall: (i) Prevent the automatic debiting of any disputed amounts if receipt of such notification precedes the automatic debiting of the cardholder’s account, or (ii) Promptly (in no case more than 2 busi ness days after receipt of the notice) restore to the cardholder’s deposit account any portion of the disputed am ount which was previously de ducted, if receipt of such notification follows the automatic debiting of the cardholder's account for any disputed amounts. (2) Nothing in this paragraph shall limit the cardholder’s right to dispute an amount he believes to be in error within 60 days of the mailing or delivery of the erroneous periodic statement, as otherwise provided in this section. (d) Closing of accounts. A creditor m ay not, prior to complying with the requirements of p ara graphs (a) and (b) of this section, restrict or close an account with respect to which the cus tom er has indicated a belief that such account contains a billing error solely because of the cus tom er’s refusal or failure to pay the am ount indi cated to be in error. This paragraph does not prohibit the creditor from applying any such am ount to the customer’s credit limitations. (e) Credit reports on amounts in dispute. (1) After receiving a proper written notification of a billing error pursuant to this section, neither the creditor nor his agent m ay directly o r indirectly threaten to report adversely to any person on the customer’s credit standing or credit rating be cause of the customer’s failure to pay the am ount specified in such notification as being a billing error, or any finance charges, late payment charges, or other charges imposed thereon, nor shall such am ount be reported as delinquent19 to any third person unless such am ount remains u n paid after the creditor has complied with all the requirements of this section and has allowed that customer the same number of days thereafter to pay as he customarily or by credit agreement al lows, whichever is longer (in no case less than 10 days), for the customer to pay undisputed amounts so as to avoid the imposition of addi tional finance charges, late payment charges, or 10 N oth in g in this p aragraph prohibits a creditor from reporting the disputed am o u n t o r account as being in dispute. REGULATION Z § 226.15 transaction on a periodic statement indicated by other charges. If, despite establishment by the the customer to be a billing error. In no case creditor of procedures reasonably adapted to as shall a creditor forfeit any am ount for an error sure compliance with this paragraph, the creditor in or his agent, within 2 business days after receiv a total figure or subtotal figure reflected on a statement which is caused solely by an error in ing proper written notification of a billingerror another item which is the subject of a dispute, pursuant to this section, inadvertently takes action nor shall a creditor suffer any forfeit more than in contravention of this paragraph, such inad once for any item or transaction which m ay ap vertent action will not be considered in violation pear on a periodic statement. of this paragraph. (2) Nothing in this subsection shall be con (2) If, within the time limit allowed fo r pay strued to limit a customer’s right to recover under ment in paragraph (e)(1) of this section, the credi tor receives a further written notification from section 130 of the Act. Exceptions to general rule. This section the customer that any portion of a billingerror (g) does not apply to credit other than open end, resolved under paragraph (a) of this section is whether or not a periodic statement is mailed or still in dispute, the creditor m ay not report to any delivered, unless it is consumer credit extended third party that such disputed am ount is delin on an account by use of a credit card. quent unless the creditor also reports that the am ount or account is in dispute and, at the same time, notifies the customer in writing of the name * SECTIO N 226.15— C O N SU M E R L E A S IN G and address of each party to whom the creditor is reporting information concerning the disputed (a) General requirements. Any lessor shall, in amount. If, pursuant to this paragraph, a creditor accordance with § 226.6 and to the extent applica has reported a disputed am ount as being delin ble, make the disclosures required by paragraph quent to any third person, the creditor shall (b) of this section with respect to any consumer report promptly in writing-0 to any such person lease. Such disclosures shall be made prior to the subsequent resolution of the reported delinquency. consummation of the lease on a dated written (3) If a creditor has reported an am ount as statement which identifies the lessor and the being delinquent to any third person who is in lessee, and a copy o f such statement shall be given the business of collecting and disseminating infor to the lessee at that time. All of the disclosures mation relating to the creditworthiness of cus shall be made together on either tomers, and such am ount is subsequently disputed (1) The contract or other instrument evidencing by the customer in accordance with the require the lease on the same page and above the place ments of § 226.2(cc), the creditor shall, within for the lessee’s signature; or one billing cycle after receipt of proper written (2) A separate statement which identifies the notification of the billing error, mail o r deliver a lease transaction. written notice21 to each such third person to In any lease of multiple items, the description w hom the delinquency was reported th a t the required by § 226.15(b)(1) m ay be provided on a am ount is in dispute. separate statement or statements which are in (f) Forfeiture penalty. (1) Any creditor who corporated by reference in the disclosure state fails to comply with the requirements of this sec ment required by § 226.15(a). tion forfeits any right to collect from the cus (b) Specific disclosure requirements. In any tom er the am ount indicated by the customer to be lease subject to this section the following items, a billing error, whether or not such am ount is as applicable, shall be disclosed: in fact in error, and any finance charges, late pay (1) A brief description of the leased property, ment charges, or other charges imposed thereon, sufficient to identify the property to the lessee and provided that the am ount so forfeited under this lessor. section shall not exceed $50 for each item or (2) The total am ount of any payment, such as 20 “ In w riting” shall include transm ission by com puter com m unication. 2 “ W ritten notice” shall include com puter com m unica 1 tion. a refundable security deposit paid by cash, check o r similar means, advance payment, capitalized * Added 3 /23 /7 7 . REGULATION Z cost reduction or any trade-in allowance, a p p ro priately identified, to be paid by the lessee at consummation of the lease. (3) T he number, am ount and due dates or periods of payments scheduled under the lease and the total am ount of such periodic payments. (4) T he total am ount paid or payable by the lessee during the lease term for official fees, regis tration, certificate of title, license fees or taxes. (5) T he total am ount of all other charges, indi vidually itemized, payable by the lessee to the lessor, which are not included in the periodic pay ments. This total includes the am ount of any liabilities the lease imposes upon the lessee at the end of the term, but excludes the potential differ ence between the estimated and realized values, required to be disclosed under § 226.15(b)(l 3). (6) A brief identification of insurance in con nection with the lease including (i) if provided or paid for by the lessor, the types and amounts of coverages and cost to the lessee, or (ii) if not provided or paid for by the lessor, the types and amounts of coverages required of the lessee. (7) A statement identifying any express w arran ties o r guarantees available to the lessee made by the lessor or manufacturer with respect to the leased property. (8) An identification of the party responsible for maintaining or servicing the leased property together with a brief description of the responsi bility, and a statement of reasonable standards for wear and use, if the lessor sets such standards. (9 ) A description of any security interest, other than a security deposit disclosed under § 226.15(b)(2), held or to be retained by the lessor in connection with the lease and a clear identification of the property to which the security interest relates. (1 0) The am ount or m ethod of determining the amount of any penalty or other charge for delinquency, default or late payments. (11) A statement of whether or not the lessee has the option to purchase the leased property and, if at the end of the lease term, at what price, and, if prior to the end of the lease term, at what time and the price or method of determining the price. (12) A statement of the conditions under which the lessee or lessor may terminate the lease prior to the end of the lease term and the amount or method of determining the amount of any penalty or other charge for early termination. § 226.15 (13) A statement that the lessee shall be liable for the difference between the estimated value of the property and its realized value at early term i nation or the end of the lease term, if such liabil ity exists. (14) W here the lessee’s liability at early term i nation or at the end of the lease term is based on the estimated value of the leased property, a statement that the lessee may obtain at the end of the lease term or at early termination, at the lessee’s expense, a professional appraisal of the value which could be realized at sale of the leased property by an independent third party agreed to by the lessee and the lessor, which appraisal shall be final and binding on the parties. (15) W here the lessee’s liability at the end of the lease term is based upon the estimated value of the leased property: (i) The value of the property at consum mation of the lease, the itemized total lease obliga tion at the end of the lease term and the differ ence between them. (ii) That there is a rebuttable presumption that the estimated value of the leased property at the end of the lease term is unreasonable and not in good faith to the extent that it exceeds the realized value by more than three times the aver age payment allocable to a monthly period, and that the lessor cannot collect the am ount of such excess liability unless the lessor brings a success ful action in court in which the lessor pays the lessee’s attorney’s fees, and that this provision re garding the presumption and attorney’s fees does not apply to the extent the excess of estimated value over realized value is due to unreasonable wear or use, or excessive use. (iii) A statement that the requirements of § 2 2 6 .15(b)(15)(ii) do not preclude the right of a willing lessee to make any mutually agreeable final adjustment regarding such excess liability. (c) Renegotiations or extensions. If any existing lease is renegotiated or extended, such renegotia tion or extension shall be considered a new lease subject to the disclosure requirements of this Part, except that the requirements of this paragraph shall not apply to (1 ) a lease of multiple items where a new item(s) is provided or a previously leased item(s) is returned, and the average pay ment allocable to a monthly period is not changed by more than 25 per cent, or (2) a lease which is extended for not more than six months on a month-to-month basis or otherwise. § STATUTORY APPENDIX 10 1 STATUTORY A PPEN DIX Titles I and V of Act of May 29, 1968, as am ended October 26, 1970, October 28, 1974, February 27, 1976, and M arch 23, 1976 § 1. Short title of entire Act This Act may be cited as the Consumer Credit Protection Act. TITLE I— CONSUMER CREDIT COST DISCLOSURE [15 U.S.C. § 1601 et seq.] Chapter Section 1. G .................................... 101 2. C r e d i t T r a n s a c t i o n s .................................... 121 3. C r e d i t A d v e r t i s i n g ....................................... 141 4. C re d it B illin g .................................................. 161 5. C onsum er .......................................... 181 eneral P r o v is io n s L eases C H A P T E R 1— G E N E R A L P R O V I S I O N S Sec. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. Short title. Findings and declaration of purpose. Definitions and rules of construction. Exem pted transactions. Regulations. D etermination of finance charge. D etermination of annual percentage rate. Administrative enforcement. Views of other agencies. [Repealed.] Effect on other laws. Criminal liability for willful and knowing violation. 113. Penalties inapplicable to governmental agen cies. 114. Reports by Board and Attorney General. 115. Liability of assignees. § 1 0 1 . S h ort title This title may be cited as the T ruth in Lending Act. § 1 0 2 . F in d in g s a n d d ecla ratio n o f p u rp ose * (a) The Congress finds that economic stabiliza * A m en d ed 10/28/74. tion 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 title to assure a meaningful disclosure of credit terms so that the consumer will be able to com pare more readily the various credit terms available to him and avoid the u nin formed use of credit, and to protect the con sumer against inaccurate and unfair credit billing and credit card practices. ** (b) 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 instalment credit sales and that these leases have been offered without adequate cost disclosures. It is the purpose of this title to assure a meaningful disclosure of the terms of leases of personal property for personal, family, or house hold purposes so as to enable the lessee to co m pare more readily the various lease terms available to him, limit balloon payments in consumer leas ing, enable comparison of lease terms with credit terms where appropriate, and to assure meaning ful and accurate disclosures of lease terms in advertisements. § 103. Definitions and rules of construction (a) The definitions and rules of construction set forth in this section are applicable for the purposes of this title. (b) T he term “Board” refers to the Board of Governors of the Federal Reserve System. (c) T he term “organization” means a corpora tion, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association. (d) The term “person” means a natural per son or an organization. (e) The term “credit” means the right granted by a creditor to a debtor to defer paym ent of debt or to incur debt and defer its payment. *** (f) The term “creditor” refers only to cred itors who regularly extend, or arrange for the ex tension of, credit which is payable by agreement in more than four instalments or for which the paym ent of a finance charge is or may be re ** A d d ed 3 /2 3 /7 6 . *** Am ended 10/2 8 /7 4 . STATUTORY APPENDIX § 103 quired, whether in connection with loans, sales of property or services, or otherwise. F o r the purposes of the requirements imposed under chapter 4 and sections 1 2 7 ( a ) ( 6 ) , 1 2 7 ( a ) (7 ) , 1 27(a)(8), 1 27(b)(1), 1 2 7 (b )(2 ), 1 27(b)(3), 127(b)(9), and 127(b)(l 1) of chapter 2 of this title, the term “creditor” shall also include card issuers w hether or not the am ount due is payable by agreement in more than four installments or the payment of a finance charge is or may be re quired, and the Board shall, by regulation, apply these requirements to such card issuers, to the ex tent appropriate, even though the requirements are by their terms applicable only to creditors offering open end credit plans. (g) The term “credit sale” refers to any sale with respect to which credit is extended o r ar ranged by the seller. T he term includes any con tract 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 ex cess 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 nomi nal consideration has the option to become, the owner of the property upon full compliance with his obligations under the contract. (h) The adjective “consumer”, used with ref erence to a credit transaction, characterizes the transaction as one in which the party to whom credit is offered o r extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, household, or agricultural p u r poses. (i) The term “open end credit plan” refers to a plan prescribing the terms of credit transactions which may be made thereunder from time to time and under the terms of which a finance charge may be computed on the outstanding u n paid balance from time to time thereunder. * (j) The term “adequate notice”, as used in section 133, means a printed notice to a card holder 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 re ceipt 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. * (1) The term “accepted credit card” means any credit card which the cardholder has re quested 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 per son to whom a credit card is issued or any per son 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 p er son 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 133, 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 167 means a reduction made from the regular price. The term “discount” as used in section 167 shall not mean a surcharge. ** (q) The term “surcharge” as used in section 103 and section 167 means any means of increas ing 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 U nited States. * (s) Any reference to any requirement im posed under this title or any provision thereof includes reference to the regulations of the Board under this title o r the provision thereof in ques tion. **** (t) The disclosure of an am ount or percent age which is greater than the amount or percent** A dded 2 /2 7 /7 6 . *** Redesignated 1 0 /2 6 /7 0 an d 2 /2 7 /7 6 . **** A dded 1 0 /2 6 /7 0 and redesignated 2 /2 7 /7 6 . * A d d ed 10/26/70. 43 § 104 age required to be disclosed under this title does not in itself constitute a violation of this title. § 104. Exempted transactions This title does not apply to the following: (1 ) Credit transactions involving extensions of credit for business or commercial purposes, or to government or governmental agencies or instru mentalities, or to organizations. (2) Transactions in securities or commodities accounts by a broker-dealer registered with the Securities and Exchange Commission. (3 ) Credit transactions, other than real prop erty transactions, in which the total amount to be 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 serv ices involved, the charges for delayed payment, and any discount allowed for early payment. * (5 ) Credit transactions primarily for agri cultural purposes in which the total am ount to be financed exceeds $25,000. § 105. Regulations T he Board shall prescribe regulations to carry out the purposes 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 trans actions, as in the judgment of the Board are nec essary or proper to effectuate the purposes of this title, to prevent circumvention or evasion thereof, or to facilitate compliance therewith. § 106. Determination of finance charge (a ) Except as otherwise provided in this sec tion, the am ount of the finance charge in connec tion 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 o r indi rectly by the creditor as an incident to the exten sion of credit, including any of the following types of charges which are applicable: (1 ) Interest, time price differential, and any am ount payable u nder a point, discount, or other system of additional charges. * A dded 10/28/74. STATUTORY APPENDIX (2) Service or carrying charge. (3 ) Loan fee, finder’s fee, or similar charge. (4 ) Fee for an investigation or credit report. (5) Premium or other charge for any guaran tee or insurance protecting the creditor against the obligor’s default or other credit loss. (b) Charges or premiums for credit life, acci dent, or health insurance written in connection with any consumer credit transaction shall be in cluded in the finance charge unless (1) the coverage of the debtor by the insur ance is not a factor in the approval by the credi tor 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 connec tion 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) Charges or premiums for insurance, writ ten in connection with any consumer credit trans action, 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) 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 re spect 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 other wise 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. (3 ) Taxes. (4 ) Any other type of charge which is not for credit and the exclusion of which from the STATUTORY APPENDIX § 107 finance charge is approved by the Board by regu lation. (e) The following items, when charged in con nection 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. (2 ) Fees for preparation of a deed, settlement statement, or other documents. (3 ) Escrows for future payments of taxes and insurance. (4 ) Fees for notarizing deeds and other docu ments. (5) Appraisal fees. (6 ) Credit reports. § 107. Determination of annual percentage rate (a) The annual percentage rate applicable to any extension of consumer credit shall be deter mined, 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 am ount of the finance charge when it is applied to the u n paid balances of the am ount financed, calculated according to the actuarial method of allocating payments made on a debt between the amount financed and the am ount 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 m ate rially simplifies computation while retaining rea sonable accuracy as compared with the rate de termined 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) 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. (c) The annual percentage rate may be rounded to the nearest quarter of 1 per centum for credit transactions payable in substantially equal instalments when a creditor determines the total finance charge on the basis of a single ad d on, discount, periodic, or other rate, and the rate is converted into an annual percentage rate under procedures prescribed by the Board. (d ) The Board may authorize the use of rate tables or charts which may provide for the dis closure of annual percentage rates which vary from the rate determined in accordance with subsection (a)(1)(A) by not more than such tol erances as the Board may allow. T he Board may not allow a tolerance greater than 8 per centum of that rate except to simplify compliance where irregular payments are involved. (e) In the case of creditors determining the annual percentage rate in a m anner other than as described in subsection (c) or (d), the Board may authorize other reasonable tolerances. (f) Prior to January 1, 1971, any rate re quired under this title to be disclosed as a per centage rate may, at the option of the creditor, be expressed in the form of the corresponding ratio of dollars per hundred dollars. § 108. Administrative enforcement (a) Compliance with the requirements imposed under this title shall be enforced under (1) section 8 of the Federal Deposit Insurance Act, in the case of (A ) national banks, by the Comptroller of the Currency. (B) member banks of the Federal Reserve System (other than national banks), by the Board. (C ) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), by the Board of Directors of the Federal Deposit Insurance C o r poration. (2 ) section 5(d) of the H om e Owners’ Loan Act of 1933, section 407 of the N ational Housing Act, and sections 6(i) and 17 of the Federal H o m e Loan Bank Act, by the Federal H om e Loan Bank Board (acting directly or through the Federal Savings and Loan Insurance Corpora- 45 § 109 tion), in the case of any institution subject to any of those provisions. * (3) the Federal Credit Union Act, by the A d m inistrator of the N ational Credit Union A dm in istration with respect to any Federal credit union. ** (4) the Federal Aviation Act of 1958, by the Civil Aeronautics Board with respect to any air carrier or foreign air carrier subject to that Act. ** (5) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture with respect to any activities subject to that Act. *** (6) the F arm Credit A ct of 1971, by the F arm Credit Administration with respect to any Federal land bank, Federal land bank association, Federal intermediate credit bank, or production credit association. (b) F o r the purpose of the exercise by any agency referred to in subsection (a) of its powers u nder any Act referred to in that subsection, a violation of any requirement imposed under this title shall be deemed to be a violation of a re quirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (a), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this title, any other authority conferred on it by law. (c) Except to the extent that enforcement of the requirements imposed under this title is spe cifically committed to some other G overnm ent agency under subsection (a), the Federal T rade Commission shall enforce such requirements. F o r the purpose of the exercise by the Federal Trade Commission of its functions and powers under the Federal T rade Commission Act, a violation of any requirement imposed under this title shall be deemed a violation of a requirement imposed under that Act. All of the functions and powers of the Federal T rade Commission under the F e d eral T rade Commission Act are available to the Commission to enforce compliance by any person with the requirements imposed under this title, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal T rade Commission Act. * A m en d ed 10/2 8 /7 4 . ** Redesignated 10/28 /7 4 . *** A d d ed 10/2 8 /74 . STATUTORY APPENDIX (d) The authority of the Board to issue regu lations under this title does not impair the a u thority o f any other agency designated in this section to make rules respecting its own proce dures in enforcing compliance with requirements imposed under this title. § 109. Views of other agencies In the exercise of its functions under this title, the Board may obtain upon request 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 title. § 110. Advisory committee [Repealed by §703(b) of P.L. 94-239 effective 3 /2 3 /7 6 .] § 111. Effect on other laws (a) This title does not annul, alter, or affect, or exempt any creditor from complying with, the laws of any State relating to the disclosure of information in connection with credit transactions, except to the extent that those laws are inconsis tent with the provisions of this title or regulations thereunder, and then only to the extent of the inconsistency. (b) This title does not otherwise annul, alter or affect in any m anner 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 title extend the applicability of those laws to any class of persons or transactions to which they would not otherwise apply. (c) In any action or proceeding in any court involving a consumer credit sale, the disclosure of the annual percentage rate as required under this title in connection with that sale m ay 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 125, 130, and 166, this title and the regulations issued there under do not affect the validity or enforceability of any contract or obligation under State or F e d eral law. s*** A m en d ed 10/2 8 /7 4 . STATUTORY APPENDIX § § 112. Criminal liability for willful and knowing violation W hoever willfully and knowingly (1) gives false or inaccurate information or fails to provide information which he is required to disclose under the provisions of this title o r any regulation issued thereunder, (2) uses any chart or table authorized by the Board under section 107 in such a m anner as to consistently understate the annual percentage rate determined under section 107(a)(1)(A), or (3) otherwise fails to comply with any require ment imposed under this title, shall be fined not more than $5,000 or impris oned not more than one year, or both. § 113. Penalties agencies inapplicable to governmental N o civil o r criminal penalty provided under this title for any violation thereof may be im posed upon the United States or any agency thereof, or upon any State or political subdivision thereof, or any agency of any State o r political subdivision. § 114. Reports by Board and Attorney General N o t later than January 3 of each year after 1969, the Board and the Attorney General shall, respectively, make reports to the Congress con cerning the administration of their functions under this title, including such recommendations as the Board and the Attorney General, respec tively, deem necessary or appropriate. In addi tion, each report of the Board shall include its assessment of the extent to which compliance with the requirements imposed under this title is being achieved. *§ 115. Liability o f assignees Except as otherwise specifically provided in this title, any civil action for a violation o f this title which may be brought against the original creditor in any credit transaction m ay be m ain tained against any subsequent assignee of the original creditor where the violation from which the alleged liability arose is apparent on the face of the instrument assigned unless the assignment is involuntary. * Added 10/2 8 /7 4. 112 CHAPTER 2—CREDIT TRANSACTIONS Sec. 121. 122. 123. 124. 125. General requirement of disclosure. F o rm of disclosure; additional information. Exemption for State-regulated transactions. Effect of subsequent occurrence. Right o f rescission as to certain transac tions. 126. Content of periodic statements. 127. Open end consumer credit plans. 128. Sales not under open end credit plans. 129. Consumer loans not under open end credit plans. 130. Civil liability. 131. Written acknowledgment as proof o f re ceipt. 132. Issuance of credit cards. 133. Liability of holder of credit card. 134. Fraudulent use of credit card. 135. Business credit cards. **§ 121. General requirement of disclosure (a) Each creditor shall disclose clearly and con spicuously, in accordance with the regulations of the Board, to each person to whom consumer credit is extended the information required under this chapter or chapter 4. (b) If there is more than one obligor, a credi tor need not furnish a statement of information required under this chapter or chapter 4 to more than one of them. The Board may provide by regulation that any portion of the information required to be dis closed by this section may be given in the form of estimates where the provider of such inform a tion is not in a position to know exact inform a tion. ***§ 122. Form of disclosure; additional informa tion (a) Regulations of the Board need not require that disclosures pursuant to this chapter or chap ter 4 be made in the order set forth in this chapter or chapter 4, and may permit the use of termi nology different from that employed in this chap ter or chapter 4 if it conveys substantially the same meaning. ** A m ended 1 0 /2 8 /7 4 and 1 /2 /7 6 . *** A m ended 10/2 8 /7 4 . STATUTORY APPENDIX § 123 (b) Any creditor m ay supply additional infor interest arising by operation of law, becomes void mation or explanations with any disclosures re upon such a rescission. Within ten days after quired under this chapter or chapter 4. receipt of a notice of rescission, the creditor shall return to the obligor any money or property § 123. Exemption for State-regulated transactions given as earnest money, downpayment, or other wise, and shall take any action necessary or The Board shall by regulation exempt from the appropriate to reflect the termination of any requirements of this chapter any class of credit security interest created under the transaction. If transactions within any State if it determines that the creditor has delivered any property to the obli under the law of that State that class of transac gor, the obligor may retain possession of it. U pon tions is subject to requirements substantially simi the performance of the creditor’s obligations lar to those imposed under this chapter, and that under this section, the obligor shall tender the there is adequate provision for enforcement. property to the creditor, except that if return of § 124. Effect o f subsequent occurrence the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable If information disclosed in accordance with value. Tender shall be made at the location of this chapter is subsequently rendered inaccurate the property or at the residence of the obligor, at as the result of any act, occurrence, or agreement the option of the obligor. If the creditor does not subsequent to the delivery of the required disclo take possession of the property within ten days sures, the inaccuracy resulting therefrom does not after tender by the obligor, ownership of the constitute a violation of this chapter. property vests in the obligor without obligation on his part to pay for it. § 125. Right of rescission as to certain transac (c) Notwithstanding any rule of evidence, tions written acknowledgment of receipt of any disclo * (a) Except as otherwise provided in this sec sures required under this title by a person to tion, in the case of any consumer credit transac whom a statement is required to be given pursuant tion in which a security interest, including any to this section does no more than create a rebut such interest arising by operation of law, is or will table presumption of delivery thereof. be retained o r acquired in any real property which (d) The Board may, if it finds that such action is used o r is expected to be used as the residence is necessary in order to permit homeowners to of the person to whom credit is extended, the meet bona fide personal financial emergencies, obligor shall have the right to rescind the transac prescribe regulations authorizing the modification tion until midnight of the third business day fol or waiver of any rights created under this section lowing the consummation of the transaction or to the extent and under the circumstances set the delivery of the disclosures required under this forth in those regulations. section and all other material disclosures required * (e) This section does not apply to the creation under this chapter, whichever is later, by notifying or retention of a first lien against a dwelling to the creditor, in accordance with regulations of the finance the acquisition of that dwelling or to a Board, of his intention to do so. T he creditor shall consumer credit transaction in which an agency clearly and conspicuously disclose, in accordance of a State is the creditor. with regulations of the Board, to any obligor in a ** (f) An obligor’s right of rescission shall expire transaction subject to this section the rights of the three years after the date of consummation of the obligor under this section. The creditor shall also transaction or upon the sale of the property, provide, in accordance with regulations of the whichever occurs earlier, notwithstanding the fact Board, an adequate opportunity to the obligor that the disclosures required under this section or to exercise his right to rescind any transaction any other material disclosures required under this subject to this section. chapter have not been delivered to the obligor. * (b) W hen an obligor exercises his right to rescind under subsection (a), he is not liable for § 126. Content of periodic statements any finance or other charge, and any security If a creditor transmits periodic statements in interest given by the obligor, including any such connection with any extension of consumer credit * A m en d ed 10/2 8 /7 4. ** A dded 10/28/74. STATUTORY APPENDIX other than under an open end consumer credit plan, then each of those statements shall set forth each of the following items: (1) The annual percentage rate of the total finance charge. (2) The date by which, or the period (if any) within which, payment must be made in order to avoid additional finance charges or other charges. (3) Such of the items set forth in section 127(b) as the Board may by regulation require as appro priate to the terms and conditions under which the extension of credit in question is made. § 127 sistent with commonly accepted standards for accounting or statistical procedures, to carry out the purposes of this paragraph. (6) The conditions under which any other charges may be imposed, and the method by which they will be determined. (7) The conditions under which the creditor may retain or acquire any security interest in any property to secure the payment of any credit extended under the plan, and a description of the interest or interests which may be so retained or acquired. * (8) A statement, in a form prescribed by regu § 1 2 7 . O p e n en d c o n su m er credit plans lations of the Board of the protection provided by (a) Before opening any account under an open sections 161 and 170 to an obligor and the creditor’s responsibilities under sections 162 and end consumer credit plan, the creditor shall dis 170. With respect to each of two billing cycles close to the person to whom credit is to be ex per year, at semi-annual intervals, the creditor tended each of the following items, to the extent shall transmit such statement to each obligor to applicable: whom the creditor is required to transmit a state !! (1) The conditions under which a finance ment pursuant to section 127(b) for such billing charge may be imposed, including the time period cycle. (if any) within which any credit extended may be (b) The creditor of any account under an open repaid without incurring a finance charge, except end consumer credit plan shall transmit to the that the creditor may, at his election and without obligor, for each billing cycle at the end of which disclosure, impose no such finance charge if pay there is an outstanding balance in that account or ment is received after the termination of such time with respect to which a finance charge is imposed, period. a statement setting forth each of the following (2) The method of determining the balance items to the extent applicable: upon which a finance charge will be imposed. (1) The outstanding balance in the account at (3) The method of determining the amount of the beginning of the statement period. the finance charge, including any minimum or * (2) The am ount and date of each extension of fixed amount imposed as a finance charge. credit during the period and a brief identification (4) Where one or more periodic rates may be on or accompanying the statement of each exten used to compute the finance charge, each such sion of credit in a form prescribed by regulations rate, the range of balances to which it is applica of the Board sufficient to enable the obligor to ble, and the corresponding nominal annual per identify the transaction, or relate it to copies of centage rate determined by multiplying the peri sales vouchers or similar instruments previously odic rate by the num ber of periods in a year. furnished. (5) If the creditor so elects, (3) The total amount credited to the account (A) the average effective annual percentage during the period. rate of return received from accounts under the (4) The amount of any finance charge added to plan for a representative period of time; or the account during the period, itemized to show (B) whenever circumstances are such that the the amounts, if any, due to the application of computation of a rate under subparagraph (A) percentage rates and the amount, if any, imposed would not be feasible or practical, or would be as a minimum or fixed charge. misleading or meaningless, a projected rate of (5) Where one or more periodic rates may be return to be received from accounts under the used to compute the finance charge, each such plan. The Board shall prescribe regulations, con rate, the range of balances to which it is applica ble, and, unless the annual percentage rate (deter mined under section 107(a)(2)) is required to be disclosed pursuant to paragraph (6), the corres ponding nominal annual percentage rate deter* A m ended 10/28/74. § 128 mined by multiplying the periodic rate by the number of periods in a year. (6) W here 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 ex pressed as an annual percentage rate (determined u nder section 107(a)(2)), 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 o f the balance to which it is applicable. (7) At the election of the creditor, the average effective annual percentage rate of return (or the projected rate) under the plan as prescribed in subsection (a)(5). (8) The balance on which the finance charge was computed and a statement of how the balance was determined. If the balance is determined with out first deducting all credits during the period, that fact and the amount of such payments shall also be disclosed. (9) The outstanding balance in the account at the end of the period. * (10) 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, im pose no such additional finance charge if payment is received after such date o r the termination of such period. ** (11) T he address to be used by the creditor for the purpose of receiving billing inquiries from the obligor. * * * (c) In the case of any existing account under an open end consumer credit plan having an out standing balance of more than $1 at or after the close of the creditor’s first full billing cycle under the plan after the effective date of subsection (a) or any amendments thereto, the items described in subsection (a), to the extent applicable and not previously disclosed, shall be disclosed in a notice mailed or delivered to the obligor not later than the time of mailing the next statement re quired by subsection (b). * A m en ded 10/2 8 /7 4 . ** A dd ed 10/2 8/7 4 . *** Am ended 10/2 8/7 4 . STATUTORY APPENDIX § 128. Sales not under open end credit plans (a) In connection with each consumer credit sale not under an open end credit plan, the credi tor shall disclose each of the following items which is applicable: (1) The cash price of the property or service purchased. (2) The sum of any amounts credited as downpayment (including any trade-in). (3) The difference between the amount referred to in paragraph (1) and the amount referred to in paragraph (2). (4) All other charges, individually itemized, which are included in the am ount of the credit extended but which are not part of the finance charge. (5) T he total amount to be financed (the sum of the amount described in paragraph (3) plus the amount described in paragraph (4)). (6) Except in the case of a sale of a dwelling, the am ount of the finance charge, which may in whole or in part be designated as a time-price differential or any similar term to the extent ap plicable. (7) T he finance charge expressed as an annual percentage rate except in the case of a finance charge (A) which does not exceed $5 and is ap plicable to an amount financed not exceeding $75, or (B) which does not exceed $7.50 and is applicable to an am ount financed exceeding $75. A creditor may not divide a consumer credit sale into two or more sales to avoid the disclosure of an annual percentage rate pursuant to this p ara graph. (8) The number, amount, and due dates or periods of payments scheduled to repay the in debtedness. (9) T he default, delinquency, or similar charges payable in the event of late payments. (10) A description of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates. (b) Except as otherwise provided in this chap ter, the disclosures required under subsection (a) shall be made before the credit is extended, and may be made by disclosing the information in the contract or other evidence of indebtedness to be signed by the purchaser. STATUTORY APPENDIX (c) If a creditor receives a purchase order by mail or telephone without personal solicitation, and the cash price and the deferred payment price and the terms of financing, including the annual percentage rate, are set forth in the credi tor’s catalog or other printed material distributed to the public, then the disclosures required under subsection (a) may be made at any time not later than the date the first payment is due. (d) If a consumer credit sale is one of a series of consumer credit sales transactions made pur suant to an agreement providing for the addition of the deferred payment price of that sale to an existing outstanding balance, and the person to whom the credit is extended has approved in writing both the annual percentage rate or rates and the method of computing the finance charge or charges, and the creditor retains no security interest in any property as to which he has re ceived payments aggregating the am ount of the sales price including any finance charges attribut able thereto, then the disclosure required under subsection (a) for the particular sale may be made at any time not later than the date the first payment for that sale is due. F o r the purposes of this subsection, in the case of items purchased on different dates, the first purchased shall be deemed first paid for, and in the case of items purchased on the same date, the lowest priced shall be deemed first paid for. § 129 purchase of that dwelling, the am ount of the finance charge. (5) T he finance charge expressed as an annual percentage rate except in the case of a finance charge (A ) which does not exceed $5 and is ap plicable to an extension of consumer credit not exceeding $75, or (B) which does n o t exceed $7.50 and is applicable to an extension of consumer credit ex ceeding $75. A creditor may not divide an extension of credit into two or more transactions to avoid the disclo sure of an annual percentage rate pursuant to this paragraph. (6) The number, amount, and the due dates or periods of payments scheduled to repay the in debtedness. (7) The default, delinquency, or similar charges payable in the event of late payments. (8 ) A description of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and a clear identification of the property to which the security interest relates. (b ) Except as otherwise provided in this chap ter, the disclosures required by subsection (a) shall be made before the credit is extended, and may be made by disclosing the information in the note or other evidence of indebtedness to be signed by the obligor. (c) If a creditor receives a request for an ex § 129. Consumer loans not under open end tension of credit by mail or telephone without credit plans personal solicitation and the terms of financing, (a) Any creditor making a consumer loan or including the annual percentage rate for repre otherwise extending consumer credit in a transac sentative amounts of credit, are set forth in the tion which is neither a consumer credit sale nor creditor’s printed material distributed to the pub under an open end consumer credit plan shall lic, or in the contract of loan or other printed disclose each of the following items, to the extent material delivered to the obligor, then the disclo applicable: sures required under subsection (a) may be made (1) The am ount of credit of which the obligor at any time not later than the date the first pay will have the actual use, or which is or will be ment is due. paid to him or for his account or to another per son on his behalf. § 130. Civil liability (2 ) All charges, individually itemized, which *(a) Except as otherwise provided in this sec are included in the am ount of credit extended but tion, any creditor who fails to comply with any which are not part of the finance charge. requirement imposed under this chapter or chap (3 ) The total am ount to be financed (the sum ter 4 or 5 of this title with respect to any person is of the amounts referred to in paragraph (1 ) plus the amounts referred to in paragraph (2)). (4 ) Except in the case of a loan secured by a first lien on a dwelling and made to finance the * A m ended 1 0 /2 8 /7 4 and 3 /2 3 /7 6 . § 130 STATUTORY APPENDIX liable to such person in an am ount equal to the tional and resulted from a bona fide error not sum of— withstanding the maintenance of procedures (1) any actual damage sustained by such per reasonably adapted to avoid any such error. son as a result of the failure; (d) Any action which may be brought under (2)(A)(i) in the case o f an individual action this section against the original creditor in any twice the amount of any finance charge in con credit transaction involving a security interest in nection with the transaction, or (ii) in the case real property may be maintained against any sub of an individual action relating to a consumer sequent assignee of the original creditor where lease under chapter 5 of this title, 25 per centum the assignee, its subsidiaries, or affiliates were in of the total am ount of monthly payments under a continuing business relationship with the origi the lease, except that the liability under this sub nal creditor either at the time the credit was ex paragraph shall not be less than $100 nor greater tended or at the time of the assignment, unless than $1,000; or the assignment was involuntary, o r the assignee (B) in the case of a class action, such amountshows by a preponderance of evidence that it did as the court may allow, except that as to each not have reasonable grounds to believe that the member of the class no minimum recovery shall original creditor was engaged in violations of be applicable, and the total recovery in such ac this chapter, and that it maintained procedures tion shall not be more than the lesser of $500,000 reasonably adapted to apprise it of the existence or 1 per centum of the net worth of the creditor; of any such violations. and (e) Any action under this section may be (3 ) in the case of any successful action to en brought in any United States district court, or in force the foregoing liability, the costs of the ac any other court of competent jurisdiction, within tion, together with a reasonable attorney’s fee as one year from the date of the occurrence of the determined by the court. violation. In determining the am ount of award in any class (f) N o provision of this section or section action, the court shall consider, among other rele 112 imposing any liability shall apply to any act vant factors, the am ount of any actual damages done or omitted in good faith in conformity with awarded, the frequency and persistence of fail any rule, regulation, or interpretation thereof by ures of compliance by the creditor, the resources the Board or in conformity with any interpretation of the creditor, the num ber of persons adversely or approval by an official or employee of the F ed affected, and the extent to which the creditor’s eral Reserve System duly authorized by the Board failure of compliance was intentional. to issue such interpretations or approvals under * (b) A creditor has no liability under this sec such procedures as the Board may prescribe tion for any failure to comply with any require therefor, notwithstanding that after such act or m ent imposed under this chapter or chapter 5, if omission has occurred, such rule, regulation, in within fifteen days after discovering an error, and terpretation, or approval is amended, rescinded, prior to the institution of an action under this or determined by judicial or other authority to section or the receipt of written notice of the be invalid for any reason. error, the creditor notifies the person concerned of **** (g) The multiple failure to disclose to any the error and makes whatever adjustments in the person any information required under this chap appropriate account are necessary to insure that ter or chapter 4 or 5 of this title to be disclosed the person will not be required to pay a charge in in connection with a single account under an open excess of the am ount or percentage rate actually end consumer credit plan, other single consumer disclosed. credit sale, consumer loan, consumer lease, or ** (c) A creditor may not be held liable in any other extension of consumer credit, shall entitle action brought under this section for a violation the person to a single recovery under this section of this title if the creditor shows by a preponder but continued failure to disclose after a recovery ance of evidence that the violation was not inten * A m en d ed 10 /2 8 /7 4 and 3 /2 3 /7 6 . »* Am ended 10/28/74. *** A d d ed 1 0 /2 8 /7 4 , am ended 2 /2 7 /7 6 . **** A d d e d 1 0 /2 8 /7 4 , am ended 3 /2 3 /7 6 . STATUTORY APPENDIX has been granted shall give rise to rights to addi tional recoveries. * (h) A person may not take any action to off set any am ount for which a creditor is potentially liable to such person under subsection (a)(2) against any am ount owing to such creditor by such person, unless the amount of the creditor’s liability to such person has been determined by judgment of a court of competent jurisdiction in an action to which such person was a party. § 131. Written acknowledgment as proof of re ceipt Except as provided in section 125(c) and ex cept in the case of actions brought under section 130(d), in any action or proceeding by or against any subsequent assignee of the original creditor without knowledge to the contrary by the assignee when he acquires the obligation, written acknowl edgment of receipt by a person to whom a state m ent is required to be given pursuant to this title shall be conclusive proof of the delivery thereof and, unless the violation is apparent on the face of the statement, of compliance with this chapter. This section does not affect the rights of the obligor in any action against the original creditor. **§ 132. Issuance of credit cards • N o credit card shall be issued except in re sponse to a request or application therefor. This prohibition does not apply to the issuance of a credit card in renewal of, or in substitution for, an accepted credit card. ***§ 133. Liability of holder of credit card (a) A cardholder shall be liable for the u n au thorized use of a credit card only if the card is an accepted credit card, the liability is not in ex cess of $50, the card issuer gives adequate notice to the cardholder of the potential liability, the card issuer has provided the cardholder with a self-addressed, prestamped notification to be mailed by the cardholder in the event of the loss or theft of the credit card, and the unauthorized use occurs before the cardholder has notified the card issuer that an unauthorized use of the credit card has occurred or may occur as the result of * A d d ed 10/28/74. ** Added 10/2 6 /7 0 . *** A dded 1 0/26 /7 0 , effective 1/25/71. § 131 loss, theft, or otherwise. Notwithstanding the foregoing, no cardholder shall be liable for the unauthorized use of any credit card which was is sued on or after the effective date of this section, and, after the expiration of twelve months follow ing such effective date, no cardholder shall be liable for the unauthorized use of any credit card regardless of the date of its issuance, unless (1) the conditions of liability specified in the preced ing sentence are met, and (2) the card issuer has provided a method whereby the user of such card can be identified as the person authorized to use it. F o r the purposes of this section, a cardholder notifies a card issuer by taking such steps as may be reasonably required in the ordinary course of business to provide the card issuer with the perti nent information whether or not any particular officer, employee, or agent of the card issuer does in fact receive such information. (b) 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 u n au th o r ized, then the burden of proof is upon the card issuer to show th a t the conditions of liability for the unauthorized use of a credit card, as set forth in subsection (a), have been met. (c) N othing in this section imposes liability upon a cardholder fo r the unauthorized use of a credit card in excess of his liability for such use under other applicable law or under any agree ment with the card issuer. (d) Except as provided in this section, a card holder incurs no liability from the unauthorized use of a credit card. * * * * § 1 3 4 . F ra u d u len t use o f cred it card (a) W hoever knowingly in a transaction affect ing interstate or foreign commerce, uses or at tempts or conspires to use any counterfeit, ficti tious, altered, forged, lost, stolen, o r fraudulently obtained credit card to obtain money, goods, services, or anything else of value which within any one-year period has a value aggregating $1,000 o r more; or (b) Whoever, with unlawful or fraudulent in tent, transports or attempts o r conspires to trans port in interstate o r foreign commerce a counter feit, fictitious, altered, forged, lost, stolen, or **** A d d ed 1 0 /2 6/70 , am ended 10/28/74. § 135 fraudulently obtained credit card knowing the same to be counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained; or (c) Whoever, with unlawful or fraudulent in tent, uses any instrumentality of interstate or fo r eign commerce to sell or transport a counterfeit, fictitious, altered, forged, lost, stolen, or frau d u lently obtained credit card knowing the same to be counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained; or (d) W hoever knowingly receives, conceals, uses, or transports money, goods, services, or anything else of value (except tickets for interstate or fo r eign transportation) which (1) within any one-year period has a value aggregating $1,000 or more, (2) has moved in or is part of, or which consti tutes interstate or foreign commerce, and (3) has been obtained with a counterfeit, fictitious, al tered, forged, lost, stolen, or fraudulently obtained credit card; or (e) Whoever knowingly receives, conceals, uses, sells, or transports in interstate or foreign co m merce one or more tickets for interstate or fo r eign transportation, which (1) within any one-year period have a value aggregating $500 or more, and (2) have been purchased or obtained with one or more counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit cards; or (f) Whoever in a transaction affecting interstate o r foreign commerce furnishes money, property, services, or anything else of value, which within any one-year period has a value aggregating $1,000 o r more, through the use of any counter feit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit card knowing the same to be counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained— shall be fined not more than $10,000 or impris oned not more than ten years, or both. * § 135. Business credit cards T he exemption provided by section 104(1) does not apply to the provisions of sections 132, 133, and 134, 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 * A dded 10/28/74. STATUTORY APPENDIX without regard to the provisions of section 133, but in no case may such business o r other orga nization 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 133. CHAPTER 3— CREDIT ADVERTISING Sec. 141. Catalogs and multiple-page advertisements. 142. Advertising of downpayments and install ments. 143. Advertising of open end credit plans. 144. Advertising of credit other than open end plans. 145. Nonliability of media. 146. More-than-four-installment rule. § 141. Catalogs and multiple-page advertisements F o r the purposes of this chapter, a catalog or other multiple-page advertisement shall be consid ered a single advertisement if it clearly and con spicuously displays a credit terms table on which the information required to be stated under this chapter is clearly set forth. § 142. Advertising of downpayments and install ments N o advertisement to aid, promote, or assist di rectly or indirectly any extension of consumer credit may state (1) that a specific periodic consumer credit am ount 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) that a specified downpayment is required in connection with any extension of consumer credit, unless the creditor usually and customarily arranges downpayments in that amount. § 143. Advertising of open end credit plans N o advertisement to aid, promote, or assist directly or indirectly the extension of consumer credit under an open end credit plan may set forth any of the specific terms of that plan or the appropriate rate determined under section 127(a)(5) unless it also clearly and conspicuously sets forth all of the following items: (1) T he time period, if any, within which any STATUTORY APPENDIX credit extended may be repaid without incurring a finance charge. (2) T he method of determining the balance upon which a finance charge will be imposed. (3) The method of determining the am ount of the finance charge, including any minim um or fixed amount imposed as a finance charge. (4) W here periodic rates may be used to com pute the finance charge, the periodic rates ex pressed as annual percentage rates. (5) Such other o r additional information for the advertising of open end credit plans as the Board may by regulation require to provide for adequate comparison of credit costs as between different types of open end credit plans. § 144. Advertising of credit other than open end plans (a) Except as provided in subsection (b), this section applies to any advertisement to aid, pro mote, or assist directly o r indirectly any consumer credit sale, loan, or other extension of credit sub ject to the provisions of this title, other than an open end credit plan. (b) The provisions of this section do not apply to advertisements of residential real estate except to the extent that the Board may by regulation require. (c) 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. (d) If any advertisement to which this section applies states the amount of the downpayment, if any, the am ount of any installment payment, the dollar am ount o f any finance charge, or the n u m ber of installments or the period of repayment, then the advertisement shall state all of the fol lowing items: (1) The cash price or the am ount of the loan as applicable. (2) The downpayment, if any. (3) The number, amount, and due dates or period of payments scheduled to repay the in debtedness if the credit is extended. (4) The rate of the finance charge expressed as an annual percentage rate. § 144 medium in which an advertisement appears or through which it is disseminated. * § 146. More-than-four-installment rule Any advertisement to aid, promote, or assist directly or indirectly the extension of consumer credit repayable in more than four installments shall, unless a finance charge is imposed, clearly and conspicuously state, in accordance with the regulations of the Board: “T H E COST O F C R E D IT IS IN C L U D E D IN T H E P R IC E Q U O T E D F O R T H E GOODS A N D SERV ICES.” * CHAPTER 4— CREDIT BILLING Sec. 161. 162. 163. 164. 165. 166. 167. 168. 169. 170. 171. Correction of billing errors. Regulation of credit reports. Length of billing period. P rom pt crediting of payments. Crediting excess payments. P rom pt notification of returns. Use of cash discounts. Prohibition of tie-in services. Prohibition of offsets. Rights of credit card customers. Relation to State laws. § 161. Correction of billing errors (a) If a creditor, within sixty days after having transmitted to an obligor a statement of the obli gor’s account in connection with an extension of consumer credit, receives at the address dis closed under section 127(b)(ll) a written notice (other than notice on a paym ent stub or other paym ent medium supplied by the creditor if the creditor so stipulates with the disclosure required under section 127(a)(8)) from the obligor in which the obligor— (1) sets forth or otherwise enables the creditor to identify the name and account num ber (if any) of the obligor, (2) indicates the obligor’s belief that the state ment contains a billing error and the am ount of such billing error, and (3) sets forth the reasons for the obligor’s be- § 145. Nonliability of media There is no liability under this chapter on the part of any owner or personnel, as such, of any * A dded 10/2 8/7 4 . § 161 STATUTORY APPENDIX lief (to the extent applicable) that the statement (1) A reflection on a statement of an extension contains a billing error, of credit which was not made to the obligor or, the creditor shall, unless the obligor has, after if made, was not in the am ount reflected on such giving such written notice and before the expira statement. tion of the time limits herein specified, agreed that (2) A reflection on a statement of an extension the statement was correct— of credit for which the obligor requests addi (A) not later than thirty days after the receipt tional clarification including documentary evi of the notice, send a written acknowledgment dence thereof. thereof to the obligor, unless the action required (3) A reflection on a statement o f goods or in subparagraph (B) is taken within such thirtyservices not accepted by the obligor or his desig day period, and nee o r not delivered to the obligor or his desig (B) not later than two complete billing cycles nee in accordance with the agreement made at of the creditor (in no event later than ninety days) the time of a transaction. after the receipt of the notice and prior to taking (4) T he creditor’s failure to reflect properly on any action to collect the amount, or any part a statement a paym ent made by the obligor or thereof, indicated by the obligor under paragraph a credit issued to the obligor. (2) either— (5) A computation error or similar error of an (i) make appropriate corrections in the accounting nature of the creditor on a statement. account of the obligor, including the crediting of (6) Any other error described in regulations of any finance charges on amounts erroneously the Board. billed, and transmit to the obligor a notification (c) F or the purposes of this section, “action to collect the amount, or any part thereof, indi of such corrections and the creditor’s explanation of any change in the am ount indicated by the cated by an obligor under paragraph (2)” does not obligor under paragraph (2) and, if any such include the sending of statements of account to change is made and the obligor so requests, cop the obligor following written notice from the ob ligor as specified under subsection (a), if— ies of documentary evidence of the obligor’s in debtedness; or (1) the obligor’s account is not restricted or (ii) send a written explanation or clarifica closed because of the failure of the obligor to tion to the obligor, after having conducted an pay the am ount indicated under paragraph (2) of investigation, setting forth to the extent applicable subsection (a), and (2) the creditor indicates the paym ent of such the reasons why the creditor believes the account of the obligor was correctly shown in the state am ount is not required pending the creditor’s ment and, upon request of the obligor, provide compliance with this section. Nothing in this copies of docum entary evidence of the obligor’s section shall be construed to prohibit any action indebtedness. In the case of a billing error where by a creditor to collect any am ount which has the obligor alleges that the creditor’s billing state not been indicated by the obligor to contain a billing error. ment reflects goods not delivered to the obligor or his designee in accordance with the agreement (d) Pursuant to regulations of the Board, a made at the time of the transaction, a creditor creditor operating an open end consumer credit m ay not construe such am ount to be correctly plan may not, prior to the sending of the written shown unless he determines that such goods were explanation or clarification required under p ara actually delivered, mailed, or otherwise sent to graph (B)(ii), restrict or close an account with the obligor and provides the obligor with a state respect to which the obligor has indicated pu r ment o f such determination. suant to subsection (a) that he believes such A fter complying with the provisions o f this sub account to contain a billing error solely because section with respect to an alleged billing error, of the obligor’s failure to pay the am ount indi a creditor has no further responsibility under this cated to be in error. N othing in this subsection section if the obligor continues to m ake substan shall be deemed to prohibit a creditor from apply tially the same allegation with respect to such ing against the credit limit on the obligor’s ac error. count the am ount indicated to be in error. (b) F o r the purpose of this section, a “billing (e) Any creditor who fails to comply with the erro r” consists of any of the following: requirements of this section or section 162 for- STATUTORY APPENDIX feits any right to collect from the obligor the am ount indicated by the obligor under paragraph (2) of subsection (a) of this section, and any finance charges thereon, except that the am ount required to be forfeited under this subsection may not exceed $50. § 162. Regulation of credit reports (a) A fter receiving a notice from an obligor as provided in section 161(a), 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 ob ligor’s failure to pay the am ount indicated by the obligor under section 161(a)(2), and such am ount may not be reported as delinquent to any third party until the creditor has met the require ments of section 161 and has allowed the obligor the same num ber of days (not less than ten) there after to make payment as is provided under the credit agreement with the obligor for the pay ment of undisputed amounts. (b) If a creditor receives a further written no tice from an obligor that an am ount is still in dis pute within the time allowed for paym ent under subsection (a) of this section, a creditor may not report to any third party that the am ount of the obligor is delinquent because the obligor has failed to pay an am ount which he has indicated under section 161(a)(2), unless the creditor also reports that the am ount 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. (c) A creditor shall report any subsequent reso lution of any delinquencies reported pursuant to subsection (b) to the parties to whom such de linquencies were initially reported. § 162 payment must be made in order to avoid imposi tion of that finance charge. (b) Subsection (a) 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 G od, war, natural disaster, strike, or other excus able or justifiable cause, as determined under regulations of the Board. § 164. Prompt crediting of payments 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 reg ulations shall prevent a finance charge from being imposed on any obligor if the creditor has re ceived the obligor’s paym ent in readily identifiable form in the amount, manner, location, and time indicated by the creditor to avoid the imposition thereof. § 165. Crediting excess payments Whenever an obligor transmits funds to a credi tor in excess of the total balance due on an open end consumer credit account, the creditor shall promptly (1) upon request of the obligor refund the amount of the overpayment, or (2) credit such am ount to the obligor’s account. § 166. Prompt notification o f returns 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, § 163. Length of billing period a credit statement with respect thereto and the (a) If an open end consumer credit plan pro credit card issuer shall credit the account of the obligor for the am ount of the transaction. vides a time period within which an obligor may repay any portion o f the credit extended without § 167. Use o f cash discounts incurring an additional finance charge, such addi *(a)(l) W ith respect to credit card which may tional finance charge may not be imposed with be used for extensions of credit in sales transac respect to such portion of the credit extended for tions in which the seller is a person other than the the billing cycle of which such period is a part card issuer, the card issuer may not, by contract unless a statement which includes the amount or otherwise, prohibit any such seller from offer upon which the finance charge for that period is based was mailed at least fourteen days prior to the date specified in the statement by which * A m ended 2 /2 7 /7 6 . § 168 ing a discount to a cardholder to induce the card holder to pay by cash, check, or similar means rather than use a credit card. * (2) N o seller in any sales transaction may im pose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. (b) With respect to any sales transaction, any discount not in excess of 5 per centum offered by the seller for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card shall not constitute a finance charge as determined under section 106, if such discount is offered to all prospective buyers and its availability is disclosed to all prospective buy ers clearly and conspicuously in accordance with regulations o f the Board. STATUTORY APPENDIX 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. (b) 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. § 170. Rights of credit card customers (a) Subject to the limitation contained in sub section (b), a card issuer who has issued a credit § 168. Prohibition of tie-in services card to a cardholder pursuant to an open end consumer credit plan shall be subject to all claims Notwithstanding any agreement to the contrary, (other than tort claims) and defenses arising out a card issuer may not require a seller, as a con of any transaction in which the credit card is dition to participating in a credit card plan, to used as a method of payment or extension of open an account with or procure any other serv credit if (1) the obligor has made a good faith ice from the card issuer or its subsidiary or agent. attempt to obtain satisfactory resolution of a dis § 169. Prohibition of offsets agreement or problem relative to the transaction (a) A card issuer may not take any action to from the person honoring the credit card; (2) the am ount of the initial transaction exceeds $50; offset a cardholder’s indebtedness arising in con and (3) the place where the initial transaction nection with a consumer credit transaction under occurred was in the same State as the mailing the relevant credit card plan against funds of the address previously provided by the cardholder cardholder held on deposit with the card issuer or was within 100 miles from such address, except unless— that the limitations set forth in clauses (2) and (1) such action was previously authorized in (3) with respect to an obligor’s right to assert writing by the cardholder in accordance with a claims and defenses against a card issuer shall credit plan whereby the cardholder agrees period not be applicable to any transaction in which ically to pay debts incurred in his open end credit the person honoring the credit card (A) is the account by permitting the card issuer periodically same person as the card issuer, (B) is controlled to deduct all or a portion of such debt from the by the card issuer, (C) is under direct or indirect cardholder’s deposit account, and com m on control with the card issuer, (D) is a (2) such action with respect to any outstand franchised dealer in the card issuer’s products or ing disputed am ount not be taken by the card services, o r (E) has obtained the order for such issuer upon request of the cardholder. transaction through a mail solicitation made by or In the case of any credit card account in exis participated in by the card issuer in which the tence on the effective date of this section, the cardholder is solicited to enter into such trans previous written authorization referred to in action by using the credit card issued by the card clause (1) shall not be required until the date issuer. (after such effective date) when such account is (b) The am ount of claims or defenses asserted renewed, but in no case later than one year after by the cardholder may not exceed the am ount of such effective date. Such written authorization credit outstanding with respect to such transaction at the time the cardholder first notifies the card * A dded 2 /2 7 /7 6 . issuer or the person honoring the credit card of STATUTORY APPENDIX such claim or defense. F or the purpose of de termining the am ount 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 ac count other than those set forth above, in the order in which each debit entry to the account was made. § 171 * * C H A P T E R 5— C O N S U M E R LEASES Sec. 181. Definitions. 182. Consumer lease disclosures. 183. Lessee’s liability on expiration or term ina tion of lease. 184. Consumer lease advertising. 185. Civil liability. 186. Relation to State laws. § 181. Definitions § 171. Relation to State laws (a) This chapter does not annul, alter, or affect, or exempt any person subject to the provisions of this chapter from complying with the laws of any State with respect to credit billing prac tices, except to the extent that those laws are inconsistent with any provision of this chapter, 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 chapter if the Board deter mines that such law gives greater protection to the consumer. (b) The Board shall by regulation exempt from the requirements of this chapter any class of credit transactions within any State if it deter mines that under the law o f that State that class of transactions is subject to requirements substan tially similar to those imposed under this chapter or that such law gives greater protection to the consumer, and that there is adequate provision for enforcement. *(c) Notwithstanding any other provisions of this title, any discount offered under section 167(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 connec tion 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. * A dded 2 /2 7 /7 6 . F o r purposes of this chapter— (1) The term “consumer lease” means a con tract in the form of a lease o r 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 house hold purposes, whether or not the lessee has the option to purchase or otherwise become the owner of the property at the expiration o f the lease, except that such term shall not include any credit sale as defined in section 103(g). Such term does not include a lease for agricultural, business, or commercial purposes, o r 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 inter est” mean any interest in property which secures payment or performance of an obligation. § 182. Consumer lease disclosures Each lessor shall give a lessee prior to the con summation of the lease a dated written state ment on which the lessor and lessee are identified setting out accurately and in a clear and con spicuous manner the following information with respect to that lease, as applicable: ** A dded 3 /2 3 /7 6 . § 183 (1) A brief description or identification of the leased property; (2) The amount o f any payment by the lessee required at the inception of the lease; (3) The am ount paid or payable by the lessee for official fees, registration, certificate of title, or license fees or taxes; (4) The am ount 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; (5) A statement of the am ount or method of determining the am ount of any liabilities the lease imposes upon the lessee at the end of the term and whether or not the lessee has the option to purchase the leased property and at what price and time; (6) A statement identifying all express w arran ties 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; (8) A description of any security interest held or to be retained by the lessor in connection with the lease and a clear identification of the property to which the security interest relates; (9) T he number, amount, and due dates or periods of payments under the lease and the total am ount of such periodic payments; (10) W here 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 m arket 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 am ount or method of determining any penalty or other charge for delinquency, default, late payments, or early termination. STATUTORY APPENDIX The disclosures required under this section may be made in the lease contract to be signed by the lessee. The Board may provide by regula tion 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. § 183. Lessee’s liability on expiration or termina tion of lease (a) Where the lessee’s liability on expiration of a consumer lease is based on the estimated resi dual value of the property such estimated residual value shall be a reasonable approximation of the anticipated actual fair market value of the prop erty on lease expiration. There shall be a rebutta ble presumption that the estimated residual value is unreasonable to the extent that the estimated residual value exceeds the actual residual value by more than three times the average payment allocable to a monthly period under the lease. In addition, where the lessee has such liability on expiration of a consumer lease there shall be a rebuttable presumption that the lessor’s estimated residual value is not in good faith to the extent that the estimated residual value exceeds the ac tual residual value by more than three times the average payment allocable to a monthly period under the lease and such lessor shall not collect from the lessee the amount of such excess liability on expiration of a consumer lease unless the lessor brings a successful action with respect to such excess liability. In all actions, the lessor shall pay the lessee’s reasonable attorney’s fees. The presumptions stated in this section shall not apply to the extent the excess of estimated over actual residual value is due to physical damage to the property beyond reasonable wear and use, or to excessive use, and the lease may set standards for such wear and use if such standards are not unreasonable. Nothing in this subsection shall preclude the right of a willing lessee to make any mutually agreeable final adjustment with respect to such excess residual liability, provided such an agreement is reached after termination of the lease. (b) Penalties or other charges for delinquency, default, or early termination may be specified in the lease but only at an amount which is reason able in the light of the anticipated or actual harm caused by the delinquency, default, or early ter STATUTORY APPENDIX § 184 mination, the difficulties of proof of loss, and the actual damage from the violation is liable to such inconvenience or nonfeasibility of otherwise ob person as provided in section 130. F or the pu r taining an adequate remedy. poses of this section, the term “creditor” as used (c) If a lease has a residual value provision at in sections 115, 130, and 131 shall include a the termination of the lease, the lessee may obtain lessor as defined in this chapter. at his expense, a professional appraisal of the (c) Notwithstanding section 130(e), any action leased property by an independent third party under this section may be brought in any United agreed to by both parties. Such appraisal shall States district court or in any other court of com be final and binding on the parties. petent jurisdiction. Such actions alleging a failure to disclose or otherwise comply with the require § 184. Consumer lease advertising ments of this chapter shall be brought within one year of the termination of the lease agreement. (a) N o advertisement to aid, promote, or assist directly or indirectly any consumer lease shall § 186. Relation to State laws state the amount of any payment, the number (a) This chapter does not annul, alter, or affect, of required payments, or that any o r no down or exempt any person subject to the provisions of payment o r other payment is required at inception this chapter from complying with, the laws of any of the lease unless the advertisement also states State with respect to consumer leases, except to clearly and conspicuously and in accordance with the extent that those laws are inconsistent with regulations issued by the Board each of the fol any provision of this chapter, and then only to the lowing items of information which is applicable: extent of the inconsistency. The Board is author (1) T h at the transaction advertised is a lease. ized to determine whether such inconsistencies (2) The am ount of any payment required at exist. The Board may not determine that any State the inception of the lease or that no such payment law is inconsistent with any provision of this chap is required if that is the case. ter if the Board determines that such law gives (3) The number, amounts, due dates or periods greater protection and benefit to the consumer. of scheduled payments, and the total of payments (b) The Board shall by regulation exempt from under the lease. the requirements of this chapter any class of lease (4) T hat the lessee shall be liable for the differ transactions within any State if it determines that ential, if any, between the anticipated fair market under the law of that State that class of transac value of the leased property and its appraised tions is subject to requirements substantially simi actual value at the termination of the lease, if lar to those imposed under this chapter or that the lessee has such liability. such law gives greater protection and benefit to (5) A statement of the am ount or method of the consumer, and that there is adequate provision determining the am ount of any liabilities the lease for enforcement. imposes upon the lessee at the end of the term and whether or not the lessee has the option to purchase the leased property and at what price and time. TITLE V— GENERAL PROVISIONS (b) There is no liability under this section on Sec. the part of any owner or personnel, as such, of any medium in which an advertisement appears 501. Severability. or through which it is disseminated. 502. Captions and catchlines for reference only. 503. Gram m atical usages. § 185. Civil liability 504. Effective dates. (a) Any lessor who fails to comply with any § 501. Severability requirement imposed under section 182 or 183 of this chapter with respect to any person is If a provision enacted by this Act is held in liable to such person as provided in section 130. valid, all valid provisions that are severable from (b) Any lessor who fails to comply with any the invalid provision remain in effect. If a provi requirement imposed under section 184 of this sion enacted by this Act is held invalid in one chapter with respect to any person who suffers or more of its applications, the provision remains § 502 STATUTORY APPENDIX in effect in all valid applications that are severable from the invalid application or applications. (2) The word “shall” is used to indicate that an action is both authorized and required. (3) The phrase “may not” is used to indicate that an action is both unauthorized and for bidden. (4) Rules of law are stated in the indicative mood. § 502. Captions and catchlines for reference only Captions and catchlines are intended solely as aids to convenient reference, and no inference as to the legislative intent with respect to any provi sion enacted by this Act may be drawn from them. § 504. Effective dates (a) Except as otherwise specified, the provisions of this A ct take effect upon enactment. In this Act: (b) Chapters 2 and 3 of title I take effect on (1) The word “m ay” is used to indicate that July 1, 1969. an action either is authorized or is permitted. (c) Title III takes effect on July 1, 1970. § 503. Grammatical usages 62 REGULATION Z— INTERPRETATIONS § 226.101 TRUTH IN LENDING INTERPRETATIONS OF REGULATION Z SECTION 226.2 SEC TIO N SECTION 226.1 226.201— LAY-AW AY PLA N S AS E X TE N S IO N S O F C R E D IT M any vendors offer lay-away plans under which they retain the merchandise for a customer until the cash price is paid in full and the customer has no contractual obligation to make payments and may, at his option, revoke a purchase made under the plan and request and receive prom pt refund of any amounts paid toward the cash price of the merchandise. A purchase under such a lay-away plan shall not be considered an extension of credit subject to the provisions of Regulation Z. SECTIO N 226.101— U SE O F “A N N U A L P E R C E N T A G E R A T E ” IN O R A L C O M M U N IC A T IO N S U nder § 226.1(a)(2), a stated purpose of the T ruth in Lending Act and Regulation Z is to as sure that every customer who has need for con sumer credit is given meaningful information with respect to the cost of that credit so that he m ay readily compare the various credit terms available to him from different sources and avoid the uninformed use of credit. U nder § 226.6(a), a creditor is required to make disclosures using certain prescribed terminology, including the “an nual percentage rate.” The question arises as to the propriety of a creditor quoting annual rates other than “annual percentage rate” in response to consumer inquiries about the cost of credit, where such other rates could not be used in an advertisement under the proscriptions of § 226.10. The T ru th in Lending Act and Regulation Z are intended to facilitate “shopping” between competitive credit plans. If a customer inquires about the cost of credit and the creditor responds by quoting an add-on or discount rate, he may mislead the customer since the use of such rates is prohibited in consumer credit advertising and such rates are significantly lower than the annual percentage rate which must be shown on the creditor’s disclosure statement. The quotation of these rates can frustrate the stated purpose of the Act and prevent the customer from making an informed use of credit. In response to any oral inquiry by a customer about the cost of credit, a creditor when quoting annual rates should use only those rates permitted to be used in advertisements under § 226.10. Irrespective of the method used by the creditor to com pute finance charges, the annual rate of the creditor’s total finance charges should be quoted only in terms of the “annual percentage rate.” 5 /5 /6 9 SECTION 226.202— S E C U R IT Y IN T E R E S T — CO N FE SSIO N S O F J U D G M E N T — C O G N O V IT N O T E S U nder § 226.2(gg) “security interest” is defined to include confessed liens w hether or not re corded and, in general, to include any interest in property which secures payment or perform ance of an obligation. In certain transactions involving a security interest, under § 226.9 the customer has a right o f rescission. In some of the States, confession of judgment clauses or cognovit provisions are lawful and make it possible for the holder of an obligation containing such clause or provision to record a lien on property of the obligor simply by recor dation entry of judgment; the obligor is afforded no opportunity to enter a defense against such action prior to entry of the judgment. Since confession of judgment clauses and cog novit provisions in such States have the effect of depriving the obligor of the right to be notified of a pending action and to enter a defense in a judi cial proceeding before judgm ent may be entered or recorded against him, such clauses and provi sions in those States are security interests under § 226.2(gg) and for the purposes of § 226.7(a)(7), § 226.8(b)(5), and § 226.9. This is the case even if the judgment cannot be entered until after a default by the obligor. Confession of judgm ent clauses and cognovit provisions which, by their terms, exclude a lien on all real property which is used or is expected to be used as the principal residence of the cus 6 /2 9 / 7 3 S EC T IO N 226.102— (Rescinded effective 6 /3 0 /7 6 ) 63 § 226.203 REGULATION Z— INTERPRETATIONS tomer, would not bring a transaction under the provisions of § 226.9. 5 /2 6 /6 9 S EC T IO N 226.203— O P E N E N D C R E D IT D IS T IN G U IS H E D F R O M O T H E R C R E D IT The fundamental qualification for “open end credit” under § 226.2(x) is that consumer credit be extended on an account pursuant to a plan under which (1) the creditor may permit the customer to make purchases or obtain loans from time to time directly or indirectly from the credi tor, as the plan may provide; (2 ) the customer has the privilege of paying the balance in full or in instalments; and (3 ) a finance charge may be computed by the creditor from time to time on an outstanding unpaid balance. U nder an open end credit account plan, it is contemplated that there will or may be repetitive transactions on a revolving basis. In certain cases, a form of contract or note re lating to a single transaction provides that the finance charge be computed from time to time by application of a rate to the unpaid balance and stipulates required minimum periodic payments. However, the obligor has the privilege of making larger and more frequent payments than stipu lated or paying the obligation in full at any time without penalty. The question arises as to whether the creditor should make disclosures in such circumstances under § 226.7 for open end credit accounts or under § 226.8 for credit other than open end. Although the terms of such a contract or note meet the second and third requirements for such a plan, they do not meet the first of such require ments nor the basic qualification that consumer credit be extended on an account pursuant to a plan. Therefore, disclosures in this case are re quired to be made under § 226.8. 5 /2 6 /6 9 SECTION 226.3 SEC TIO N 226.301— A G R IC U L T U R A L PUR PO SES— W H E N E X E M P T F R O M T H E R E G U L A T IO N U nder § 226.3(a), the Regulation does not apply to “Extensions o f credit to organizations, including governments, or for business or com m er cial purposes, other than agricultural purposes.” The definition of “organization” in § 226.2(y) includes a corporation, trust, estate, partner ship, cooperative, or association as well as governmental entities. T he question arises as to whether the Regulation applies to extensions of credit to organizations, including governments, for agricultural purposes. Extensions of credit to organizations, including governments, for agricultural purposes are ex empt from the Regulation. 5 /2 6 / 6 9 SECTIO N 226.302— C R E D IT F O R BUSINESS OR C O M M E R C IA L PUR PO SES— M O R E T H A N 4 F A M IL Y U N IT S U nder § 226.3(a), extensions of credit for business or commercial purposes, other than agri cultural purposes, are not subject to Regulation Z. T he question arises as to whether an extension of credit relating to a dwelling (as defined in § 226.2(v)) which contains more than 4 family housing units is an extension of credit for busi ness or commercial purposes. Credit extended to an owner of a dwelling con taining more than 4 family housing units for the purpose of acquiring, financing, refinancing, im proving, or maintaining that dwelling is an exten sion of credit for business or commercial p u r poses. 1 /2 8 /7 0 SECTION 226.4 SEC TIO N 226.401— SER V IC E C H A R G E S ON A C C O U N T S N O T P A ID W IT H IN A G IV E N P E R IO D O F T IM E Some vendors bill their customers for property or services purchased under the terms of a credit plan which requires that the full am ount of each billing be paid within a stipulated period after billing, with no privilege of paying in instalments. If a bill is not paid within that stipulated period of time, the vendor imposes a service charge pe riodically on the unpaid balance until the account is paid in full. The question arises as to whether Regulation Z applies to such transactions. REGULATION Z— INTERPRETATIONS When in the ordinary course of business a ven dor’s billings are n o t paid in full within that stip ulated period of time, and under such circum stances the vendor does not, in fact, regard such accounts in default, but continues or will con tinue to extend credit and imposes charges pe riodically for delaying payment of such accounts from time to time until paid, the charge so im posed comes within the definition of a “finance charge” (§ 226.2(w)) applicable in each case to the am ount of the unpaid balance of the account. U nder such circumstances the credit so extended comes within the “open end credit” in § 226.2(x), the vendor is a creditor as defined in § 226.2(s), and the disclosures required for open end credit accounts under § 226.7 shall be made. § 226.402 ing to include the insurance premium in the finance charge. Irrespective of whether such insurance may be obtained from or through the creditor, if the creditor requires property insurance and wishes to exclude the cost from the finance charge, he is required to state clearly and conspicuously to the customer that he m ay choose the person through which the insurance is to be obtained. However, if the insurance is not obtainable from or through the creditor, he is no t required to disclose the cost of that insurance, unless, of course, the p re miums are included in the “am ount financed,” in which case it would have to be disclosed under § 226.8(c)(4) or (d)(1), as the case may be. 5 /2 6 /6 9 4 /2 2 /6 9 SEC TIO N 226.402— T E R M O F IN S U R A N C E COVERAGE U n d er § 226.4(a)(5) and (6) certain disclo sures of insurance premium costs, if applicable, are required. The question arises as to whether such amounts of cost disclosed must include the cost o f insurance for the full term of the transac tion. U n d er § 226.4(h) the cost of insurance for the full period of insurance coverage which the credi tor will require shall be disclosed if the cost of the insurance premium is required to be included in the finance charge. However, if the cost of in surance is not required to be included in the finance charge, the cost to be disclosed need only be the cost of premiums fo r the term of the ini tial policy or policies written in connection with the transaction, accompanied by a statement of the type of insurance and the term thereof. 5 /5 /6 9 SEC T IO N 226.403— D IS C L O SU R E O F COST O F P R O P E R T Y IN S U R A N C E W H E N N O T O B T A IN A B L E F R O M OR T H R O U G H T H E C R E D IT O R In m any cases a creditor requires insurance against loss or damage to property or liability arising out of its use but such insurance is not obtainable from or through him. The question arises under § 2 2 6 .4 ( a ) ( 6 ) as to w hether such a creditor must make any disclosures to avoid hav SEC T IO N 226.404— P R E M IU M S F O R V E N D O R ’S S IN G L E IN T E R E S T IN S U R A N C E R E Q U IR E D BY C R E D IT O R T he question arises w hether charges or p re miums for single interest insurance (V endor’s Single Interest Insurance) written in connection with a credit transaction may be excluded from the finance charge under § 226.4(a)(6) if the in surer waives subrogation. If the insurer waives all right of subrogation against the customer in a single interest policy of insurance against loss of or damage to property (which may include coverage for skip, conceal ment, conversion, and embezzlement) written in connection with a credit transaction, and the creditor complies with the requirements of § 226.4(a)(6), charges or premiums fo r such in surance may be excluded from the am ount of the finance charge on that transaction. However, if the insurer does not so waive subrogation in such policy of insurance, the charges or premiums shall be included in the finance charge. 1 /2 8 /7 0 (Supersedes interpretation § 226.404 is sued 8 / 1 / 6 9 ) SEC T IO N 226.405— P R O P E R T Y IN S U R A N C E W R IT T E N IN C O N N E C T IO N W IT H A T R A N S A C T IO N — O B T A IN E D F R O M OR T H R O U G H T H E C R E D IT O R Footnote 4 to § 2 2 6 .4 ( a ) ( 6 ) specifies that a policy of insurance against loss or damage to § 226.406 property or liability arising out of its use is not considered to be “written in connection with” a transaction when it . . was not purchased by the customer for the purpose of being used in connection with that extension of credit.” T here fore, whenever such a policy is purchased by the customer for the purpose of being used in con nection with a specific extension of credit, it is insurance “written in connection w ith” that trans action. If the customer elects to purchase such insur ance otherwise than from or through the creditor, the creditor is not required to disclose the cost of the insurance or include the premium in the finance charge. However, if the cost of such in surance is to be financed through the creditor, the premiums must be included in the “amount financed” and disclosed under § 226.8(c)(4) or (d)(1), as the case may be. 9 /1 1 /6 9 REGULATION Z— INTERPRETATIONS such action as may be appropriate in the circum stances. However, it will not attempt to prescribe rules creating a presumption that all discounts or points are passed on to the customer or buyer and hence must be included in the finance charge in any particular class of transaction. O n the other hand, the inclusion of seller’s points or dis counts in the finance charge will be acceptable to the Board as a correct disclosure under Regula tion Z. This position relates only to the Board’s ad ministrative enforcement procedures and it is not intended in any way to restrict or prejudice the rights of any customer or buyer to bring an ac tion u nder sections 130 and 131 of the Act where he has reason to believe he is or was re quired to pay directly or indirectly a finance charge imposed directly or indirectly by the cred itor of the transaction and the am ount of that finance charge was not disclosed to him. 1 0 /2 3 /7 0 S EC T IO N 226.406— SEL L E R ’S P O IN TS A N D D ISC O U N T S U N D E R R E G U L A T IO N Z Section 226.4(a) of Regulation Z includes in the finance charge any charge “payable directly or indirectly by the customer, and imposed di rectly or indirectly by the creditor as an incident to or as a condition of the extension of credit. . . .” T he question arises as to the proper treatment of discounts paid by the seller, including points imposed on the seller by the lender in connection with a real estate transaction. U nder the general rule in § 226.4(a), any such discount, to the extent it is passed on to the buyer through an increase in the selling price, must be included in the finance charge. However, as a practical matter, it may be difficult to deter mine whether or not a discount paid by the seller in connection with a real estate transaction has been, in fact, passed along to the customer as a part of the purchase price of the property. The same situation may exist in other cases, for ex ample, those in which the creditor sells at a dis count obligations payable in m ore than fo u r in stalments. T he Board has concluded that in any such transaction coming within its administrative en forcement authority, where seller’s points or dis counts were, in fact, passed along to the cus tom er or buyer and the am ount thereof was not disclosed as a finance charge, the Board will take S EC T IO N 226.407— C H A R G E S F O R M E M B E R SH IP IN O P E N E N D C R E D IT PL A N A credit card issuer charges the cardholder an annual fee for membership in the credit plan and for issuance of a credit card for use in conjunc tion with the plan. T he payment of the fee is re quired as a condition of membership in the plan, whether or not the cardholder uses his card for the purpose of obtaining credit. T h e question arises whether these fees are finance charges under § 226.4(a) of Regulation Z. Since such fees are imposed as a qualification of membership in the plan and for the issuance of a credit card, and not as incident to or as a condition of any specific extension of credit, they do not fall within the definition of a “finance charge” under § 22 6 .4 (a) of Regulation Z. 8 /1 2 /7 1 SECTION 226.5 SEC TIO N 226.501— U SE OF R A N G E S OR BRA CK ETS TO D E T E R M IN E P E R IO D IC R A T E O F F IN A N C E C H A R G E ON O PE N E N D A C C O U N T S Section 226.5(a)(1) of Regulation Z, in effect, gives a creditor the option in certain circum REGULATION Z— INTERPRETATIONS stances of stating (1 ) two or more separate an nual percentage rates (e.g., the rate on a $700 balance might be stated as 18% on balance to $500 and 12% on balance over $500), or (2) a single annual percentage rate determined by the “quotient m eth o d ” resulting from applying the rates to a total balance (e.g., in the example above, an annual percentage rate of 16 V a % on a $700 balance). Section 226.5(a)(2), which relates to the use of ranges or brackets to compute periodic finance charges, does not prevent a creditor who uses such brackets from exercising the options r e ferred to in § 226.5(a)(1). 4 /2 /6 9 SEC T IO N 226.502— A N N U A L P E R C E N T A G E R A T E ON S IN G L E A D D -O N R A T E T R A N SA C T IO N S T he application of a single add-on rate to transactions of varying maturities, when con verted to an annual percentage rate determined by the actuarial method, results in m inor varia tions. Such annual percentage rate variations on maturities up to 60 months are so insignificant that separate computations are unwarranted. The question arises as to whether a creditor may disclose a single annual percentage rate on all such transactions based upon the highest rate which will arise from the application of the same single add-on rate to each of such transactions. W hen the same add-on rate is applied to all transactions within a range of maturities up to 60 months, and provided that all payments on each transaction are equal in am ount and due at equal intervals of time within the limits provided by § 2 2 6 .5 (d ), a single annual percentage rate may be disclosed in which case it shall be the highest annual percentage rate that may be applicable to any such transactions. 5 /2 6 /6 9 SEC T IO N 226.503— M IN O R I R R E G U L A R IT IE S — M A X IM U M I R R E G U L A R P E R IO D L IM ITS Section 226.5(d) specifies certain minimums in determining w hat minor irregularities in first pay ment periods may be disregarded in determining § 226.502 the annual percentage rate. The question arises as to what maximum limits for such periods would still permit the irregular periods to be considered regular in computing the annual percentage rate. If the period from the date on which the finance charge begins to accrue and the date the final payment is due is not less than 3 months in the case of weekly payments, 6 months in the case of biweekly or semimonthly payments, or 1 year in the case of monthly payments, the maximum interval of time from the date the finance charge begins to accrue to the date the first payment is due is as follows: (1 ) in the case of weekly payments, 12 days: (2) in the case of biweekly or semimonthly payments, 25 days; (3) in the case of monthly payments, 50 days. If the period from the date on which the finance charge begins to accrue and the date the final payment is due is less than 3 months in the case of weekly payments, 6 months in the case of biweekly o r semimonthly payments, or 1 year in the case of monthly payments, the m axim um interval of time from the date the finance charge begins to accrue to the date the first payment is due is as follows: (1) in the case of weekly payments, 10 days; (2) in the case of biweekly or semimonthly payments, 21 days; (3 ) in the case of monthly payments, 42 days. 6 /1 0 / 6 9 SEC T IO N 226.504— T R E A T M E N T O F “PIC K -U P P A Y M E N T ” IN A N IN S T A L M E N T C O N T R A C T In some instances involving an instalment con tract arising from a credit sale, the purchaser may not pay the full am ount of the required dow npayment at the time he signs the contract or otherwise enters into the credit transaction. In such cases, the creditor may include in the instal ment contract or accept a separate obligation for the unpaid portion of the downpayment, co m monly called a “pick-up payment,” the am ount of which usually carries no finance charge and is to be paid on or before a specified date independent of the other scheduled payments. T he question arises whether the “pick-up pay m ent” must be treated as part of the “amount financed” for purposes of disclosure and determi § 226.505 nation of the “annual percentage rate” or whether it may be treated as a deferred portion of the downpayment. In determining the “am ount financed” the creditor may exclude the am ount of the “pick-up paym ent” provided that: (1 ) T he am ount of the finance charge applica ble to the transaction does not exceed the amount that would have been imposed h ad the required downpayment been paid in full upon consum m a tion of the transaction; and (2 ) The due date of the “pick-up paym ent” is n o t later than the due date of the second payment otherwise scheduled. In making the disclosures required under § 226.8(b) (3 ), if such “pick-up paym ent” is more than twice the amount of an otherwise reg ularly scheduled equal payment, the creditor shall state the conditions, if any, under which such “pick-up paym ent” may be refinanced if not paid when due; and such “pick-up paym ent” m ay be identified using that term or the term “balloon paym ent.” 9 /1 1 /6 9 SEC T IO N 226.505— A P P L IC A T IO N OF T H E M IN O R IR R E G U L A R IT IE S PRO VISIO N S IN D E T E R M IN IN G T H E A M O U N T O F T H E F IN A N C E C H A R G E Some creditors calculate finance charges in a credit transaction on the basis of predetermined percentage rate or rates, e.g., 1% per m onth on the unpaid balances. Determination of the amount of the finance charge is fairly routine for these creditors if the contracts are written for regular payments at regular intervals. However, m any times the first payment m ay be irregular either in am ount or paym ent period, or both, especially in those instances where creditors require payments to fall due on fixed dates or those who are paid by means of payroll deductions. T he m inor irregu larities provisions of § 226.5(d) of the Regulation and § 226.503 of the interpretations to Regulation Z, which pertain to the determination of the annual percentage rate, also apply to the determi nation of the finance charge. F o r convenient ref erence, the applicable provisions of § 226.5(d) and § 226.503 as they apply to the determination of the finance charge are set forth below. REGULATION Z— INTERPRETATIONS In determining the finance charge, a creditor may, at his option, consider the paym ent irregu larities set forth below in subparagraphs (1) and (2) as if they were regular in amount or time, as applicable, provided that the transaction to which they relate is otherwise payable in equal instalments scheduled at equal intervals. (1) If the period from the date on which the finance charge begins to accrue and the date the final payment is due is not less than 3 months in the case of weekly payments, 6 months in the case of biweekly or semimonthly payments, or 1 year in the case of monthly payments, either or both of the following: (i) The am ount of 1 paym ent other than any downpayment is not more than 50 per cent greater nor 50 per cent less than the amount of a regular payment; or (ii) T he interval between the date on which the finance charge begins to accrue and the date the first payment is due is not less than 5 nor more than 12 days for an obligation otherwise payable in weekly instalments, not less than 10 nor more than 25 days for an obligation other wise payable in biweekly or semimonthly instal ments, or not less than 20 nor more than 50 days for an obligation otherwise payable in monthly instalments. (2 ) If the period from the date on which the finance charge begins to accrue and the date the final payment is due is less than 3 months in the case of weekly payments, 6 months in the case of biweekly or semimonthly payments, or 1 year in the case of monthly payments, either or both of the following: (i) The amount of 1 payment other than any downpayment is not more than 25 per cent greater nor 25 per cent less than the am ount of a regular payment; or (ii) The interval between the date on which the finance charge begins to accrue and the date the first paym ent is due is not less than 6 nor more than 10 days for an obligation otherwise payable in weekly instalments, not less than 12 nor more than 21 days for an obligation other wise payable in biweekly or semimonthly instal ments, or not less than 25 nor more than 42 days for an obligation otherwise payable in monthly instalments. F o r the purposes of § 226.8(b)(3) in disclos ing the number, am ount and due dates or periods of payments scheduled to repay the indebtedness REGULATION Z— INTERPRETATIONS and the “total of payments,” the creditor may treat such irregular payments or payment periods, or both, as if they were regular. If the creditor so elects, he may indicate the exact am ount of pay ment period involved in the minor irregularity. 9 /1 1 / 6 9 SECTIO N 226.506— D A IL Y P E R IO D IC RA TE; C O M P U T A T IO N O F T H E ANNUAL PERCEN TAG E RATE U n d er § 2 2 6 .5 (a) (1) ( i i ) , (3 ) (i), and (3 ) (ii), the quotient used in computing the annual per centage rate in open end credit accounts must be multiplied “by the num ber of billing cycles in a year.” The question arises as to the method which should be used to compute the annual per centage rate under those sections where a daily periodic rate or rates is used. In any open end credit account to which the provisions of § 226.5(a)(1)(H) or 226.5(a)(3)(i) apply where all or a portion of the finance charge is determined by the application of one or more daily periodic rates, the annual percentage rate may be determined (1) by dividing the total fi nance charge by the average of daily balances and multiplying the quotient by the number of billing cycles in a year, or alternatively (2) by dividing the total finance charge by the sum of the daily balances and multiplying the quotient by 365. In any open end credit account to which the provisions of § 22 6 .5 (a) (3) (ii) apply, where a portion of the finance charge is determined by application of one or more daily periodic rates, the phrase “sum of the balances” in footnote 5a shall also mean the “average of daily balances.” 6 /1 / 7 3 § 226.506 regarding an annual percentage rate (e.g., “the annual percentage rate does not exceed 1 8 % ” ) be preprinted on a contract or periodic statement and comply with disclosure requirements when the actual rate will at times be lower (e.g., 1 5 % ) for some transactions? Section 226.5 specifies the methods which shall be employed in determining annual percentage rates. Section 2 2 6 .6 (h ) is not intended to provide an alternative to these requirements, but is merely to provide appropriate relief to a creditor who overstates accidentally. Any disclosure of an annual percentage rate whether preprinted or otherwise which overstates the annual percentage rate determined in accordance with § 226.5 other than through inadvertence does not comply with requirements. 4 /2 /6 9 S EC T IO N 226.602— (Rescinded effective 3 /1 / 7 4 ) SEC TIO N 226.603— D ISCLO SU RES IN T R A N S A C T IO N IN V O L V IN G M U L T IP L E CU ST O M E R S Section 226.6(e) states the general rule that, except in the case of a rescindable transaction under § 226.9, where there are multiple customers in a transaction, the creditor is only required to make disclosures to one of them. However, in de termining which customer shall receive disclo sures, the creditor may not select a customer who is secondarily liable, such as an endorser, co maker (when designated as surety), guarantor, or a similar party. This does not prohibit the creditor from also furnishing disclosures to such persons who are secondarily liable. 4 /2 /6 9 SECTION 226.6 SEC T IO N SEC T IO N 226.601— O V E R S T A T E M E N T OF A N N U A L P E R C E N T A G E RA T E Section 22 6 .6 (h ) of Regulation Z provides that in certain circumstances the disclosure of an an nual percentage rate which is greater than that required to be disclosed under the Regulation does not in itself constitute a violation of the Regulation. U nder this section may a disclosure 226.604— IN C O N S IS T E N T R E Q U IR E M E N T S STA TE Section 226.6(b) of Regulation Z indicates types of State law requirements that are inconsistent with Regulation Z, and § 226.6(c) indicates the methods of dealing with such inconsistent require ments of State law. W hether State laws are inconsistent with Regu lation Z necessarily depends on the nature of the § 226.606 State laws. Section 2 2 6 .6 ( b ) ( 1 ) provides that State law is inconsistent to the extent that it “re quires a creditor to make disclosures different from the requirements of this P art with respect to form, content, terminology, or time of deliv ery.” This refers to disclosures of the kinds of in formation covered by Regulation Z, and n ot to other or collateral information such as a state m ent telling the customer that he should read the contract carefully, or that there should be no blanks in the contract. Similarly, it does not refer to headings that State law may require on a con tract such as “Retail Installment Contract.” Simi larly, a specification in a State law that certain size type must be used is not necessarily incon sistent with the requirements of Regulation Z. 4 /2 2 /6 9 SEC TIO N 226.605— (Rescinded effective 3 /1 / 7 4 ) S EC TIO N 226.606— M O D IF IC A T IO N O F S E M IA N N U A L S T A T E M E N T S P U R S U A N T TO S T A T E LAW Sections 226.7(a)(9) and 226.7(d)(5) prescribe statements regarding customers’ rights and credi tors’ responsibilities under certain sections of the Regulation. These statements contain specific ref erences to the “Federal T ru th in Lending A ct,” “Federal F air Credit Billing Act,” and the “A ct.” Certain States have adopted, or intend to adopt, regulations or statutes identical to the amendments to Regulation Z adopted by the Board on Septem ber 15, 1975, for the purpose of implementing the F air Credit Billing Act. T he question has arisen w hether the statements prescribed by §§ 226.7(a)(9) and 226.7(d)(5) may be modified under these cir cumstances to include a reference to the State law immediately following the relevant reference to the Federal law, or whether separate statements are required under both the State law and Federal law. In the circumstances described above, it is p er missible fo r a creditor to modify the statements prescribed by §§ 226.7(a)(9) and 226.7(d)(5) in the form of a reference to the relevant State law by name. Such a disclosure, if made immediately following the relevant reference to the titled F e d eral law in substantially the following m anner: “and the [insert the name of the State and the State law involved],” is permissible under Regula REGULATION Z—INTERPRETATIONS tion Z and any State law requiring such a disclo sure is not inconsistent with the Act or Regulation within the meaning of § 226.6(b). It is similarly permissible to substitute “these Acts” for the words “the A ct” where they appear in the state ment required by § 226.7(a)(9). 1 /3 0 /7 6 SECTION 226.7 SEC TIO N 226.701— P E R IO D IC STA T E M E N T S — F IN A N C E C H A R G E R E S U L T IN G FROM M ORE THAN ONE P E R IO D IC R A T E Section 226.7(b)(l)(iv) of Regulation Z requires that a periodic statement for open end credit show the amount of any finance charge, and that the statement also itemize and identify that po r tion of the finance charge that is due to applica tion of one or more periodic rates and that p o r tion due to any other charge such as minimum, fixed, check service, transaction, activity, or simi lar charge. This does not require the statement to state separately the portions of a finance charge due to application of two or more periodic rates. F or example, if a creditor charges 1 Vi % per m onth on the first $500 of a balance and 1 % p er month on amounts over $500, the monthly charge on a $600 balance would be $8.50, which must be shown. However, it would not be necessary to itemize the two components ($7.50 and $1.00) of the $8.50 charge. U nder § 226.7(b)(5), the periodic rates that may apply to the account, and the applicable range of balances must, of course, be shown, but this could be preprinted. 4 /2 /6 9 SEC T IO N 226.702 is incorporated into § 226.7 (c) effective 6 /1 / 7 3 , and is revoked effective that date. SEC TIO N 226.703— F IN A N C E C H A R G E BASED ON A V E R A G E D A IL Y B A L A N C E OR D A IL Y BA LA NC ES IN O PE N E N D C R E D IT A C C O U N T S Section 226.7(b)(l)(viii) requires that periodic statements for open end accounts shall disclose, am ong other things, “the balance on which the REGULATION Z— INTERPRETATIONS finance charge was computed, and a statement of how that balance was determined.” In some in stances, creditors compute a finance charge on the average daily balance by application of a monthly periodic rate or rates. In such case, this information is adequately disclosed if the state ment gives the am ount of the average daily balance on which the finance charge was com puted, and also states how the balance is deter mined. In other instances, the finance charge is com puted on the balance each day by application of one or more daily periodic rates, and the question arises as to how the balance on which the finance charge was computed should be disclosed in such circumstances. If a single daily periodic rate is imposed, the balance to which it is applicable may be stated in any of the following ways: (i) A balance for each day in the billing cycle; or (ii) A balance for each day in the billing cycle on which the balance in the account changes; or (iii) The sum of the daily balances during the billing cycle; or (iv) The average daily balance during the bill ing cycle, in which case the creditor shall state (on the face of the periodic statement, on its reverse side, or on an enclosed supplement) wording to the effect that the average daily balance is or can be multiplied by the number of days in the bill ing cycle and the periodic rate applied to the product to determine the amount of the finance charge. If two or more daily periodic rates may be im posed, the balances to which the rates are applica ble may be stated in accordance with (i) or -(ii) above or as two or more average daily balances, each applicable to the daily periodic rates imposed. For example, if the creditor imposes one daily periodic rate on balances up to $500 and another daily periodic rate on balances over $500, the creditor would show average daily balances of $500 and $200 in an account which had a $700 balance for the entire billing cycle. If the average daily balances are stated, the creditor shall state (on the face of the periodic statement, on its re verse side, or on an enclosed supplement) wording to the effect that the finance charge is or may be determined by (1) multiplying each of the average daily balances by the num ber of days in the billing § 2 2 6 . 7 0 5 cycle, (2) multiplying each of the results by the applicable daily periodic rate, and (3) adding these products together. 1 2 /2 7 /7 4 (Supersedes interpretation § 226.703 issued 6121172 and prior interpretation § 226.703 issued 5 / 5 / 6 9 ) SECTION 226.704 is incorporated into § 226.5 (a)(3) effective 6 /1 / 7 3 , and is revoked effective that date. S EC T IO N 226.705— O PE N E N D C R E D IT — C H A N G E IN T H E M E T H O D OF D E T E R M IN IN G T H E B A L A N C E ON W H IC H F IN A N C E C H A R G E S ARE COMPUTED The creditor of an open end credit account plan desires to change his m ethod of determining the balance on which finance charges are com puted from a method in which paym ents and credits made during the billing cycle are not de ducted in determining such balance to a method in which such payments and credits are deducted in determining such balance. This change results in a reduction in finance charges to the customer, where full payment of the account is deferred. The question arises w hether notice of such change is required to be sent to customers of open end credit accounts under § 226.7(f), since that section also provides that prior notice is not required if the only change is a reduction in the “periodic rate or rates, or in any minimum, fixed, check service, transaction, activity, or similar charge applicable to the account.” W here a creditor changes his method of deter mining the balance on which finance charges are computed from a m ethod in which payments and credits made during the billing cycle are not de ducted in determining such balance, to a method in which such payments and credits are deducted in determining such balance, § 226.7(f) requires no prior notice of such change in terms, provided no other changes in terms applicable to the ac count are made simultaneously which would re quire § 226.7(f) notification. 7 /2 9 /7 1 SEC T IO N 226.706— O P E N E N D C R E D IT — A L LO C A T IO N O F P A Y M E N T S Section 2 2 6 .7 ( a ) ( 2 ) provides that before the first transaction is made on any open end credit § 226.707 account, the creditor must disclose “the method of determining the balance upon which a finance charge may be imposed.” Section 226.7(b)(l)(viii) requires the creditor to disclose on the periodic statement “the balance on which the finance charge was computed, and a statement of how that balance was determined.” The question is raised whether these provisions require a creditor to provide a description of the manner in which payments or other credits are applied to various portions of the balance or balances on which finances charges are computed. In disclosing the method of determining the balance(s) upon which finance charges are com puted, it is not necessary to show the method of allocating payments or other credits. F or exam ple, explanation of the m anner in which pay ments or credits may be applied to late charges, overdue balances, finance charges, insurance p re miums or other portions of balances is not re quired. Similarly, explanation of the method of allocating such payments between cash advance and purchase portions of the account is not re quired. Such explanations in many cases involve lengthy and complex descriptions which may u n duly complicate disclosures. Explanation of the allocation method may be made by creditors where it can be done in con formity with § 226.6(c) which authorizes addi tional information or explanations as long as they are not stated, utilized, or placed so as to mislead or confuse the customer or contradict, obscure, or detract attention from the required disclosures. 6 /2 1 /7 2 SEC TIO N 226.707— D ISCLO SU R ES— V A R IA B LE PER IO D IC RATES U n d er the terms of some open end credit plans the periodic rates of finance charges and corre sponding annual percentage rates are tied to a fluctuating base rate, for example, the “prime rate.” Consequently, both the periodic rates and annual percentage rates may change from time to time with changes in the base rate. The ques tion arises as to the proper disclosure, if any, which should be made under § 22 6 .7 (a) (4 ), § 226.7(b)(l)(v), § 226.7(b)(l)(vi), § 226.7(f), and § 226.10(c)(4) in connection with such plans. W here any creditor’s open end credit plan pro vides that the account is subject to variations in REGULATION Z— INTERPRETATIONS any periodic rate of finance charge, the creditor need not comply with § 226.7(f) with respect to any prospective change in any periodic rate or corresponding annual percentage rate applicable to the account, provided that in connection with the disclosures made pursuant to paragraph 226.7(a)(4) the creditor has disclosed that such rates are subject to change, the conditions under which such rates may be changed, and, if appli cable, the maximum and minimum limits of such rates. The requirements of § 226.7(b)(l)(v) and § 226.10(c)(4) may be complied with by similarly disclosing the method of computing the periodic or annual percentage rates which are subject to variation. In disclosing an annual percentage rate or rates under § 226.7(b)( 1)(vi) where there have been variations during the billing cycle, the computations as specified in § 2 26.5(a) (1) (ii), § 226.5(a)(2), § 226.5(a)(3)(i) or § 226.5(a)(3)(ii), as applicable, should be used. 1 1 /2 /7 2 SEC TIO N 226.708— T IM IN G A N D M O D IF IC A T IO N O F S E M IA N N U A L STATEMENTS Sections 226.7(d)(1) through 226.7(d)(4) set out the method by which the statement required by § 226.7(a)(9) is to be provided to customers on a semiannual basis. Section 226.7(d)(5) provides for a shorter statement which, as an alternative to the provisions of §§ 226.7(d)(1) through 226.7(d)(4), may, under certain conditions, be provided with each periodic statement. The question has arisen of when the first state ment, either the longer statement required by § 226.7(a)(9) or the alternate shorter statement under § 226.7(d)(5), must be provided under § 226.7(d). Creditors must mail or deliver one or the other of these statements, pursuant to § 226.7(d), not later than seven months after Octo ber 28, 1975. In determining when to send the first statement pursuant to § 226.7(d), the initial statements prescribed by § 226.7(a)(9) which are sent to customers with accounts in existence on October 28, 1975, pursuant to § 226.7(i), may not be considered a statement sent for purposes of § 226.7(d). A second question has arisen regarding the timing of disclosures should a creditor change practices and provide the statement under § 226.7 § 226.8 REGULATION Z—INTERPRETATIONS (d)(5) instead of the longer statement prescribed in § 226.7(a)(9). T he same question has arisen with respect to the opposite case, i.e., when a creditor first makes disclosure under § 226.7(d)(5) and subsequently decides to make disclosure of the statement prescribed by § 226.7(a)(9) semi annually. If a creditor first discloses the § 226.7 (a)(9) statement semiannually and subsequently decides to use the § 226.7(d)(5) alternative, the first statement which must be provided pursuant to § 226.7(d)(5) must be mailed or delivered not later than the time that the next § 226.7(a)(9) state ment would have been required had no change in the creditor’s practice occurred. If a creditor first chooses to make disclosure pursuant to § 226.7 (d)(5) and subsequently decides to provide the longer statement prescribed in § 226.7(a)(9) semi annually, the creditor must mail or deliver such longer statement to those customers receiving pe riodic statements (not later than the mailing or delivery of such periodic statements) pursuant to § 226.7(b) for the billing cycle immediately subse quent to the billing cycle for which the last state ments were mailed or delivered pursuant to § 226.7(d)(5). The timing of mailing or delivery of § 226.7(a)(9) statements on a semiannual basis subsequent thereto is to be determined in accord ance with §§ 226.7(d)(1), (2), (3), and (4). A further question has arisen whether a creditor m ay delete portions of the statement prescribed in § 226.7(d)(5) which are inapplicable to its par ticular credit plan as in the case of the statement prescribed by § 226.7(a)(9). In line with the gen eral policy of the T ru th in Lending A ct and Reg ulation Z which attempt to avoid disclosures which might be confusing to consumers, any portions of the § 226.7(d)(5) statement which are inapplicable to a credit plan may be deleted from the § 226.7 (d)(5) statement by the creditor of that plan. The question has also arisen whether references to the “creditor” in the statement prescribed by § 226.7(d)(5) may be altered or modified as is permitted with regard to the statement prescribed by § 226.7(a)(9). Such alteration or modification is permissible; wherever the word “creditor” ap pears or is referred to in the statement prescribed by § 226.7(d)(5), the creditor may substitute ap propriate references, such as “com pany,” “bank,” “we” or a specific name. 1 /3 0 /7 6 SECTION 226.8 SEC TIO N 226.801— L O C A T IO N O F D IS CLOSURES W H E N C O N T R A C T , SE C U R IT Y A G R E E M E N T , A N D E V I D E N C E O F T R A N SA C T IO N A R E C O M B IN E D IN A S IN G L E DOCUMENT Some creditors incorporate the terms of a con tract, a security agreement, and evidence of a transaction in a single document. These docu ments are designed for processing by mechanical and electronic equipment. If all of the required disclosures under § 226.8 should be placed on the face of such a document, the creditor will be un able to utilize conventional accounting and record keeping equipment because of the size of the re sulting document. The question arises as to whether required disclosures may be made on the face and the reverse side of such a document. W here a creditor elects to combine disclosures with the contract, security agreement, and evi dence of a transaction in a single document, the disclosures required under § 226.8 shall, in ac cordance with § 226.6, be made on the face of that document, on its reverse side, or on both sides, provided that the am ount of the finance charge and the annual percentage rate shall ap pear on the face of the document, and, if the re verse side is used, the printing on both sides of the document shall be equally clear and conspicu ous, both sides shall contain the statement, “N O T IC E : See other side for im portant inform ation,” and the place for the customer’s signature shall be provided following the full content of the docu ment. 4 /2 2 /6 9 S EC T IO N 226.802— D ISCLO SU RES ON M A IL O R T E L E P H O N E O RD ERS U nder § 226.8(g), disclosures may be made at any time not later than the date the first payment is due under certain conditions. The question arises as to when disclosures shall be made on mail or telephone orders where the information outlined in § 226.8(g)(1) and (2) is not available to the customer or prospective customer. U nder the circumstances set forth in the above question, the creditor shall make the disclosures required under Regulation Z as follows: § 226.803 (1 ) W ith respect to credit sales, not later than at the time of delivery of the property or first perform ance of service ordered. (2) W ith respect to loans, not later than at the time proceeds of the loan are disbursed. (3) Except that if the transaction is subject to the provisions of § 226.9, the disclosures shall be made before the transaction is consummated. 5 /5 /6 9 S EC T IO N 226.803— D ISCLO SU RES W H E N D ISC O U N T S A PP L Y F O R P R O M P T PAYM ENT U n d er § 226.8(o), disclosures shall be made on the billing statement whereas under § 226.8(a) disclosures shall be made before the transaction is consummated. The question arises as to which provision prevails. T he provisions of § 226.8(o) prevail under the conditions set forth in that paragraph unless the transaction is also subject to the provisions of § 226.9 in which event the disclosures shall be made before the transaction is consummated. 5 /5 /6 9 SECTION 226.804— SERIES O F S A L E S CONTENT OF A GREEM ENT U nder § 226.8(h), if a credit sale is one of a series of transactions made under an agreement providing for the addition of a current sale to an existing outstanding balance and the customer has approved in writing the annual percentage rate or rates and certain other requirements are met, dis closures may be made at any time not later than the date the first paym ent for that sale is due. The question arises as to how the annual per centage rate or rates should be shown in an agreement where, for example, an 18% annual percentage rate applies to the first $500 of bal ance, a 12% annual percentage rate applies to all balances over $500, and the mix of the two rates on transactions over $500 will produce a grad ually decreasing annual percentage rate as the am ount of balance over $500 increases. In addition to meeting the other requirements of § 226.8(h), if two or more annual percentage rates apply to ranges of balances, the agreement need only state each annual percentage rate and the range of balances to which it applies. H ow REGULATION Z— INTERPRETATIONS ever, the disclosures which must be made not later than the date the first paym ent is due must include the actual annual percentage rate applica ble to that sale. 5 /5 /6 9 SEC TIO N 226.805— SERIES O F SALES AS D IS T IN G U IS H E D F R O M R E F IN A N C IN G , C O N SO L ID A T IN G , O R IN C R E A S IN G The question arises as to the distinction be tween the provisions of § 226.8(h) Series o f sales, and the provisions of § 226.8(j) Refinancing, consolidating, or increasing. Section 226.8(h) is applicable only when a credit sale is made pursuant to an agreement which provides for the addition of a current (or new) sale to an existing outstanding balance. In such cases, and provided that all of the require ments of § 2 2 6 .8 (h )(1 ) and (2 ) are met, the dis closures may be made at any time not later than the date the first payment for that sale is due. If there is no agreement, or if the agreement does not meet all of the requirements of § 226.8(h), the disclosures required in connection with any subsequent sale, which is added to a previously outstanding balance shall be made under the provisions of § 226.8(j). F or example, the fact that an agreement provides a method of com put ing an unearned portion of the finance charge in the event of prepayment, but does not otherwise meet the requirements of § 226.8(h), will not qualify transactions made pursuant to that agree ment for disclosure under the terms of § 226.8(h). 5 /2 6 / 6 9 SECTIO N 226.806— D E PO SIT BA LA NCES A P P L IE D T O W A R D SA T ISFA CT IO N O F C U S T O M E R ’S O B L IG A T IO N Section 2 2 6 .8 (e )( 2 ) provides that required deposit balances must be deducted under § 226.8(c)(6) and excluded under § 226.8(d)(1) in determining the am ount financed. Subdivision (ii) of § 226.8(e)(2) provide an exception in the case o f Morris Plan type transactions in which payments in the transaction are made and accumulated in a deposit account which is then wholly applied to satisfy the obligation. Unless the deposit balance account is created for the sole purpose of accumulating payments REGULATION Z— INTERPRETATIONS and then being applied toward satisfaction of the customer’s obligation in the transaction, such de posit balance does not fall within the exception provided in subdivision (ii). In any case in which a deposit balance quali fies for this exception, each deposit made into the account shall be considered the same as a pay ment on the obligation for the purpose of com pu tations and disclosures. 5 /2 6 / 6 9 SEC T IO N 226.807— A SSU M PT IO N O F AN O B L IG A T IO N — DISCLO SU RES § 2 2 6 . 8 0 7 balance, the creditor shall make the disclosures required under § 226.8(b) and (d). and. if appli cable in connection with the assumption, the dis closures required under § 226.4(a)(5) and (6), except that in determining the amount of the finance charge and the annual percentage rate to be disclosed to the customer who assumes the ob ligation, the creditor may disregard any prepaid finance charges paid by the original customer, but shall include in the finance charge as a “prepaid finance charge” the total amount of the charges imposed by the creditor, individually itemized, in connection with the assumption. 6 /1 0 /6 9 T he question arises as to which disclosures are required to be made under § 226.8(k). F or the purposes of § 226.8(k), an “assump tion” occurs only when, by written agreement en tered into between a subsequent customer and the creditor, that subsequent customer is or will be accepted by that creditor as an obligor on an existing evidence of debt. In such circumstances, disclosures shall be made as follows: (1) If the finance charge originally imposed on the existing evidence of debt was an add-on or discount type finance charge, the creditor need only disclose: (i) The unpaid balance of the obligation as sumed; (ii) The total amount of the charges imposed by the creditor, individually itemized, in connec tion with the assumption; (iii) The number, amount, and due dates of remaining payments to be made after as sumption, the total of such payments, and any other applicable information required under § 226.8(b)(3); (iv) Identification of the type of security in terest, if any, retained or to be acquired in any property of the assuming customer and a brief identification of that property; (v) The information required to be disclosed under § 226.8(b)(4), (6) and (7); (vi) If applicable in connection with the assumption, the disclosures required under § 226.4(a)(5) and (6); and (vii) If that obligation was entered into on or after July 1, 1969, the annual percentage rate originally disclosed on the existing obligation. (2) If the existing evidence of debt is subject to a finance charge computed from time to time by application of a percentage rate to an unpaid SECTION 226.808— D ISCLO SU RE OF AM OUNT OF SCHEDULED PAYMENTS Section 226.8(b)(3) requires the creditor to disclose the “amount . . . of payments scheduled to repay the indebtedness.” In certain transactions each payment consists of an equal amount to apply on principal and a finance charge which is determined by application of a rate to the de creasing unpaid balance. In such cases no two payments are equal in amount. The question arises as to whether it is necessary to list the re spective dollar amount of each such payment to comply with this requirement of § 226.8(b)(3), or whether an optional disclosure is permitted. In any transaction in which the amount of each regularly scheduled payment (other than a first or last paym ent) includes an equal amount to be applied on principal and a finance charge com puted by application o f a rate to the decreasing unpaid balance, at the creditor's option the re quirem ent of § 226.8(b)(3) with respect to the amount of each payment may be met by disclos ing the following information: (1) The amount of each payment to be ap plied on principal, and an identification of that amount as payment on principal; and (2) The respective amount of finance charge included in the first and last scheduled payments so described. If this option is utilized, the exceptions pro vided under paragraphs ( b ) ( 3 ) , and ( c ) ( 8 ) and ( d ) ( 3 ) of § 226.8 shall not apply. 6/ 10/69 § 226.810 S EC T IO N 226.809— DISLOSURES F O R C E R T A IN S T U D E N T LOANS Footnotes 10 and 11 to Regulation Z provide an exception from specified disclosure require ments for interim student loans under certain federally insured student loan programs. These exceptions are applicable to other student loans of the same type, including those made to stu dents under federally supported loan programs or programs of loan guarantee, administered by or under agreement with the U.S. Department of Health, Education, and Welfare. In all of such cases, however, all disclosures must be made prior to the time the final note is executed or re paym ent schedule is agreed upon. 6 /1 0 /6 9 SEC T IO N 226.810— D ISCLO SU R ES— V A R IA B L E IN T E R E S T RATES In some cases a note, contract, or other instru ment evidencing an obligation provides for p ro spective changes in the annual percentage rate or otherwise provides for prospective variation in the rate. The question arises as to what disclo sures must be m ade under these circumstances when it is not known at the time of consumma tion of the transaction whether such change will occur or the date or amount of change. In such cases, the creditor shall make all dis closures on the basis of the rate in effect at the time of consummation of the transaction and shall also disclose the variable feature. If disclosure is made prior to the consum m a tion of the transaction that the annual percentage rate is prospectively subject to change, the condi tions under which such rate m ay be changed, and, if applicable, the maximum and minimum limits of such rate stipulated in the note, con tract, or other instrument evidencing the obliga tion, such subsequent change in the annual p er centage rate in accordance with the foregoing disclosures is a subsequent occurrence under § 226.6(g) and is not a new transaction. 6 /2 0 /6 9 SEC T IO N 226.811— R E N E W A L S O F N OTES Any renewal of an extension of credit provid ing for payment of the full principal sum on a specified date shall not be considered a refinanc REGULATION Z—INTERPRETATIONS ing under § 226.8( j), and no disclosures need be made in connection with such renewal, provided: (i) All disclosures required under this Part were made in connection with the original exten sion of credit or a prior renewal thereof; (ii) The am ount of the renewal does not ex ceed the amount of the unpaid balance plus any accrued and unpaid finance charge; (iii) The annual percentage rate (or rates) previously disclosed is not increased; and (iv) The period for which renewal is made does not exceed by more than 4 days the period of the extension of credit for which disclosures were made. In instances in which disclosures are required to be made and renewal is made by mail, the creditor may not know whether the customer will reduce his obligation by a payment on principal or, if reduced, the amount of that reduction. The question arises as to what disclosures should be made by mail to the customer in these circum stances. If the creditor knows the amount of the princi pal payment, all disclosures should be made on the basis of the resulting new am ount financed. If, however, the creditor does not know whether the customer will reduce his original obligation, or if so, by how much, he should disclose on the assumption that there will be no reduction. In such circumstances, at the creditor’s option, he may make one or more additional disclosures based on one or more examples of graduated principal reduction. F o r example, if a single pay ment note for $1,000 at 7% is proposed to be renewed for $1,000 at 8% for 3 months, in addi tion to the other required disclosures, the creditor should disclose an am ount financed of $1,000 with a finance charge of $20, and may, in addi tion, disclose that with a principal payment of $300 the am ount financed would be $700 with a finance charge of $14, and with a principal pay ment of $500 the am ount financed would be $500 with a finance charge of $10. 1 /2 8 /7 0 (Supersedes interpretation § 226.811 is sued 8 /1 / 6 9 ) SECTIO N 226.812— A D V A N CES U N D E R O PE N E N D R E A L E ST A T E M O R T G A G E S F O R A G R IC U L T U R A L PU R PO SE S U nder § 2 26.8(p) disclosures are permitted in connection with certain extensions of credit for § 226.813 REGULATION Z— INTERPRETATIONS n agricultural purposes which may involve advances under an open end real estate mortgage or simi lar lien. Section 2 26.8Cj) in part treats advances for agricultural purposes under an open end real estate mortgage or similar lien. The question arises as to the respective application of these paragraphs to such advances. If an extension of credit involving multiple a d vances, whether or not under an open end m o rt gage, meets the tests of § 226.8 ( p ), disclosures need only be made prior to consummation of the credit transaction and need not be made at the time of each individual advance, even though such advance for agricultural purposes may not meet the tests in § 2 26.8(j). Conversely, exten sions of credit for agricultural purposes involving advances under an open end real estate mortgage or similar lien which do not meet the tests for disclosure under § 2 2 6 .8 (p ) are subject to the relevant provisions of § 2 26.8(j) dealing with such advances. m P B (ii) If interest is computed from the date of each advance on only the amounts advanced: nrL + 2mP Estimated annual percentage rate = ---------------------n(L - 2P - 2B) nrL Estimated interest finance charge = -----2m (iii) If interest is computed on the full amount of the commitment without regard for the dates of disbursements or actual amounts dis bursed: 2nrL + 2mP Estimated annual percentage rate = ---------------------n(L - 2P - 2B) nrL Estimated interest finance charge = -----m (2 ) If the equations under subdivision (ii) of paragraph (1) are utilized, the amounts of any required interest payments during the construc tion phase may be omitted in making the disclo sure required under § 226.8(b)(3); however, if the equations under subdivision (iii) of p ara graph (1 ) are utilized, then the amount of each scheduled interest payment shall be disclosed as required under § 2 2 6 .8 (b ) (3 ) . (3 ) In the case of a combination construction loan and perm anent financing provided by the same creditor: (i) T he amount of interest finance charge to be paid prior to the due date of the first am orti zation payment shall be estimated as prescribed under subdivision (ii) or (iii) of paragraph (1) as the case may be and shall be treated as pre paid finance charge for computational purposes; and (ii) Estimation of the annual percentage rate shall be made without regard to the num ber of interest only payments to be made, assuming the first paym ent period to be that interval between the date the finance charge begins to accrue and the date the first amortization paym ent is due. (4 ) Disclosures made in accordance with this interpretation, when made along with the other disclosures required under § 226.8(b) and (d), 1 1 /6 /6 9 SECTIO N 226.813— D ISCLO SU RES ON M U L T IP L E A D V A N C E LOANS In connection with construction and other mul tiple advance loans under § 2 26.8(i), which are payable in a single sum or permanently financed by the same creditor at maturity of the construc tion phase with interest only payable up to such maturity, and in which either the amount or date of an advance is not determinable, the question arises whether a method might be utilized to esti mate the information to be disclosed under § 2 2 6 .8 ( b ) ( 2 ) and (3) and ( d ) ( 3 ) . In such cases, at the creditor’s option, required information may be estimated and disclosed as follows: (1 ) The following mathematical equations based upon assumed continuous advances may be utilized in estimating the amount of the interest component of the finance charge and the annual percentage rate by substituting the appropriate numerical amounts for the following symbols in the equations: (i) Symbols L r = = Amount of loan commitment, Stated annual interest rate pressed as a decimal figure. = N u m b er of interest payments to be made to maturity, = Num ber of interest periods (unitperiods) in 1 year. = Total am ount of any prepaid fi nance charge under § 226.8(e). = Amount of any required deposit balance under § 226.8(e). ex 77 § 226.813 REGULATION Z— INTERPRETATIONS shall constitute “all other material disclosures required under this P art” referred to under § 226.9(a): F rom mortgage amortization tables: Amortization of a $20,000 6% 20-year loan in 240 equal monthly payments including interest and principal requires each monthly payment to be $143.29. Example I Total of 240 payments = 240 X $143.29 = $34,389.60 Subtract amount of loan principal $ 20,000.00 A $20,000 construction loan commitment on which the precise dates or amounts of advances are not determinable. The obligation bears a stated 6% interest rate and interest is to be paid monthly on the amounts advanced, and the total of the amounts advanced under the commitment plus any unpaid interest is due and payable at the end of nine months from the date the finance charge begins to accrue. There is a loan fee of 1% ($ 2 0 0 ), but there is no required deposit bal ance. Substituting these terms for the symbols, the equations become: Interest finance charge on permanent financing Add: Estimated interest finance charge on construction phase (pursuant to sub division (ii)) Add: Loan fee 1 point Estimated finance charge t9 X .06 X 20,000) + (2 X 12 X 200) 9 X [ 2 0 ,0 0 0 .0884 o r 8.84% estim ated annual percentage 450 o r $450 estim ated interest ------------------------- = finance charge component of 2 X 12 the finance charge. If the terms stated in the example were changed so that interest would be computed on the full amount of the commitment from the date the finance charge begins to accrue without r e gard for the dates of disbursements or actual amounts of funds disbursed, the equations under (iii) above become: Total am ount treated as prepaid finance charge for computational purposes .1497 o r 14.97% o r 15% estim ated ann ual p ercent age rate. 900 or $900 estimated interest 12 200.00 $15,039.60 Loan fee 1 point prepaid finance charge F or computational purposes con sider interest to be paid on con struction phase as prepaid (not to be disclosed as prepaid) (2 X 9 X .06 X 20,000) + (2 X 12 X 200) 9 X [20,000 - (2 X 200)] 9 X .06 X 20,000 450.00 (If the interest on the construction phase is computed on the full am ount of the commitment for the full time to maturity without regard for the dates of disbursements or actual amounts dis bursed pursuant to subdivision (iii), the estimated interest finance charge for the construction phase would be $900.00 which would result in a total estimated finance charge of $15,489.60.) (2 X 200)1 or 8 % % rate. 9 X .06 X 20,000 $14,389.60 finance charge component of the finance charge. This inter est would be payable in 9 monthly payments of $100 each. 200.00 450.00 $ 650.00 Computational Disclosure Purposes Purposes $ 20,000 A m ount o f loan D educt total of esti mated finance charge treated as prepaid Deduct actual amount of prepaid finance charge A $20,000 construction loan followed by per m anent financing in same amount. Six per cent interest. One point loan fee. N ine months to m a turity of construction phase. Nine months pay ments of interest only during construction phase. Twenty-year maturity on perm anent financing to be amortized in 240 equal monthly payments in cluding interest and principal. 78 $ Estimated am ount fi nanced for com puta tional purposes Am ount financed to be disclosed Example II $ 20,000 $19,350 650 $ 200 $ 19,800 REGULATION Z— INTERPRETATIONS Adjust first payment period (period of con struction loan plus period from maturity date of construction loan to due date of first amortization paym ent) by dividing the period of the construc tion loan by 2 and adding the period of time be tween the maturity date of the construction loan and the date the first amortization paym ent is due. 9 months divided by 2 = 1 month ■ = 5 Vi months 4 Vi months plus F rom Appendix A (page A2) of Volume I of the Board’s Annual Percentage Rate Tables, read across to 5 months and on the line below opposite 15 days (Vi m onth) read + 9 .0 . This adjustment should be added to the num ber of regular am orti zation payments to determine the num ber of pay ments in utilizing the Annual Percentage Rate Tables: 240 monthly payments + adjustment 9.0 = 249 Following the directions on page 1 of Volume I: Estimated finance charge $15,039.60 X 100 = $1,503,960 which should be divided by the estimated am ount financed for computational purposes: $1,503,960 ' 1 9 , 3 5 0 ■ = $77.72 estimated fi nance charge per $100 of estimated am ount financed for computational purposes. Refer to page 309M of Volume 1, read down n um ber of payments column to 249; read across to 78.71 (which is nearest to $77.72 computed above), and read up to 6.25% which is the esti mated annual percentage rate to be disclosed. In the example where the interest on the con struction phase is computed on the full amount of the com mitment without regard for the dates of advances o r actual amounts advanced, the esti mated finance charge per $100 of am ount financed is $81.96. On page 309M of Volume I, read down to the 249th payment line and across to 82.39 which is the nearest am ount to $81.96, and read up to 6.50% which is the estimated an nual percentage rate to be disclosed. 1 /2 8 /7 0 SEC TIO N 226.814— P R E M IU M S F O R IN S U R A N C E A D D E D T O AN E X IS T IN G B A L A N C E Subsequent to the consummation of a con sumer credit transaction the customer may wish to purchase optional insurance in connection with § 226.814 the obligation. Typically, mortgage life and dis ability insurance may be offered to the customer at some date after consummation under a plan in which the lender will advance the am ount of the premium due and add that am ount to the existing unpaid balance of the obligation. Generally, each instalment on the original obligation paid during the period before the next prem ium is due will be increased proportionately to liquidate the amount of the additional advance plus any finance charge. Additional advances are made automati cally for renewal premiums as they become due unless the borrower requests discontinuance of the coverage. T he question arises as to the re quired disclosures. In such cases the insurance agreement may be considered a single separate transaction, and the disclosures required under § 226.8, at the credi tor’s option, need be made only prior to the time the agreement is executed and only with respect to the amount of the initial advance. F o r exam ple, a mortgage life and disability insurance plan in which the annual premium advanced was $145 repayable in 12 monthly instalments of $12.61 added to the regular monthly mortgage payments would be disclosed as an “amount financed” of $145, a “finance charge” of $6.32, and a “total of payments” of $151.32. Additional disclosures as applicable under § 226.8 would, of course, be made. If, as in some cases, only a portion of the advance is liquidated during the premium period with the remainder payable at the end of the mortgage contract, the creditor would likewise calculate the am ount of finance charge which would accrue on the advance until paid in full. In some cases the advance is secured by a se curity interest in real property which is used or expected to be used as the principal residence of the customer. In those cases the premium ad vance agreement is rescindable under § 226.9, and notice o f the right of rescission provided in § 226.9(b) need only be given at the time the agreement is executed. Subsequent advances for renewal premiums are not subject to the right of rescission. 1 /2 8 / 7 0 SEC TIO N 226.815— D ISCL O SU R E F O R D EM AN D LOANS Section 226.8(b)(3) requires a creditor to dis close the number, am ount and due dates o r pe § 226.816 REGULATION Z—INTERPRETATIONS riods of payments scheduled to repay an exten sion of credit other than open end and, in appropriate cases, the total of payments. The question arises as to how these requirements should be met in the case of demand loans. Section 226.4(g) provides that for the purpose of calculating the finance charge and annual per centage rate, dem and loans are considered to have a one-half year maturity unless the obliga tion is alternatively payable upon a stated m atu rity, in which case the stated maturity shall be used. In order to comply with the requirements of § 2 2 6 .8 ( b ) ( 3 ) , if no alternative maturity date is specified, the creditor need disclose only the due dates or periods of payments of all scheduled in terest payments for the first one-half year. In such cases, the creditor need not disclose the number, amounts or total of payments or identify any balloon payment. Effective May 1, 1970, creditors shall disclose the fact that the obligation is payable on demand. I f an alternative maturity date is specified, all disclosures required under § 2 2 6 .8 ( b ) ( 3 ) shall be made, using that date. shall be based upon the earliest date demand for payment in full may be made under the terms of the mortgage showing the unpaid balance due at that time as a “balloon paym ent.” The disclosure requirements of this interpreta tion shall become effective May 1, 1970. 1 /2 8 /7 0 3 /3 1 /7 0 SEC TIO N 226.816— M O R T G A G E S W IT H DEM AND FEATURES In some cases real estate mortgages are written for a stated period, for example one year, with the provision that they shall be payable on de m and after expiration of that period, provided that until such demand is made the principal and interest shall be paid in scheduled periodic instal ments until paid in full. T he obligation is thus payable according to a specified amortization schedule subject to the holder’s right to demand payment after the stated period. The question arises whether the creditor may make disclosures based on the specified am ortiza tion schedule or whether disclosures must be made on the basis of the maturity established by the expiration of the stated period. In such cases the creditor may make disclo sures based on the specified amortization sched ule, provided he discloses clearly and conspicu ously that the obligation is payable on demand after the stated period together with the fact that disclosures are made on the basis of the specified amortization schedule. Otherwise, disclosures 1 /28/70 SEC TIO N 226.817— R E D U C T IO N IN A N N U A L PERCEN TAG E RATE Section 2 26.8(j) specifies that if any existing extension of credit is refinanced, such transaction shall be considered a new transaction subject to the disclosure requirements of Regulation Z. The question arises as to whether a reduction in the annual percentage rate applicable to an existing extension of credit, when no other credit terms are changed, constitutes a refinancing under § 226.8( j ) . When no other credit terms are changed, a re duction in the annual percentage rate applicable to an existing extension of credit does not consti tute a refinancing under § 2 26.8(j), and no dis closures are required. S EC T IO N 226.818— R E F U N D O F U N E A R N E D F IN A N C E C H A R G E ; P R E P A Y M E N T PENALTY U nder § 2 2 6 .8 ( b ) ( 7 ) a creditor must provide an identification of the method of computing any unearned portion of the finance charge in the event of prepayment of an obligation, as well as a statement of the amount or method of compu tation of any charge that may be deducted from the amount of any rebate. Section 2 2 6 .8 (b ) (6 ) requires the creditor to provide “a description of any penalty charge that may be imposed by the creditor or his assignee for prepayment of the principal of the obligation. . . . ” A question arises whether the computation of certain rebates of u n earned finance charges on contracts with precom puted finance charges involves a “prepayment penalty.” A second question concerns the disclo sures required to identify the method of com put ing any finance charge rebate. Section 2 2 6 .8 ( b ) ( 6 ) relates only to charges as sessed in connection with obligations which do not involve precomputed finance charges included in the obligation. It applies to transactions in § 226.819 REGULATION Z— INTERPRETATIONS which the finance charge is computed from time to time by application of a rate to the unpaid principal balance. Prepayment penalties which re quire disclosure under this section (which princi pally arise in connection with prepayment of real estate mortgages) occur when the obligor in such a transaction is required to pay separately an ad ditional amount for paying all or part of the obligation before maturity. On the other hand, § 2 2 6 .8 (b ) (7 ) is designed to encompass the dis closures necessary with regard to the prepayment of an obligation involving precomputed finance charges which are included in the face amount of the obligation. Therefore, although in a precom puted obligation the finance charge rebate to a customer may be less when calculated according to the “Rule of 78’s,” “sum of the digits,” or other method than if calculated by the actuarial method, such difference does not constitute a penalty charge for prepayment that must be de scribed pursuant to § 2 2 6 .8 ( b ) ( 6 ) . Section 2 2 6 .8 ( b ) ( 7 ) requires “identification” of the rebate method used on precomputed con tracts. Many State statutes provide for rebates of unearned finance charges under methods known as the “Rule of 78’s,” or “sum of the digits” or other methods. In view of the fact that such stat utory provisions involve complex mathematical descriptions which generally cannot be condensed into simple accurate statements, and which if re peated at length on disclosure forms could de tract from other important disclosures, the re quirement of rebate “identification” is satisfied simply by reference by name to the “Rule of 78’s” or other method, as applicable. 4 /3 0 /7 3 SEC TIO N 226.819— P R E P A ID F IN A N C E C H A RG E S; A D D -O N S A N D D ISCO U N T S Sections 226.8(c)(6), 226.8(d)(2) and 226.8(e)(1) require that certain finance charges be disclosed as “prepaid finance charges.” They also require that such prepaid finance charges be excluded or deducted from the credit extended in arriving at the “am ount financed.” The question arises whether add-on, discount or other precomputed finance charges which are reflected in the face am ount of the debt instrument as part of the cus tom er’s obligation, but which are excluded from the “amount financed,” must be labeled as “pre paid” finance charges. The concept of prepaid finance charges was adopted to insure that the “am ount financed” re flected only that credit of which the customer had the actual use. Precomputed finance charges which are included in the face am ount of the ob ligation are not the type contemplated by the “prepaid” finance charge disclosure concept. A l though such precomputed finance charges are not to be included in the “am ount financed,” they need not be regarded as finance charges “paid separately” or “withheld by the creditor from the proceeds of the credit extended” within the meaning of § 226.8(e) to require labeling “pre paid” under § 2 2 6 .8 ( c ) ( 6 ) and 2 2 6 .8 ( d ) ( 2 ) . They are “finance charges,” of course, to be dis closed under § 226.8(c)(8) and 226.8(d)(3). 8 /2 3 / 7 3 SECTION 226.820— (Rescinded effective 8 /6 /7 6 ) SECTION 226.9 S EC T IO N 226.901— W A IV ER O F SEC U RITY IN T E RE ST S— E F F E C T ON T H E R IG H T O F RESCISSION Section 226.9(a) provides for a right of rescis sion “in the case of any [consumer] credit trans action in which a security interest is or will be retained or acquired in any real property which is used or is expected to be used as the principal residence of the customer.” U nder § 226.2(gg), security interests include mechanic’s and material m en ’s liens. If a creditor effectively waives his right to retain, or to acquire such a lien, he has not retained or acquired such security interest. The question arises, however, of whether waiver of a creditor’s lien rights is effective to remove a transaction from the scope of rescission when lien rights which are not waived arise in favor of subcontractors, workmen, or others who are not creditors in the transaction. T he fact that the creditor waives his lien rights does not, in itself, determine whether or not the transaction is rescindable. If all security interests are effectively waived, the transaction is not re scindable. On the other hand, if as a result of the transaction, a security interest is or will be re tained or acquired by a subcontractor, workman, § 2 2 6 . 9 0 2 or other person, the transaction is rescindable. In the latter case the creditor would be responsible for delivering the rescission notice as well as other applicable disclosures, delaying perform ance as provided under § 2 2 6 .9 (c ), and identify ing himself as the creditor on the rescission no tice. The subcontractors, workmen, and others would not be responsible for delivering rescission notices to the customer. 5 /2 6 /6 9 SECTIO N 226.902— “C U S T O M E R S ” A N D JO IN T O W N E RS O F P R O P E R T Y UNDER T H E R IG H T OF RESCISSION Section 226.9(f) provides that, for the purpose of the right of rescission, “customer” shall in clude two or more customers where joint owner ship is involved. The question arises of whether this means that all joint owners of record, regard less of whether or not they are parties to the transaction, are customers for this purpose, and whether each of such owners of record (1) must receive disclosures and a notice of the right of rescission, (2) may exercise the right of rescis sion, and (3) must join in signing a waiver if one is appropriately taken by the creditor. U nder § 226.9(f) where there are joint owners, the right to receive disclosures and notice of the right of rescission, the right to rescind, and the need to sign a waiver of such right, apply only to those joint owners who are parties to the trans action. 5 /2 6 /6 9 SEC TIO N 226.903— R E F IN A N C IN G A N D IN C R E A S IN G — DISCLOSURES A N D E F F E C T S ON T H E R IG H T O F RESCISSION In some cases the creditor of an obligation will refinance that obligation at the request of a cus tom er by permitting the customer to execute a new note, contract, or other document evidencing the transaction under the terms of which one or more of the original credit terms, including the maturity date of the obligation, are changed. E x cept as provided in § 226.811, such refinancing constitutes a new transaction, and all disclosures required under § 226.8 must be made. T he ques REGULATION Z— INTERPRETATIONS tion arises as to whether that transaction is sub ject to the right of rescission under § 226.9 where the obligation is already secured by a security in terest in real property which is used or expected to be used as the principal residence of that cus tomer. If the amount of such new transaction does not exceed the am ount of the unpaid balance plus any accrued and unpaid finance charge on the existing obligation, § 226.9 does not apply to the transaction. If, however, such new transaction is for an in creased amount, that is, for an am ount in excess of the amount of the unpaid balance plus any ac crued and unpaid finance charge on the existing obligations, § 226.9 applies to the transaction. However, such right of rescission applies only to such excess and does not affect the existing obli gation (or related security interest) for the un paid balance plus accrued unpaid finance charge. If a transaction is refinanced by a creditor other than the creditor of the existing obligation, the entire transaction is subject to § 226.9. 1 /2 8 / 7 0 (Supersedes interpretation § 226.903 is sued 6 / 2 0 /6 9 ) SECTION 226.10 SECTION 226.1001— A D V E R T IS IN G O F C R E D IT T E R M S IN O T H E R T H A N O PE N E N D C R E D IT The statement of certain credit terms in adver tisements such as “no downpayment,” the amount of any instalment payments, dollar am ount of finance charge, num ber of payments, etc., as pro vided in § 2 2 6 .1 0 ( d ) ( 2 ) , requires that certain other terms also be stated in the same advertise ment. The question arises as to how a creditor may advertise credit terms in a meaningful way when all of his credit sales or loans are not made on the same basis. The advertisting of credit terms may be made by giving one or more examples of typical extentions of credit and stating all of the terms appli cable to each example. In any such case, the ad vertiser shall set forth one or more examples which are, in fact, typical of the type of credit and terms usually and customarily made available by the creditor to present and prospective cus REGULATION Z— INTERPRETATIONS tomers and each shall be clearly and conspicu ously identified as examples of typical transac tions. 4 /2 2 /6 9 SEC TIO N 226.1002— C A T A L O G S— TABLES OR S C H E D U L E S O F C R E D IT T ERM S Under § 226.10(b) in order that a catalog may qualify as a single advertisement, among other things, it must include a table or schedule of credit terms. It has been the practice of catalog houses to include such tables in catalogs; how ever, such tables generally state amounts of p u r chases, amounts of finance charges, and number and am ount of payments for brackets up to a certain level and then contain an instruction to include a specified dollar amount in computing the finance charge by application of a percentage rate on any purchase in excess of that level. Tables to show the actual terms including annual percentage rates for all purchases into thousands of dollars would be unwieldy, present a form ida ble appearance, and may be more confusing than helpful to the user. The question arises as to § 2 2 6 . 1 0 0 2 whether a creditor who publishes a catalog is re quired to include tables in detailed amounts from the minimum up to, for example, $5,000, his highest priced cataloged merchandise. Tables or schedules of terms in catalogs must include all amounts up to a level of the more commonly sold higher priced property or services which are offered for sale, but in no event greater than $1,000 unless the creditor elects to do so. If the creditor offers property or service for sale at prices higher than the uppermost level covered by his table, he shall state the method by which the finance charge is computed on larger amounts, how the amount of payments and the number and periods of payments are determined and state, for each representative amount in in crements of not more than $500 up to the high est priced property or service offered, the annual percentage rate. Any catalog which contains such a table or schedule of credit terms will comply with requirements of § 226.1 0 (b ) provided all other requirements are met and such catalog shall be considered adequate for the purpose of § 2 2 6 .8 ( g ) ( 1 ) . 4 /2 2 /6 9 SECTION 226.15 Lease Disclosure Statements and Instructions to follow. SECTION 226.1501—OPEN-END OR FIN A N C E VEHICLE LEASE DISCLOSURE STATEM ENT D a t e __________ _ 1. LESSOR(S) These disclosures are provided pursuant to the Federal Consumer Leasing Act. LESSEE(S) 2. Description o f leased property_________________________________________ __________________________________________ Year | M ake j Model T Body Style I Vehicle ID # 3. (a) Initial Charges, consisting o f FI Capitalized Cost Reduction n Trade-in Allowance D $ (b) O ther Charges Payable at Inception, consisting o f □ Advance M onthly Payment o f □ Refundable Security Deposit □ Delivery Charge $ □ Registration Fees n Total Payment Due a t Inception: 4. (a) Basic M onthly Payment: $ (b) Other Charges Payable Monthly: □ Maintenance □ Registration Fees $ □ Insurance n Total Monthly Payment: 5. Term o f this lease: The first monthly payment of S is due on : subseauent payments o f $ on the of each month thereafter. 6. Total of Basic Monthly Payments: 7. Total o f Other Charges Payable to Lessor: n Disposition $ I- ) Maintenance $ n S 8. Fees and Taxes T otal am ount you will pay during the term for official fees, registration, certificate o f title, license fees and taxes. 9. Insurance The following types and am ounts o f insurance will be acquired in connection with this k ase: [~j We t lessor) will provide the insurance coverage quoted above for a total premium cost of $ □ You (lessee) agree to provide insurance coverage in the amounts and types indicated above. 10. Estimated value o f the vehicle at the end of the lease term : (Your liability for this sum may be limited, See Item 14.) 11. Total Lease Obligation: (Items 3(a), 6 and 10.) 12. Initial Value o f Vehicle: 13. Difference: (Item 11 less Item 12.) S s $ $ s s s s s $ 14. End o f Term Liability (a) The estimated value of the vehicle stated in Item 10 is based on a reasonable, good faith estimate o f the value o f the vehicle at the end o f the lease term. If the actual value o f the vehicle at that time is greater than the estimated value, you will have n o further liability under this lease, except for other charges already incurred (and are entitled to a credit o r refund o f any surplus]. If the actual value o f the vehicle is less than the estimated value, you will be liable for any difference up to $ (3 times Item 4(a)). Fo r any difference in excess o f that am ount, you will be liable only if 1. Excessive use or damage [as described in Item 15] [representing more than normal wear and tear] resulted in an unusually low value at the end o f the term. 2. You voluntarily agree with us after the end o f the lease term to m ake a higher payment. 3. The m atter is not otherwise resolved and we win a lawsuit against you seeking a higher payment. Should we bring a lawsuit against you. we must prove that our original estimate o f the value o f the leased property at the end of the lease term was reasonable and was made in good faith. For example, we might prove that the actual value was less than the orig inal estimated value, although the original estimate was reasonable, because o f an unanticipated decline in value for that type o f vehicle. Unless we prove that the excess amount owed was the result o f excessive use o r unreasonable wear and tear, we will pay your reasonable attorney’s fees. ' ’ (b) If you disagree with the value we assign to the vehicle, you may obtain, at your own expense, from an independent third party agreeable to both o f us, a professional appraisal o f the______________ value o f the leased vehicle which could be realized at sale. The appraised value shall then be used as the actual value. 15, Standards for W ear and Use The following standards are applicable for determining unreasonable o r excessive wear and use o f the leased vehicle:____________ 16. Maintenance [You are responsible for the following maintenance and servicing o f the leased vehicle:. [We are responsible for the following maintenance and servicing of the leased vehicle:. 17. W arranties The leased vehicle is subject to the following express warranties 18. Early Termination and Default (a) You may terminate this lease before the end o f the lease term under the following conditions:. T h e c h a r g e f o r s u c h e a r ly t e r m i n a t i o n is (b) We may terminate this lease before the end o f the lease term under the following conditions:. U pon such termination we shall be entitled to the following charge(s) for. 19. (c) T o the extent these charges take into account the value o f the vehicle a t the end o f the lease term, you have the same right to a professional appraisal as th at stated in Item 14(b). Security Interest We reserve a security interest o f the following type in the property listed below to secure performance o f y our obligations under this lease:_________________________________________________________________________________________________ _ 20. Late Payments The charge for late payments is______________________________________ 21. Option to Purchase [You have an option to purchase the leased vehicle a t the following times:. If at the end of the term, the price will be $ If prior to the end of the term, the price will be $ _ _ [You have no option to purchase the leased vehicle.] REGULATION Z— INTERPRETATIONS § 226.1501 I N S T R U C T I O N S F O R C O M P L E T I O N O F § 2 2 6 .1 5 0 1 — O P E N - E N D O R F I N A N C E V E H IC L E L E A SE D IS C L O S U R E S T A T E M E N T G e n e r a l In stru ctio n s C o m p letio n o f this fo rm m ay be facilitated by referen ce to the follow ing instructions. A n y ques tion as to the permissibility o r ac c u ra c y o f a spe cific disclosure m a y be an sw e re d by referen c e to R e gu lation Z, 12 C F R P a r t 226. P a re nth etica l citations are to R e g ulatio n Z. In f o rm a tio n w hich is req u ire d to be disclosed m a y be estim ated if the in fo rm a tio n is u n k n o w n o r unavailable, p rovided th a t the in fo rm a tio n is clearly identified as an estim ate an d the estim ate is b ased o n the best in fo rm a tio n available a n d is reasonable (§ 226.6(f)). A n y in applicable disclosures should be deleted. T his fo rm is based o n a m o n th ly periodic p a y m ent. A n y lessor w h o se lease co n tem p lates a d if fere n t p a y m e n t perio d sho u ld c h an g e the fo rm w here it refers to “m o n th ly ” a m o u n ts to read “w eekly” o r o th e r time p eriod, as ap pro priate. All n u m e rica l a m o u n ts m u st be stated in figures an d shall be prin ted in n o t less tha n the e quivalent o f te n p o int type o r elite ty pe w ritten n u m e rals or legibly h a n d w ritte n (§ 226.6(a)). P a r a g r a p h n u m bers n eed n o t be p rin ted in ten p o in t type o r its equivalent. Specific In struction s Ite m 1. T h e disclosures m u s t be m a d e on a w rit ten d ated statem ent. All lessors an d lessees m u st be identified by n a m e (§ 226.15(a)). If, fo r e x a m ple, o n e p erson arran ges the lease and a n o th e r person enters into the lease, b o th m u st be identi fied as lessors (§ 226.2(h) a nd (oo)). A n address m a y a u g m e n t the identification b u t need n ot be supplied as p art of the disclosure form. Item 2. T h is disclosure p rovides a b rief descrip tion o f the leased p ro p erty (§ 226.15(b)(1)). L e s sors m a y in clude a m o re detailed description in cluding, fo r exam ple, special accessories. T h e re is n o re q u ire m e n t th a t a vehicle identification n u m b er fo r the vehicle be disclosed. Item 3. T h is disclosure shows the total a m o u n t o f an y initial p a y m e n t the c u sto m e r m u s t m ak e w h e n the lease is e n te re d into (§ 226.15(b)(2)). T h e c o m p o n e n ts o f the initial p a y m e n t m u st be identified and m a y, at the lessor’s option, be item ized w ith respect to dollar am ount. T h is item is divided into tw o distinct parts. T h e item s identified in 3(a) a re those w h ich a re in clu d ed in the calculation o f the “T o ta l Lease Obli g atio n .” T h o se w h ic h a p p e a r in 3(b) are not included in the “T o tal L ease O bliga tion.” F o r co n v e n ie n t referen ce an d to provide th e cu sto m er w ith th e total a m o u n t d u e at the inception o f th e lease, subtotals f o r 3(a) a n d 3(b) are p ro v id ed as well as a c o m b in e d total o f 3(a) an d 3(b) (shown as “T o ta l P a y m e n t D u e a t In c e p tio n ”). T h e te rm “C apitalized C o st R e d u c tio n ” is used to indicate a p a y m e n t in the n a tu re o f a d o w n p a y m e n t w h ich reduces the value o f th e leased vehicle to be a m o rtized over the te rm o f the lease. T h e “A d v a n c e M o n th ly P a y m e n t” is th e total of all a m o u n ts collected at the inc eption o f th e lease w hich are to be a ttrib u te d to a m o n th ly p a y m e n t s ) . F o r exam ple, if the first m o n t h ’s rental p a y m e n t is collected at th e inception, th e fo r m m ig h t re a d “A d v a n c e M o n th ly P a y m e n t o f th e first m o n t h ’s r e n t” o r a sim ilar p h rase. I f th e last m o n t h ’s p a y m en t, o r an y o th e r p a y m e n t in th e n a tu re of ren tal f o r a p o rtio n of the te rm , is col lected a t the inception, a p p ro p ria te la nguage should be p ro v id ed to describe th e c o m p o n e n ts o f the “A d v a n c e M o n th ly P a y m e n t.” C hecklists are p rovided fo r b o th 3(a) a n d 3(b) to aid in identifying th eir com p o n en ts. B lank spaces a n d c h ec k boxes a re p ro v id ed to identify an y o th e r elem ents w h ich a re to be inc lu ded in these items. I te m 4. T h is item discloses the p a y m e n t e lessee m u s t m a k e each p a y m e n t period. T h is item is divided into tw o parts. T h e te rm s in 4(a) are those p ortio n s o f eac h p a y m e n t w h ich are in clud ed in the c o m p u ta tio n o f th e “T o tal Lease O blig a tion .” T h is item includes sale s/u se taxes p aid on the periodic (m onthly) pay m en t. T h e term s in 4(b) a re n o t included in th e “T o ta l L ease O bliga tion.” F o r c o nv en ient refe re n ce an d to p ro vide the c u s to m e r w ith the total a m o u n t o f each p ay m e n t, subtotals are pro vided fo r 4(a) an d 4(b) as well as the c o m b in ed total o f 4(a) a n d 4(b) (show n as the “T o ta l M o n th ly P a y m e n t”). T h e c o m p o n e n ts o f 4(a) an d 4(b) m a y be itemized as to d o llar am o u n t. Ite m 5. T h is item discloses the te rm o f the lease, th e d ate o f th e first p e rio d ic p a y m e n t an d the dates o r p erio ds o f all su bse q uent periodic p ay m en ts. T h e b la n k spaces should be filled in § 226.1501 w ith th e a p p ro p ria te term s. F o r exam ple, a fte r the p h rase “T e rm o f this lease:” the lessor m a y place th e w o rd s “ 24 m o n th s ” o r “A pril 2, 1977, th ro u g h A pril 2, 1979,” as a pp rop riate. In th e b lan k spaces p rovided after the p hrase “T h e first m o n th ly p a y m e n t o f:” should be the a p p ro riate a m o u n t and date. T h e first m o n th ly p a y m e n t m a y be p a rt or all o f th e “A d v a n c e M on th ly P a y m e n t” disclosed u n d e r 3(b). T h e p h rase “su bse quent p ay m e n ts o f ” sh ou ld be p reced ed by the a p p ro p ria te n u m b e r o f p ay m e n ts an d follow ed with th e a p p ro p ria te terms, s u c h as “ $ 1 0 0 .0 0 on th e 2d o f e a c h m o n t h th e re after.” Ite m 6 . T his item discloses the total o f the basic m o n th ly p a y m e n ts p ay ab le over the te rm o f the lease. T h is figure is c o m p u te d by m ultiplying the basic m o n th ly p a y m e n t fro m Ite m 4(a) b y the n u m b e r of su b seq u en t pay m en ts in Ite m 5 an d adding to th e p ro d u c t the basic p o rtio n of the first m o n th ly p ay m en t. T h is figure will be used in co m p u tin g the “T o ta l Lease O b lig atio n .” I te m 7 . T h is ite m discloses th e total o f o th e r charges p ayable to the lessor (§ 226.15(b)(5)). T his excludes charges fo r official fees, taxes, in su ran c e an d charges disclosed as totals u n d e r o th e r items. T h e individual c o m p o n e n ts m u s t be identi fied a n d item ized as to am o u n t. A b la n k ch ec k b ox is p ro v id ed in o rd e r to a d d to the list, as necessary. Item 8 . T h is item discloses th e to tal a m o u n t to be p aid by the lessee d u rin g the lease te rm fo r taxes a n d o th e r official fees (§ 226.15(b)(4)). Ite m 9. T h is item req u ires disclosure o f th e types a n d am o u n ts o f insu ra n ce coverage, w ith th eir total p re m iu m cost, if the in su rance is p ro vided by the lessor (§ 2 2 6 .1 5(b)(6)(i)). In the a lte r native, o n ly th e types an d am o u n ts o f c overage r e q u ire d o f th e lessee m u s t be disclosed if the lessee provides th e insuran ce c overage (§ 226.15 (b)(6)(h)). T h e disclosure is to be co m p le te d by identifying the types a n d a m o u n ts o f insurance coverage following th e colon at the e nd o f the first sentence. If th e lessor is to provide the co v erage the top c h ec k box should be filled in an d th e total p re m iu m cost indicated in the blank space provided. O therw ise the b o tto m ch eck box should be filled in. Ite m 1 0 . T his item provides fo r disclosure of th e estim ated value o f the leased vehicle at the en d o f the te rm , a n elem ent of the “T o ta l Lease O bligation” (§ 2 2 6 .1 5(b)( 15)(i)). T h e referen ce to Ite m 14 is to call the lessee’s attention to the REGULATION Z— INTERPRETATIONS q ualifying disclosures in th a t item req u ire d by §§ 2 2 6 .1 5 (b ) ( l4) and 2 2 6 .1 5(b)(15)(ii) a n d (iii). A b la n k space is p ro v id e d in w hich to indicate w h e th e r the value show n is, fo r exam ple, “retail” o r “ w holesale” value. Ite m s 1 1 , 1 2 a n d 13. T hese items provide fo r disclosure o f the difference betw een the “T o ta l Lease O bligation” a n d th e vehicle’s value at the inception o f th e lease. T h e definition o f “ T otal Lease O b lig atio n ” (§ 226.2(rr)) is the sum o f any initial charges (Item 3(a)), the total o f basic m on th ly p a y m en ts (Item 6) a n d th e estim ated value o f the p ro p e rty at the en d o f the te rm (Item 10). T h e B o ard has in dicated it does not consider items such as refu n d a b le security deposits a n d in su ran ce p rem iu m s to be a m o u n ts pro p erly includable in the “T o ta l L ease O bligation.” 41 Federal R egister 4 5537. Item 14. T his item provides disclosures with respect to the lessee’s liability at the end o f the lease term. T h e b ra ck e te d p h rase in the second sentence is a p p ro p ria te only w h ere the lessee will be given an y surplus resulting fr o m the disposi tion. Item 14(a) im plem ents, in lay language, the disclosures re q u ired by § 2 2 6 .1 5(b)(l 5)(ii) and (iii). T h e lessor m ay, in Item 14(a) 1, referen ce the sta n d ard s set fo rth in Item 15, if the lessor set such standards. If the lessor does n o t set stan d ards fo r w e a r a n d use, the second b ra ck e te d p h rase should be used. Item 14(b) discloses th e lessee’s right to an in d e p e n d e n t appraisal req u ire d by § 2 2 6 .1 5(b)( 14). T h e b la nk space in Item 14(b) is pro v id ed to indicate w h e th e r the value o f the a p praisal should be, fo r exam ple, “w holesale” o r “retail.” T his item should be consistent w ith the type of value used in Ite m 10. Item 1 5 . T his item discloses reasonable sta n d ard s fo r w e a r a nd use established by the lessor. T h e lessor is p e rm itte d b u t n o t req u ire d to set such standards. T h e re fo re , the disclosure m a y be o m itted by lessors w h o do not set stan d a rd s f o r w e ar a nd use (§ 226.15(b)(8)). Item 16. This item provides f o r disclosure o f the m a in te n a n ce and servicing responsibilities o f the parties (§ 2 2 6 . 15(b)(8)). T h ese responsibilities m a y be allocated either to th e lessor or to the lessee, o r m a y be divided b etw een them . Item 17. T h is item discloses all express w a r ranties on th e leased p ro p e rty m a d e by th e m a n u fa c tu re r o r lessor an d available to the lessee (§ 226.15(b)(7)). A b rie f identification o f the w a r ra n ty m ust be supplied. A re fe re n ce to the sta n d REGULATION Z— INTERPRETATIONS § 226.1501 ard m a n u f a c tu r e r ’s w a rra n ty , fo r exam ple, w o u ld suffice. Ite m 18. T h is ite m discloses the conditions u n d e r w h ich th e lessee m a y te rm in ate the lease p ri o r to the end o f the lease term . It also discloses th e a m o u n t o r m e th o d o f de te rm in in g th e a m o u n t o f th e c h arg e w h ich th e lessee m u s t p ay fo r early te rm in ation (§ 226.15(b)(12)). T his ite m should disclose th e conditions u n d e r w h ich th e lessor m a y te rm in a te the lease p rio r to th e en d o f th e term , su ch as default. T his item sho u ld also b e u sed to disclose the a m o u n t o r m e th o d of d eterm in in g the a m o u n t o f any de fau lt c h arg es (§ 2 2 6 .1 5(b)( 10)). T h e ch arge s o r m e th o d o f d eterm inin g the charges fo r early te rm in a tio n by th e lessor o the r th a n fo r lessee’s d e fa u lt sho u ld be separately specified in this item. Ite m 19. T h is disclosure o f the security ta k en m u s t include, in th e space provided, a b rief id e n tification of the types o f security interests a n d an identification o f the p ro p e rty covered by each (§ 226.15(b)(9)). Item 20. T h is disclosure indicates the a m o u n t o r m e th o d of d eterm in in g th e a m o u n t o f an y ch arg es fo r late p a y m e n t (§ 2 2 6 .1 5(b)(l 0)). Ite m 21. This item provides alternative dis closures covering the several o ptions a lessor m a y offer to a lessee to p u rc h ase th e leased p rop erty . A lessor sh o u ld use the disclosures applicable to th e lease plan used. F o r exam ple, if n o o p tio n to p u rc h a s e is offered, only the last sentence o f the item should be used. If the lessor offers an option to purchase, the tim es at w h ic h it m a y be ex e r cised m u s t be supplied. T h e price m u s t be dis closed fo r an o p tio n exercised at th e en d o f the te rm an d the price o r m e th o d of c o m p u tin g the price fo r an option exercised d u ring the lease te rm m u s t be supplied (§ 2 2 6 .1 5 (b)( 11)). 87 SEC TIO N 226.1502—C L O SED -E N D OR N E T V EHICLE LEASE DISCLO SU R E STATEM ENT D a te ____________ T hese disclosures a re p rov id ed p u rs u a n t to the F e d e ra l C o n su m e r Leasing Act. 1. L E S S O R (S ) LE SSE E(S) 2. D escription o f leased p ro p e rty Year Make Model Body Style 3. Total Payment Due at Inception: □ Capitalized Cost Reduction □ Delivery Charge □ Trade-in Allowance □ Registration Fees □ Advance Monthly Payment of □ Refundable Security Deposit 4. Term o f this lease: The first monthly payment of $ is due on payments o f $ on the of each month thereafter. 5. T otal Monthly Payment: 6. Total of Monthly Payments: 7. T otal of Other Charges Payable to Lessor: [~l Disposition $ I ] Maintenance $ - n Vehicle ID # S : subsequent $ S $ $ 8. Fees and Taxes T otal am ount you will pay during the term for official fees, registration, certificate of title, license fees and taxes. 9. Insurance The following tvpes and am ounts o f insurance will be acquired in connection with this lease: — We (lessor) will provide the insurance coverage auoted above for a total premium cost of S □ You (lessee) agree to provide insurance coverage in the amounts and types indicated above. s s T h e following s ta n d a rd s a re app licable for determ inin g u n re a so n a b le o r excessive w ear a n d use o f the leased vehicle: 11. M ain ten a n c e [Y ou a re responsible fo r th e following m a in te n a n ce a n d servicing o f the leased vehicle: [We a re responsible fo r th e following m a in te n a n ce a n d servicing o f th e leased vehicle:. 12. W arra n tie s T h e leased vehicle is subject to th e follow ing express w arra ntie s 13. E arly T e rm in atio n a n d D efault (a) Y ou m a y te rm in a te this lease b efo re the e n d o f the lease term u n d e r the following c o n d itio n s :. T h e c harg e fo r su ch early te rm in a tio n is_ (b) W e m a y te rm in a te this lease before the end o f the lease te rm u n d e r the following c o n d itio n s :. U p o n su ch te rm in a tio n we shall be entitled to the following charge(s) f o r . (c) T o th e extent th a t these ch arges ta k e in to a cc o u n t the value o f the vehicle a t the end o f th e lease term , if you disagree w ith the value we assign to th e vehicle, y ou m ay o b ta in a t y o u r o w n expense, fro m a n in d e p e n d en t th ird p a rty agreeable to b o th o f us, a p rofessio nal a p p ra isa l o f th e __________________ value o f the leased vehicle w hich cou ld be realized a t sale. T h e ap p ra ise d value shall then be used as th e a ctu al value. 14. Security Interest W e reserve a security interest o f th e follow ing type in the p ro p e rty listed below to secure p e rfo rm an c e o f y o u r obligations u n d e r this le a se : _______________________________________________________________________________________________ ___________________ 15. L ate P aym en ts T h e c harg e fo r late p a y m e n ts i s . 16. Lessee’s O p tio n to Pu rchase [Y ou ha ve a n o p tio n to p u rc h a se th e leased vehicle a t the follow ing tim e s :. I f a t th e e n d o f th e term , th e price will be $______ I f p rio r to the e n d o f th e te rm , th e price will be $ . [Y ou h ave n o o p tio n to p u rc h a se the leased vehicle.] 88 REGULATION Z— INTERPRETATIONS IN S T R U C T IO N S FO R C O M PL E T IO N O F § 2 2 6 .1 5 0 2 — C L O S E D - E N D O R N E T V E H I C L E L E A S E D IS C L O S U R E STATEMENT G en er a l In struction s C o m p le tio n o f this form m ay be facilitated by referen ce to the following instructions. A n y q u e s tion as to the permissibility o r ac cu rac y o f a spe cific disclosure m a y be answ ered by reference to R egulation Z, 12 C F R P a r t 226. Paren th etical citations are to R eg ulatio n Z: In fo rm a tio n w hich is req u ired to be disclosed m a y be estim ated if the in fo rm atio n is u n k n o w n o r unavailable, provided th at the in fo rm a tio n is clearly identified as an estim ate and the estim ate is based on the best in fo rm ation available an d is reason able (§ 226.6(f)). A n y inapplicable disclosures should be deleted. T h is fo rm is based on a m o n th ly periodic p ay m ent. A ny lessor w hose lease c o ntem p lates a dif ferent p ay m en t period should change the form w here it refers to “ m o n th ly ” a m o u n ts to read “w eek ly ” o r o th e r time period, as appropriate. All num e rical a m o u n ts m ust be stated in figures an d shall be printed in not less th a n the equivalent of ten point type o r elite typew ritten n u m e rals or legibly h an d w ritten (§ 226.6(a)). P a ra g r a p h n u m b e rs need not be printed in ten point type or its equivalent. Specific In struction s Item 1. T he disclosures m ust be m a d e on a w rit ten dated statem ent. All lessors an d lessees m ust be identified by n a m e (§ 226.15(a)). If, fo r e x a m ple, o n e persons arran ges the lease an d an o th e r person enters into the lease, both m ust be id en ti fied as lessors (§ 226.2(h) an d (oo)). A n address m a y a u g m e n t the identification b ut need not be supplied as p art of the disclosure form. Item 2. T h is disclosure provides a brief d escrip tion o f the leased p ro p e rty (§ 226.15(b)(1)). L es sors m a y include a m o re detailed description in cluding, for exam ple, special accessories. T h e re is no re q u ire m e n t th a t a vehicle identification n u m b er fo r the vehicle be disclosed. Item 3. T his disclosure shows the total a m o u n t o f any initial p a y m e n t the c u sto m e r m ust m a k e w h en the lease is e n tered into (§ 226.15(b)(2)). T h e c o m p o n e n ts of the initial p a y m e n t m u st be identified a nd m ay, a t the lessor’s option, be ite m ized with respect to dollar am o un t. T h e te rm “C apitalized C ost R e d u c tio n ” is used § 2 2 6 . 1 5 0 2 to indicate a p a y m e n t in the n a tu re o f a d o w n p a y m e n t w hich reduces the value o f the leased vehicle to be am o rtiz ed o ve r the te rm o f the lease. T h e “ A d v a n ce M on th ly P a y m e n t” is the total of all a m o u n ts collected at the inception o f the lease w hich are to be attrib u ted to a m o n th ly p ay m e n t^ ). F o r exam ple, if the first m o n t h ’s rental p a y m e n t is collected at the inception, the form m ight read “ A d v a n c e M o n th ly P a y m e n t o f the first m o n t h ’s r e n t” o r a sim ilar phrase. If the last m o n t h ’s p ay m en t, o r any o th e r p ay m e n t in the n atu re o f rental fo r a p o rtio n o f the term , is col lected at the inception, a p p ro p ria te la nguage should be p ro v id ed to describe the co m p o n en ts o f the “ A d v an c e M o n th ly P a y m e n t.” C hecklists are provided to aid in identifying the co m p o nents. B lank spaces an d check boxes are provided to identify any o th e r elem ents w h ich are to be in cluded in this item. Item 4 . T his item discloses the te rm of the lease, the date o f the first periodic p a y m e n t an d the dates o r periods o f all sub se q uent periodic pay ments. T h e bla n k spaces should be filled in with the a p p ro p ria te terms. F o r exam ple, a fter the phrase “T e r m o f this lease:” the lessor m ay place the w ords “24 m o n t h s ” o r “A p ril 2, 1977, th ro ug h April 2, 1979,” as a p p rop riate. In the blank spaces p rovided a fte r th e p hrase “T h e first m o n th ly p a y m e n t o f :” should be the a p p ro p ria te a m o u n t and date. T h e first m o n th ly p a y m e n t m a y be p a rt or all o f the “A d v a n ce M o n th ly P a y m e n t” disclosed u n d er Item 3. T h e p hrase “su bse quent p aym ents o f ” should be preceded by the a p p ro p ria te n u m b er of paym ents an d followed w ith the ap p ro p ria te terms, such as “ $ 1 00.00 on the 2d of ea ch m o n th th e re a fte r.” Item 5. T his item discloses the p a y m e n t the lessee m u st m a k e each p ay m en t period (§ 226.15 (b)(3)). T h e c o m p o n e n t parts o f the “T otal M o n th ly P a y m e n t” m ay but need n o t be identified a nd itemized as to am o u n t. Item 6. T his item discloses the total o f the m o n th ly paym ents payable over the te rm o f the lease (§ 226.15(b)(3)). T h is figure is c o m p u te d by m ultiplying the m o n th ly p a y m e n t fro m Item 5 by the n u m b e r o f su bse quent p ay m en ts in Ite m 4 and ad d in g the first m o n th ly p a y m e n t to the p roduct. Item 7 . T his item discloses the total o f other charges payable to the lessor (§ 226.15(b)(5)). This excludes charges fo r official fees, taxes, insurance an d charges disclosed as totals u n d e r o th e r items. T h e individual co m p o n e n ts m u st be identified and § 226.1502 itemized as to am o u n t. A blank c h eck box is p ro vided in o rd e r to ad d to the list, as necessary. Item 8. T h is item discloses the total a m o u n t to be paid by the lessee d u rin g the lease term for taxes a n d o th e r official fees (§ 226.15(b)(4)). Item 9 . T his item requires disclosure of the types a nd a m o u n ts of in su rance coverage, with th e ir total p rem iu m cost, if the insurance is p ro v ided by the lessor (§ 2 2 6 .1 5(b)(6)(i)). In the a lte r native, only th e types an d a m o u n ts of coverage req u ired o f the lessee m ust be disclosed if the lessee provides the insurance c overage (§ 226.15 (b)(6)(H)). T h e disclosure is to be co m p leted by identifying the types a n d am o u n ts of insurance coverage following the colon a t the end o f the first sentence. If the lessor is to provide the co v erage the top check box should be filled in and the total p re m iu m cost indicated in the blank space provided. O therw ise the b o tto m check box should be filled in. Item 1 0 . T his item discloses reasonable s ta n d a rd s fo r w ear and use established by the lessor. T h e lessor is perm itted but not required to set such s ta n d ard s (§ 226.15(b)(8)). T h erefo re, the disclosure m a y be om itted by lessors w ho do not set stan d ard s fo r w ea r and use. Item 1 1 . This item provides for disclosure of the m a in te n a n ce an d servicing responsibilities of the parties (§ 226.15(b)(8)). T hese responsibilities m ay be allocated either to the lessor o r to the lessee, o r m ay be divided betw een them. Item 12. T h is item discloses all express w a r r a n ties o n the leased p ro p erty m a de by the m a n u f a c tu r e r o r lessor a nd available to the lessee (§ 226.15(b)(7)). A brief identification of the w a r ran ty m u s t be supplied. A reference to the s ta n d ard m a n u f a c tu r e r ’s w arran ty , for exam ple, would suffice. REGULATION Z— INTERPRETATIONS Item 13. T his item discloses the conditions u n d e r which the lessee m ay te rm inate the lease p rio r to the end of the lease term. It also discloses the a m o u n t or m e th o d of d eterm in in g the a m o u n t of the ch arge w hich the lessee m u st pay fo r early te rm in ation (§ 2 2 6 . 15(b)(12)). T h is item should disclose the conditions u n d er w hich the lessor m ay te rm in a te the lease p rio r to the end o f the term, such as default. T his item should also be used to disclose the a m o u n t o r m e tho d of d ete rm in in g the a m o u n t of any d efau lt charges (§ 226.1 5 (b)( 10)). T h e charges o r m eth o d of d eterm in in g the charges fo r early te rm in atio n by the lessor o th e r th a n fo r lessee’s default should be separately specified in this item. T h e bla n k space in I 3(c) is provided to indicate w h eth er the appraisal should be, fo r ex am ple, “ retail” or “w holesale.” Item 14. T h is disclosure o f the security taken m ust include, in the space provided, a brief identi fication of the types o f security interests an d an identification of the p ro p erty covered by each (§ 226.15(b)(9)). Item 15. This disclosure indicates the a m o u n t o r m e th o d of d eterm in in g the a m o u n t of any charges fo r late p a y m e n t (§ 2 2 6 .1 5(b)( 10)). Item 1 6 . T h is item provides alternative disclo sures covering the several options a lessor m a y offer to a lessee to p urchase the leased property. A lessor should use the disclosures applicable to the lease plan used. F o r exam ple, if no o p tio n to purch ase is offered, only the last sentence o f the item should be used. If the lessor offers an option to purchase, the times at w hich it m ay be exercised must be supplied. T h e price m u st be disclosed fo r an option exercised at the end o f the term , an d the price o r m e th o d o f co m p u tin g the price fo r an option exercised d u ring the lease term m u s t be supplied (§ 2 2 6 .1 5(b)(l 1)). S E C T IO N 226.1503— F U R N I T U R E L E A SE D IS C L O S U R E S T A T E M E N T D a te_ These disclosures are provided pu rsu an t to the Federal C on su m er Leasing'Act. 1. LESSOR(S) 2. Description o f leased property [is attached]. Item C olor S tock # LESSEE(S) Mfg. Qty. 3. T o tal Paym ent Due at Inception: □ R efundable Security Deposit □ Delivery C harge □ Advance M o nthly Paym ent of ... □ ........................ . . ..... 4. Term o f this lease: T he first m onthly payment of $ is due on ; subsequent paym ents o f $ on the of each m onth thereafter. 5. T otal M onthly Paym ent: 6. T o tal of M onthly Payments: 7. T otal o f O ther Charges Payable to Lessor: (“I Pick-up C harge S n $ 8. Fees and Taxes T otal a m o u n t y o u will pay during the term for official fees and taxes. 9. Insurance (“ 1 You (lessee) agree to provide insurance coverage of the following types in the following am ou nts: S s $ 5 $ 1 We (lessor) will provide the following types an d am o un ts o f insurance coverage: T otal prem ium co st: n Y ou agree to pay a waiver fee of $ per m o nth in lieu of insurance T o tal Waiver Fee: 10. M aintenance [You are responsible for the following m aintenance o f the leased property:. s s [We are responsible for the following m aintenance ot the leased pro perty 11. W arranties T he leased pro perty is subject to the following express warranties:. 12. Standards for W ear and Use The following standards are applicable for determining unreasonable o r excessive wear and use of the leased property 13. Early T erm ination and Default (a) Y ou m ay term inate this lease before the end o f the lease term under the following conditions:. T h e charge fo r such early term ination is_ (b) We may term in ate this lease before the end o f the lease term under the following conditions U p o n such term ination we shall be entitled to the following charge(s) 14. Security Interest W e reserve a security interest o f the following type in the property listed below to secure perform ance o f y o u r obligations under this lease: __________________________________________________________________ 15. Late Paym ents The charge for late paym ents is_ 16. O p tion to Purchase [You have an option to purchase an y o r all items o f the leased prop erty at the following times:. If at the end o f the term , the price will be $_ I f p rio r to the end o f the term , the price will be [You have n o o ption to purchase th e leased property.] 9 1 * _____ § 226.1503 IN S T R U C T IO N S F O R C O M PL E T IO N O F § 2 2 6 .1 5 0 3 — F U R N I T U R E L E A S E D ISC L O SU R E S T A T E M E N T G en era] In struction s C o m p le tio n o f this fo rm m a y be facilitated by referen c e to th e following instructions. A n y q u e s tion as to th e perm issibility o r a cc u ra cy o f a specific disclosure m a y be an sw ered by refe re n ce to R e gu lation Z, 12 C F R P a rt 226. Paren th etical citations are to R egu lation Z. In f o rm a tio n w h ic h is re q u ire d to be disclosed m a y be estim ated if th e in fo rm a tio n is u n k n o w n o r unavailable, p rov id ed th a t the in fo rm a tio n is clearly identified as an estim ate and the estimate is based o n the best in fo rm a tio n available an d is reasonable (§ 226.6(f)). A n y inapplicable disclosures should be deleted. T his fo r m is based o n a m o n th ly periodic p a y ment. A n y lessor w hose lease c o n te m p la te s a d if ferent p a y m e n t perio d should c h an g e th e fo rm w h e re it refers to “ m o n th ly ” am o u n ts to read “ w eek ly” o r o th e r tim e p eriod, as appropriate. A ll n u m e ric al a m o u n ts m u s t be stated in figures an d shall be p rin te d in not less th a n the equivalent of ten p oin t type o r elite ty p e w ritte n n u m e rals or legibly h a n d w ritte n (§ 226.6(a)). P a ra g r a p h n u m bers need n o t be p rin ted in ten point type o r its equivalent. Sp ecific In struction s Ite m 1. T h e disclosures m u st be m a d e on a w ritten d ated statem en t. All lessors and lessees m ust be identified by nam e (§ 226.15(a)). If, for exam ple, one p e rso n arranges the lease and a n o th e r perso n enters into the lease, b o th m ust be identified as lessors (§ 226.2(h) an d (oo)). A n a d dress m a y a u g m e n t the identification b u t n eed not be supplied as p a rt o f the disclosure form. Item 2. T h is disclosure provides a brief d e scription o f the leased items (§ 226.15(b)(1)). In the left c o lu m n the n a m e of the item sho u ld a p pear. T h e relev an t entry sh o u ld be m a d e in the a p p ro p ria te b ox in the colum n s to th e right o f the n a m es o f th e items as indicated by th e colum n headings. All o f the descriptive elements in the co lu m n headings, except th e one labeled “ Ite m .” are exam ples only. T h o se w hich are inapplicable to a lease p lan m a y be deleted. O th e r descriptive c o lu m n headings m a y be a d d ed (as indicated by the blank colum ns) if th e lessor desires. Item 3. T h is disclosure show s th e total am o u n t REGULATION Z— INTERPRETATIONS o f an y initial p a y m e n t the cu sto m e r m u s t m a k e w h en the lease is c o n su m m a te d (§ 226.15(b)(2)). T h e c o m p o n e n ts o f the initial p a y m e n t m u st be identified an d m a y, at th e lessor’s option, be ite m ized w ith respect to d o lla r am o u n t. A d d itio nal c o m p o n e n ts m a y be a d d e d to the list, as n eces sary, b y use o f the b la n k ch eck box. T h e “A d v an c e M o n th ly P a y m e n t” is th e total of all a m o u n ts collected at th e inception o f the lease w h ich are to be attrib u ted to a m o n th ly p a y m e n t s ) . F o r exam ple, if the first m o n t h ’s rental p a y m e n t is collected at th e inception, th e fo rm m ig h t read “ A d v an c e M o n th ly P a y m e n t o f the first m o n t h ’s r e n t” o r a similar ph rase. If th e last m o n t h ’s p ay m en t, o r any o th e r p a y m e n t in the n a tu re o f rental fo r a po rtio n o f the term , is col lected at the inception, a p p ro p ria te la nguage should be provided to describe the co m p o n e n ts of the “ A d v an c e M o n th ly P a y m e n t.” Item 4. T h is item discloses the te rm o f the lease, the date o f the first periodic p ay m e n t an d the dates o r periods o f all su b se qu e nt periodic paym ents. T h e b lan k spaces should be filled in with the a p p ro p ria te term s. F o r exam ple, after the p hrase “T e rm o f this le a s e :” th e lessor m a y place the w ords “ 24 m o n th s ” o r “April 2, 1977, th r o u g h A pril 2, 1979,” as a p pro pria te. In the b lan k spaces p rovided a fter the p h rase “ T h e first m on th ly p a y m e n t o f : ” should be the ap p ro p ria te a m o u n t an d date. T h e first m o n th ly p a y m e n t m ay be p a r t o r all o f th e “A d v an c e M onthly P a y m e n t” disclosed u n d e r Ite m 3. T h e p hrase “su b seq u en t p ay m en ts o f” should be p rec e d e d by th e a p p r o priate n u m b e r o f pay m en ts an d follow ed with the ap p ro p ria te terms, such as “ $ 1 0 0 .0 0 on the 2d o f e ach m o n th th e re a fte r.” Item 5. T his item discloses the p a y m e n t the lessee m u st m a k e each m o n th (§ 226.15(b)(3)). T h e c o m p o n e n t parts of the m o n th ly p a y m e n t m ay b u t n eed not be itemized as to am o u nt. Item 6. T his item discloses the total o f the m on th ly p ay m e n ts payable o v e r the te rm o f the lease. T his figure is c o m p u te d by m ultiplying the a m o u n t of the m o n th ly p a y m e n t in Item 5 by the n u m b e r o f su b seq u en t p ay m en ts in Item 4 and adding to th a t p ro d u c t the a m o u n t o f the first m o n th ly paym ent. Item 7. T h is item discloses the total o f o th e r charges payable to the lessor (§ 226.15(b)(5)). T his excludes charges fo r official fees, taxes, in su ran c e an d charges disclosed as totals u n d e r o th e r items. T h e individual co m p o n e n ts m u st be § 226.1503 identified an d itemized as to am o un t. A bla n k c h ec k box is p ro v id ed in o rd e r to ad d to the list, as necessary. Ite m 8. T his item discloses the total a m o u n t to be paid by the lessee d u rin g th e lease te rm fo r taxes an d o th e r official fees (§ 226.15(b)(4)). Item 9. T h is item provides alternative m e th o d s of disclosing in su ran c e coverage. It provides a disclosure fo r situations in w hich the lessee p ro vides the coverage, in w h ic h case the types and am o u n ts o f coverage m u st be specified (§226.15 (b)(6)(ii)). It p rovides a disclosure fo r situations in w h ich the lessee pro cu res coverage th r o u g h the lessor, in w hich case the types, a m o u n ts a n d costs o f coverage m u s t be specified (§ 226.15(b)(6)(i)). It also provides fo r disclosure of a fee in lieu o f insurance. Ite m 10. T h is item provides fo r disclosure of the m a in te n a n c e an d servicing responsibilities of the parties (§ 226.15(b)(8)). T h e se responsibilities m ay be allocated e ith er to the lessor o r to the lessee, o r m ay be divided b etw een them. Ite m 11. T h is item discloses all express w a r ranties applicable to th e leased p ro p e rty m a d e by th e m a n u fa c tu r e r o r lessor a n d available to the lessee (§ 226.15(b)(7)). A b rie f identification of the w a rra n ty m ust be supplied. A re ference to the sta n d ard m a n u f a c tu r e r ’s w a rra n ty w ould suffice. Item 12. T his item discloses sta n d ard s fo r w ear a n d use established by th e lessor. T h e lessor is perm itted, b u t not required, to set such stan d ard s (§ 226.15(b)(8)). Item 13. T his item discloses the conditions u n d e r w hich the lessee m a y te rm in ate the lease REGULATION Z— INTERPRETATIONS p rio r to th e en d o f the lease term. It also discloses the a m o u n t o r m e th o d of de te rm in in g the a m o u n t o f the charge w h ich th e lessee m u st p ay fo r early te rm in a tio n (§ 2 2 6 .1 5 ( b ) ( l2)). T his item should disclose the conditions u n d e r w h ic h th e lessor m a y te rm in a te the lease p ri o r to the en d of the term, su ch as default. T his item sh o uld also be used to disclose th e am o u n t o r m e th o d o f d e te r m in in g the a m o u n t o f an y d e fa u lt charges (§ 226. 15(b)( 10)). T h e charges or m e th o d o f d eterm in in g the charges fo r early te rm in a tio n b y th e lessor o th e r th a n fo r lessee’s d efau lt should be separately specified in this item. Item 14. T h is disclosure o f th e security taken m ust include, in th e space provided, a b rie f id e n tification o f the types of security interests and an identification o f the p ro p e rty covered by each such interest (§ 226.15(b)(9)). Item 15. T his disclosure indicates the a m o u n t o r m e th o d o f d eterm in in g th e a m o u n t o f a n y charges fo r late p a y m e n t (§ 2 2 6 .1 5(b)(10)). Item 16. T h is item provides alternative dis closures covering the several options a lessor m a y offer to a lessee to pu rch a se the leased property. A lessor should use the disclosures applicable to the lease plan used. F o r exam ple, if no option to p u rc h ase is offered, only the last sentence o f the item sh ou ld be used. If the lessor offers an option to purchase, the times at w h ich it m a y b e exer cised m ust be supplied. T h e price m u st be dis closed for an option exercised at th e e nd o f the term and the price o r m e th o d of co m p u tin g the price fo r an option exercised d u rin g th e lease te rm m ust be supplied (§ 2 2 6 .1 5(b)(l 1)). APPENDIX A QUESTIONS AND ANSWERS If you extend consum er credit, issue credit cards o r engage in c o n s u m e r leasing as a lessor, you must b eco m e fam iliar with R egulation Z. Y o u will be responsible for com plying with the R egulation a n d this p am p h let tells you how R eg u latio n Z affects yo u r business. T h e questions and answ ers tha t follow are stated as simply and clearly as possible. H O W E V E R , F O R E X A C T I N F O R M A T I O N O N W H A T YO U M U S T DO TO C O M P L Y W IT H T H E L A W , YO U M U S T R E A D T H O R O U G H L Y T H E A P P L I C A B L E S E C T I O N S O F R E G U L A T I O N Z. SO M E G E N E R A L Q U E ST IO N S A N D A N SW E R S Q: W ha t is the pu rp ose o f R e g u la tio n Z? A: Q: A: T h e p u rp o s e is to let b o rro w ers an d c o n su m e rs kn ow the cost of credit so that the y c a n c o m p a re costs betw een various credit sources an d avoid the u n in fo rm e d use of credit. R egulation Z also regulates issuance o f credit cards and sets m a x im u m liability fo r the u n au th o rize d use o f credit cards. It provides a p ro cedu re fo r resolving billing errors which o cc u r in op en e n d credit accounts. In addition, its p urpose is to inform lessees of the costs of c o n su m e r leasing and to place c ertain restrictions o n the lessee’s ultim ate liability when leasing personal p ro p erty . (Reg. Z / 2 2 6 . 1 ) W hat k in ds o f b u sinesses are affected? R egulation Z applies to credit ca rd issuers a nd an y individual or o rg an izatio n th a t extends o r a r ranges c red it fo r which a finance charge is o r m ay be payable o r w hich is rep ay ab le by a g ree m e n t in m o re th a n fo u r instalments. It also applies to an individual o r o rg an izatio n w ho leases o r arran g es fo r the lease o f personal p ro p erty . F o r exam ple, the R egulation applies to banks, savings and loan associations, credit unions, c o n su m e r finance co m p an ies a nd residential m ortgage brokers. It may also apply to d e p a rtm e n t stores, autom obile, fu rn itu re and appliance dealers an d lessors, c raftsm en such as p lu m b ers and electricians, doctors, dentists and o th e r professional people, an d hospitals. (Reg. Z /2 2 6 .2 ( p ), (q) and (s)) • Q: W h a t ty p e s o f credit tra n sactions are c o v er ed u n der R eg u la tio n Z? A: G enerally, credit you extend to people fo r personal, family, household o r agricultural uses, n o t ex ceeding $25,000. (Reg. Z /2 2 6 .2 ( p )) But all real estate credit transactions fo r these purposes are cov ered regardless o f the a m o u n t, except agricultural credit o ve r $25,000. (Reg. Z /2 2 6 .3 ( c ) a n d (e)) Q: W hat ty p es o f credit tran sa ctio n s are not covered ? A: T h e following are not affected by R egulation Z: (Reg. Z / 226.3) 1. 2. Business and co m m ercial credit— except agricultural credit. C redit to F ederal, State a nd local govern m ent. (H owever, go v e rn m en ta l units extending credit to individuals are affected by this law.) 3. T ra n sa c tio n s in securities and co m m o d ities accou n ts with a b ro k e r-d e ale r registered w ith the Securities a n d E x ch an g e C om m ission. 4. T ra n sa c tio n s u n d er ce rtain public utility tariffs. 5. C red it o v er $ 25 ,0 0 0— except real estate transactions. 6. A g ricu ltu ral credit o v er $ 2 5 ,0 0 0 — including real estate transactions. Q: W hat ty p e s o f lease tran sa ctio n s are c o v er ed under R e g u la tio n Z? A: Leases o f personal p ro p e rty p rim a rily fo r personal, h o useh o ld a n d fam ily use, w h ere the lessee is obligated for less th an $ 25 ,0 0 0 and the term o f th e lease is m ore th a n fo u r m onths. T h e R egulation covers b o th p u rch a se op tio n an d no n -p u rch ase option leases. (Reg. Z /2 2 6 .2 ( m m ) ) APPENDIX A Q: W hat types o f lease transactions are n o t co vered ? A : T h e following are not affected by R egulation Z: (Reg. Z /2 2 6 .2 ( m m ) a n d 226.3(f)) 1. Business, co m m e rc ia l an d agricultural leases. 2. Leases to organizations. 3. Leases for a period o f time less than fo u r m onths. 4. Leases fo r a total c o n trac tu a l obligation exceeding $25,000. 5. Leases w hich m eet the definition of a credit sale. (Reg. Z /2 2 6 .2 ( t)) 6. Leases o f personal p ro p e rty which are incident to the lease o f real p ro p e rty w here the lessee has no liability fo r the value o f th e p ro p e rty except fo r a b n o rm a l w ea r and te a r and the lessee has n o option to p u rch a se the leased property. Q: C an a State law be su bstitu ted fo r R e g u la tio n Z? A. Yes, it can, provided the F e d eral R eserve Board m akes th a t d ete rm in atio n as provided b y law. A n y d e term in a tio n m a d e will be published. (Reg. Z / 2 2 6 . 12) W ith regard to ce rtain sections of the R egulation w hich im p lem ent the F a ir C redit Billing A ct (discussed in m o re detail elsewhere in this A ppendix), the State law can be followed in som e cases, if doing so does n o t violate the R egulation. (Reg. Z /2 2 6 .6 (b )) Q: W ha t ha p p en s if I no t o n ly fo llo w R e g u la tio n Z but also e le c t to f o llo w in c o n siste n t State law ? A: In these cases the State disclosures m ay be show n on a separate sheet. T h e y m ay also be show n on the sam e statem e n t as the Federal disclosures. But in this event they m ust a p p e a r separately an d b e low the Federal disclosures, clearly m a rk e d th a t they are inconsistent w ith the F ed e ral disclosures, and sep arated by a dividing line. (Reg. Z /2 2 6 .6 ( c )) Special rules on this question apply to the F a ir C red it Billing req uirem ents o f the R egulation. (Reg. Z /226.6(b)(2)(iii)) Q: Is any sp ec ia l te rm in o lo g y prescribed? A: Yes, c ertain term ino lo g y is specified th at m ust be used in m a k in g disclosures co n ce rn in g credit tran saction s required by the R egulation. (Reg. Z /2 2 6 .6 ( a ); Reg. Z /2 2 6 .7 ( a ), (b) a nd (c); Reg. Z /2 2 6 .8 ( b ), (c) a nd (d); Reg. Z /2 2 6 .9 ( b ); Reg. Z /2 2 6 .1 0 ( f); Reg. Z / 2 2 6 . 11(c)) Q: D o d isclo su res h a v e to be m ade in the order they app ear in the R egu lation? A: N o . but they m ust be listed in an o rd e r w hich will be m ean in gfu l to y o u r custom er. (Reg. Z /2 2 6 .6 ( a )) Q: W hat term s are u sed to d escrib e credit tran sa ctio n s in the R eg u lation? A: T h e R egulation divides all c o n su m e r credit tran sactio n s into tw o b ro a d categories: open end credit a n d c red it o th e r th a n open end. T hese are discussed in su b seq u en t sections o f these Q uestions and Answers. Q: H o w lon g do I h av e to k eep records? A: Y o u should keep evidence o f co m p lia n c e fo r tw o years. (Reg. Z /2 2 6 .6 (i)) Q: W ill a n y o n e in sp ect m y records? A: If asked by the p ro p e r agency you must show y ou r records relating to disclosure an d evidence of com plia nce. (Reg. Z /2 2 6 .6 (i)) Q: A re there p ro v isio n s fo r e n fo r ce m en t? A: Specific responsibilities f o r e n fo rc e m e n t o f R egulation Z are divided am o n g nine F e d e ra l agencies. A co m p lete list o f these agencies and types o f businesses they cover can be fo u n d in A p p e n d ix E. If you need additional in form atio n , you should co n tact the a p p ro p ria te F e d e ra l agency. (Reg. Z /2 2 6 .1 (b )) APPENDIX A Q: A re there an y pen a lties fo r violatin g the A ct? A: If you fail to m a k e disclosures as requ ired u n d e r the T r u t h in L ending Act, you m a y be sued fo r actual d a m ag e s plus twice the a m o u n t o f the finance charge in the case of a credit transaction, and fo r 25% of the total m o n th ly p ay m en ts in the case o f a c o n su m e r lease, as well as c o u rt costs and a tto rn e y ’s fees. T h e finance c h arg e an d c o n su m e r lease p o rtions of dam ages are subject to a m in i m u m of $100 a nd m a x im u m o f $1,000. If you a re convicted in a crim inal action for willfully o r know ingly violating the A ct o r the R egulation, you could be fined up to $ 5,000 or im prisoned for u p to o n e year, o r both. (Reg. Z /2 2 6 .1 ( c )) In addition, a forfeitu re penalty (m a x im u m o f $50) a p plies to any failure to co m ply with the F a ir C red it Billing provisions. (Reg. Z /2 2 6 .1 4 ( f)) If you violate the lease advertising provisions o f the C o n su m er Leasing A ct, you m a y be sued for actual dam ages. SO M E Q U E ST IO N S A N D A N S W E R S O N T H E F IN A N C E C H A R G E A N D A N N U A L PERCENTAGE RATE Q: A: Q: A: W hat is the finance charge? It is the total o f all costs w hich y o u r cu sto m e r must (Reg. Z / 226.4) pay, directly o r indirectly, for o b taining credit. W h at co sts are inclu d ed in the finance charge? H ere are som e o f the m ore c o m m o n items that you must include in y o u r finance charge. See Z / 2 2 6 . 4 fo r o th ers and fo r qualifications w hich apply. Reg. 1. Interest. 2. L oan fee. 3. F in d e r ’s fee o r similar charge. 4. T im e price differential. 5. A m o u n t paid as a discount. 6. Service, tra n sac tio n or carrying charge. 7. Points. 8. A ppraisal fee (except in real estate transactions). 9. P rem iu m fo r credit life insurance, should y o u m a k e this a condition for g ranting credit. 10. Investigation o r credit repo rt fee (except in real estate transactions). Q: In w h at fo r m is the finance charge to be sh o w n to the custom er? A : It m ust be clearly typed o r w ritten, stating the dollars a nd cents total an d the a n n u al percentage rate. T h e w o rds “finance c h a rg e ” an d “annual percentage ra te ” m u st stand out especially clearly. (Reg. Z /2 2 6 .6 ( a )) In som e tran sactio n s involving the sale o f dwellings, the total dollar finance ch arg e need not be stated, altho u g h the a n n u al precentage rate m ust be disclosed. Q: W ha t is th e a nn ual percen ta g e rate? A : S im ply put, it is the relative cost of cred it in p e rcen tag e terms. (Reg. Z /2 2 6 .2 (g )) Q: A: A r e m a x im u m or m in im u m rates specified in R eg u latio n Z? N o . R eg ulatio n Z does n o t fix m a x im u m , m in im u m , or any charges for credit. But you show w h a tev e r annual perce n ta g e rate y ou do charge. itrequires th a t Q: H o w accu rate m ust the ann ual p ercen ta g e rate be? A : It m ust be c o m p u te d so as to perm it disclosure with an ac cu rac y at least to the nearest o n e-q u a rter o f 1% . (Reg. Z / 2 2 6 . 5) APPENDIX A Q: H o w is the ann ual p ercen ta ge rate co m p u te d ? A: It d e p e n d s o n w h e th e r the c redit is open end (Reg. Z /2 2 6 .5 (a )) or o ther than o pen end credit. (Reg. Z /2 2 6 .5 ( b )) SO M E Q U E ST IO N S A N D A N SW E R S A B O U T O P E N E N D C R E D IT Q: W hat is o p e n end credit? A : T ypically it covers m ost c re dit cards, as well as all revolving charge acc o u n ts in retail stores and check o v erd raft plans in banks, w here finance ch arg es are usually imposed on unpaid a m o u n ts each m o n th . (Reg. Z /2 2 6 .2 (s), (x) and 226.7) Q: W ha t m ust an o p e n e n d credit c u sto m e r be told under this law? A: If it is a new account, then y o ur c u sto m e r m ust receive these specific items in w riting to the extent applicable: (Reg. Z /2 2 6 .7 ( a )) 1. T h e co nditions u n d e r which the finance c h arg e m ay be imposed and the period in w hich p a y m e n t c an be m a d e w ithout incurring a finance charge. 2. T h e m e th o d used in d eterm in ing the balance o n which the finance charge is to be im posed. 3. H o w the actual finance charge is calculated. 4. T h e periodic rates used an d the ran g e o f balances to which each applies. 5. T h e c onditions u n d e r w hich additional charges m a y be m a d e alo n g with details of how they are calculated. 6. D escrip tio ns of any lien which y ou m ay acq u ire on a c u s to m e r’s p roperty. 7. T h e m in im u m p a y m e n t th a t m u s t be m a d e o n each billing. 8. A statem en t o f the c u s to m e r’s rights u n d er the F a ir C redit Billing Act. (Reg. Z /2 2 6 .7 (a)(9 )) Q: A re p eriod ic sta tem en ts n ecessary o n o p e n e n d a cco u n ts? A: Yes, b ut only w here there is a debit o r credit balance over $1 or w here a finance c h arg e is im posed. (Reg. Z /2 2 6 .7 ( b )) Q: W hat sort o f in fo r m a tio n m ust a c c o m p a n y a m o n th ly statem en t? A: W h e re applicable, you m ust give cu sto m e rs this in fo rm ation : (Reg. Z /2 2 6 .7 ( b )) 1. 2. 3. T h e debit o r credit balance at the start o f the billing period. A copy o f the sales v o u c h e r o r w ritten identification of the transaction. A m o u n ts an d dates of p ay m en ts m ad e by a cu sto m er, as well as o th e r credits, including re turns, rebates and adjustm ents. 4. T h e finance cha rg e shown in dollars and cents. 5. T h e rates used in calcu latin g the finance ch a rg e plus the range o f balances to w hich they a p ply, the co rre sp o n d in g a n n u a l percentage rate in each case calculated by m ultiplying the rate for the time period by the n u m b e r o f periods you use each year, and any m in im u m charge. 6. T h e annual p ercen tage rate, w hen a finance ch a rg e is im posed. 7. T h e un p aid balance on w hich the finance ch a rg e was calculated. 8. T h e closing date o f the billing cycle and the debit o r credit b alan ce at tha t time. 9. A sta te m en t o f the c u s to m e r’s rights u n d e r the F a ir C redit Billing provisions. (Reg. Z /2 2 6 .7 ( d )) 10. A n address to w hich billing e rr o r inquiries m ay be sent. Q: W here m ust this in form ation appear? A: S om e items m u st a p p e a r on the actual face of the statem ent. O thers m a y be show n on the reverse side, o r on a separate fo rm enclosed in the sam e envelope. (Reg. Z /2 2 6 .7 ( c )) APPENDIX A Q: H o w is the ann ual p er ce n ta g e rate determ in ed o n o p e n end credit? A : T h e finance c h arg e is divided by th e u n p aid b alan c e to w hich it applies. This gives the rate per m o n th o r w h a te v e r tim e period is used. T h e result is multiplied by 12 o r the o th e r n u m b e r o f time p erio ds used by you d urin g the year. (Reg. Z /2 2 6 .5 ( a )) F o r exam ple, a typical ch a rg e o f \ V i% is m a d e on an u n p aid balance w h ere bills are sent o u t m o nthly. T h e an n u a l percentage rate w ould be tw elve times 1 Vi % o r 1 8 % . O th e r m e th o d s for calculating the a n n u a l p erce n ta g e rate on o p en end cred it are detailed in Reg. Z /2 2 6 .5 ( a ). SO M E Q U E ST IO N S A N D A N SW E R S A B O U T C R E D IT O T H E R T H A N O P E N E N D Q: W h a t types o f credit are in clu ded? A: Both loans and sales c red it— in every case fo r a specified period of time w here the total am o u n t, n u m b e r o f p ay m en ts, an d du e dates are ag reed upon by you and y o u r custom er. T ypically, it is used in buying o r financing the p u rc h ase of “big tick e t” items. A g o od e xam ple is a loan fr o m a finance c o m p a n y to b uy an autom obile. A n o th e r ex am p le is credit extended by a store to buy a w ashing m a chine, a television set, o r o th e r m a jo r appliance. It also includes single p a y m e n t loans and m o r t gages. (Reg. Z / 226.8) Q: A: W hat m u st the credit c u sto m e r be told in these types o f transactions? Y o u m ust present to y o u r c u sto m e r in writing the following info rm a tio n as applicable, plus ad d i tional in form atio n relating to the type o f credit extended: (Reg. Z /2 2 6 .8 ( b )) 1. 2. 3. 4. 5. 6. 7. 8. 9. T h e total d ollar a m o u n t o f the finance c h arg e and , if there is m o re th an one type of charge, a description o f the a m o u n t o f each type, except in the case of a credit tran sa ctio n to finance th e p u rc h as e o f a dwelling. T h e date on w hich the finance c h arg e begins to accrue, if this is different fr o m the d ate of the transaction. T h e annual p ercentage rate. (F o r exception, see Reg. Z /226.8 (b )(2)(i) an d (ii)) T h e n u m b e r, am ou n ts, an d due dates o f paym ents. T h e total paym ents, except in the case o f first m ortgages on dwelling purchases. T h e a m o u n t you c h arg e for any default, d elinquency, etc.. or m e th o d you use fo r calculating that am o u n t. D escription o f any security you will hold and identification of the pro p erty to w hich it relates. D escription o f any penalty c harg e fo r p re p ay m e n t o f principal. Identification o f the m e th o d used to c o m p u te the a m o u n t of any finance ch arge reb ate in the case o f p re p a y m e n t in full o f c o ntracts involving p re co m p ute d finance charges. C h arg es d e ducted fro m any re b ate m ust be stated. If no rebate is given, th a t fact m u st be stated. Q: A r e there a n y oth er th ings c u sto m e rs m ust be told? A : T h a t d ep e n d s o n the tran sa ctio n — w h e th e r it is a loan o r a credit sale. Q: A: In th e ca se o f a lo a n , w h a t do I have to tell m y cu stom ers? In addition to the in form ation given y o u r custom er, as previously indicated, you m u st also provide this in fo rm ation : (Reg. Z /2 2 6 .8 ( d )) 1. T h e a m o u n t o f credit to be given to y o u r c ustom er. This includes all charges w hich a re part of the a m o u n t o f credit extended but are not a p a rt o f the finance charge. T h is inform ation m u st b e itemized. 2. A m o u n ts th a t are d ed u cted as prepaid finance charges and required deposit balances. (Reg. Z / 226.8(e)) 98 APPENDIX A Q: R eg a r d in g credit sales, w h a t ad d ition al in fo r m a tio n do I g iv e th ese cu stom ers? A: A gain, you m ust give yo u r custom ers all the in form atio n in the answ er to the second question in this section, a n d the following additional in fo rm a tio n as applicable: (Reg. Z /2 2 6 .8 (c )) 1. 2. 3. 4. 5. 6. 7. 8. T h e cash price. T h e d o w n p a y m en t, including trade-in and cash. T h e difference betw een the two. All o th e r charges, itemized, th at are included in the a m o u n t financed b ut not p a rt o f the finance charge. T h e u np a id balance. A m o u n ts deducted as p repaid finance charges o r req u ired deposit balances. (Reg. Z / 226.8(e)) T h e a m o u n t financed. T h e d e fe rre d p a y m e n t price, w hich is the total o f the cash price, finance ch arge an d all o the r charges. (This does not apply to the sale o f a dwelling.) Q: W h en m ust c u sto m e rs r ec eiv e all this in fo r m a tio n o n loa n s or credit sales? A : Before th e credit is extended. (Reg. Z /2 2 6 .8 ( a )) Q: M u st this in fo r m a tio n be g iv en to c u sto m e rs in writing? A : Yes. Y o u m ust include the in fo rm atio n on the note o r o th e r in stru m en t evidencing the obligation above o r a djacent to the c u sto m e r’s signature, o r o n on e side o f a sep arate sheet th a t identifies the transaction. (Reg. Z /2 2 6 .8 ( a )) Q: A re m o n th ly statem en ts required? A: M o st closed end cred ito rs need not send m on th ly statem ents b ut the R egu lation provides an ex cep tion to this rule fo r closed end credit extended b y use o f a credit card. (Reg. Z /2 2 6 .8 ( q )) If you do send out m o n th ly statem ents, yo u m u st sh o w clearly th e annual p e rcentag e rate a n d the p e rio d in w hich a p a y m e n t m u st be m a d e to avoid late charges. (Reg. Z /2 2 6 .8 ( n )) Q: H o w is th e a n n u a l p e r ce n ta g e rate ca lcu la ted o n loa n s or credit o th e r than o p e n end? A: By the actuarial m e th o d — p ay m en ts a re applied first to interest due and an y re m a in d e r is then a p plied to red uce principal. (Reg. Z /2 2 6 .5 ( b )) Q: W ha t are e x a m p les o f the actuarial m eth o d ? A: H e re are tw o simple examples: 1. 2. A b an k loan o f $ 1 00 repayable in equal m o n th ly instalm ents over one year is made, at a 6% a d d -o n finance charge. T h e a n n u a l p erce n ta g e rate w ould be 1 1 % . T h e b o rro w e r w ould rep ay $106 ov e r on e year. H e w o uld only have use o f the full $100 until he m ad e his first p ay m e n t, and less a n d less each m o n th as p a y m e n ts are m ade. T h e effect is th a t the actual an n u al p erc en tag e rate is alm ost twice the ad d -o n p erce n ta g e rate. U sing the sam e ex am p le as above with the 6 % finance c harg e d iscounted in advance, the a nn u al p erc en tag e ra te w o u ld be 11 '/2 % because the cu sto m er w ould only receive $94 and have to rep ay $100. H e w ould have full use o f only $94 o f the loan up to the time he m ak es his first p aym ent. Q: B u t isn’t the actuarial m e th o d v ery c o m p lica ted ? A: Yes, it is. Recognizing this, the F ederal R eserve B oard has p rep a re d tables show ing th e a n n u a l pre- c en tag e ra te based on the finance c harg e and the n u m b e r of weekly or m o n th ly p ay m e n ts to be m ad e. T h ese tables are available fro m the F ed eral R eserve B oard and F e d eral Reserve Banks at $ 1.00 pe r copy. (Reg. Z /2 2 6 .5 ( c )) APPENDIX A Q : M u st I u se th e B o a r d ’s A n n u a l P er ce n ta g e R a te tables? A : N o . Y o u m a y wish to p u rch a se specially p rep a red tables fo r y o u r type o f business fro m on e o f sev eral table o r c h a rt publishers. T r a d e associations an d financial institutions can be helpful also. (Reg. Z /2 2 6 .5 (c )(2 )) Q: M u st the creditor a lw a y s sh o w the a nn ual percen ta g e rate? A : G e n era lly yes, except th at o n credit o th e r th a n o p e n e n d credit, if the finance c h a rg e is $5 o r less, an d applies to credit o f $75 o r less, it need not be shown. T h e sam e exception applies to a finance c h arg e o f $7.50 o r less o n cred it of m o re th a n $75. (Reg. Z /2 26 .8 (b)(2 )(i) an d (ii)) SO M E Q U E ST IO N S A N D A N SW E R S A B O U T R E A L EST A T E Q: Is real estate credit c o v er ed under R e g u la tio n Z? A: Yes. All real estate credit in a ny a m o u n t is covered u n d e r this R egu lation w hen it is to an individual an d not fo r business purposes, except th a t real estate credit fo r agricultural purp oses in excess o f $25 ,0 0 0 is exem pt. (Reg. Z / 226.3) Q: D o e s su ch real estate credit c o v e r m o re than m ortgages? A : Yes, very definitely. A n y credit tran sa ctio n (other th a n a business c red it tran sactio n) th a t involves any type of security interest in real estate o f a c o n s u m e r is covered. (Reg. Z /2 2 6 .2 ( d d ), (ee), (ff) and (gg)) Q: A r e there a n y sp ec ia l p r o v isio n s that a p p ly to real estate credit? A: T w o basic points: 1. 2. In m a n y cases, y o u d o n o t h av e to sh o w the total dollar a m o u n t o f th e finance ch arge o n a c red it sale o r first m o rtg a g e loan to finance the p u rch a s e o f th e c u s to m e r’s dwelling. (Reg. Z / 226.8(c)(8) an d (d)(3); 22 6.808) In m a n y instances, y o u r cu sto m e r has the right to cancel a credit a r r a n g e m e n t w ithin three business days if his residence is used as collateral fo r credit. (Reg. Z / 226.9) Q: M u st a cred ito r in fo rm h is c u sto m e r o f the right to can cel? A: Yes. H e m u st fu rn ish the N o tic e p rescribed by the R egulation. (Reg. Z /2 2 6 .9 (b )) Q: W h a t m u st th e c u sto m e r do to c a n c e l a real estate transa ctio n under the R eg u la tio n ? A : A c u sto m e r m a y cancel a transaction or or or or 1. b y signing an d dating the N o tic e to c u sto m e r req u ired by F e d e ra l law, w h ich h e receives fr o m the creditor, an d either (a) m ailing the N o tic e to the c re d ito r at th e address show n on the N otice, (b) delivering the N o tic e to the cre d ito r at the address sh o w n o n the N o tic e either personally o r by m essenger (or by o th e r agents), 2. by sending a telegram to the c re d ito r at the address show n o n the N otice. A b rief descrip tion o f the transaction w hich the c u sto m e r wishes to cancel should be included in th e tele gram , 3. by p re p a rin g a le tter (or o th e r writing) w hich includes a brief description o f th e transaction which he wishes to cancel, and either (a) m ailing th e le tter (or o th e r writing) to the c re d ito r at the address sho w n on the N o tice, (b) delivering the letter (or oth e r w riting) to the cred ito r at the address sh o w n o n th e N o tic e either personally or by m e ssenger (or by o th e r agents). 100 APPENDIX A Q: W hat if the c u sto m e r te le p h o n e s that he is g o in g to can cel? A : A te lep h o n e call to the creditor m a y n o t he used to cancel a transaction: W R I T T E N n otice o f can cellation is required. If the c u sto m e r takes one of the above steps to cancel within th e three-day period, he h as effectively cancelled th e transaction. Q: A: W h a t if I h a v e n ’t r eceived the n o tic e o f ca n c ella tio n in three days? Y o u should allow time fo r a mailed letter o r te legram sent within the th ree-d ay period livered. o r otherwise d e te rm in e th a t y o u r cu sto m e r has not cancelled th e transaction. to be d e Q: D o e s this right o f c a n c ella tio n app ly to a first m ortgage? A : A first m o rtg ag e to finance th e p u rc h as e o f y o u r c u sto m e r’s dwelling carries no right to cancel, H o w ever, a first m o rtg ag e fo r any o th e r p u rp o se an d a second m o rtg ag e o n the sam e dw elling m ay be cancelled. (Reg. Z /2 2 6 .9 (g )) Q: W h a t hap p en s reg arding ca n c ella tio n in the ca se o f a m e c h a n ic ’s lie n o r sim ilar secu rity interest a c q u ir ed b y a c ra ftsm a n w h o w ork s o n credit? A: T a k e a cra ftsm a n , fo r exam ple, w h o charges his cu sto m ers a finance ch a rg e o r agrees to accept p a y m e n t in m o r e th a n fo u r instalments. H is cu sto m er does have a right to cancel, b u t only w ithin th ree business days. U nless th ere is an em e rg e n cy the c ra f tsm a n should wait the three days b e fo re sta rt ing work. (Reg. Z /2 2 6 .9 ( c )) Q: S u p p o se a c u sto m e r n eed s e m e r g e n c y repairs and c a n n o t w a it fo r three days? A: A c u sto m e r m a y waive his right t o cancel a cre d it a g ree m en t if c re d it is n eeded to m eet a b o n a fide p erso n al financial em e rg e n cy an d if failure to start rep airs w ould e n d a n g e r him , his family, or his p ro p e rty . P re p r in te d w aiver fo rm s m a y not be used. (Reg. Z /2 2 6 .9 ( e )) SO M E Q U E S T IO N S A N D A N S W E R S A B O U T C R E D IT C A R D S Q: W h a t is a credit card? A : A credit c a rd is a single cred it device existing for the p u rp o se o f being used fro m time to tim e u p o n p resen tatio n to o bta in m oney, p ro p e rty , labor, o r services on credit. (Reg. Z /2 2 6 .2 ( r)) Q: A r e there restrictions o n issu a n ce o f credit cards? A : Yes. A c red it c a rd m ay not be issued except in response to a request o r application o r as a renew al of. o r in substitution for, an accepted credit card. (Reg. Z /2 2 6 .1 3 ( a )) Q: W hat is a n a c ce p te d credit card? A : A n a ccepted cred it ca rd is a credit card w hich the c a rd h o ld e r has requested o r applied fo r an d re ceived, o r h as signed, o r h as used, o r has a u th o riz ed a n o th e r p erso n to use. A n y credit c ard issued in renew al of, o r in substitution for, an accepted c red it card becom es an a ccep ted credit card w h en received by th e card h o ld e r. (Reg. Z /2 2 6 .2 ( a )) Q: D o e s R e g u la tio n Z a p p ly to credit cards issu ed fo r b u sin ess purposes? A : In general, R eg ulatio n Z applies to all c redit card s w h e th e r issued fo r personal, fam ily, household, agricultural, business, o r c o m m ercial pu rposes, regardless o f w h e th e r issued to an individual p erson o r to an organ izatio n . But special provisions o n liability m a y apply to certain c re d it cards issued fo r business pu rp o ses to an organ izatio n. (Reg. Z /2 2 6 . 1 3 ( a ) an d (h)) APPENDIX A Q: Is a card holder liable fo r un au th o rized u se o f a credit card? A : A c a rd h o ld e r is liable for u n a u th o riz e d use o f a credit ca rd only if 1. 2. the credit c a rd is an accep ted credit card; the liability does n o t exceed the lesser o f $50 or the a m o u n t of m oney, p rop erty , lab o r or services o b tain ed by u n au th o rize d use p rio r to notification o f the c a rd issuer; 3. the card issuer has given the c a rd h o ld e r a d eq uate notice on the credit card o r w ithin two y ears p rec ed in g u n a u th o riz e d use regard in g the c a rd h o ld e r’s potential liability; 4. the c a r d issuer has p ro v id ed the c a rd h o ld e r with an addressed postage-paid notification to be m ailed in event o f loss, theft, o r possible u n a u th o riz e d use o f the credit c ard , a n d 5. the c a rd issuer h a s p rovided a m e th o d w h e re b y the user o f the c ard can be identified as th e p erson au th o riz ed to use it, such as by signature, p h o to g ra p h , o r fingerprint o n the c a rd , or by electronic o r m e ch an ical confirm ation. S O M E Q U E ST IO N S A N D A N S W E R S A B O U T T H E A D V E R T IS IN G O F C R E D IT AND LEASES Q: D o e s R e g u la tio n Z affect credit a n d lease advertising? A: Yes, it does. It affects all advertising to aid o r p ro m o te a ny extension o f c o n s u m e r credit o r any c o n s u m e r lease regardless of w ho th e advertiser m ay be. A n association, fo r exam ple, w hich a d v er tises th at its m e m b e rs extend c o n su m e r credit o r lease p ersonal p ro p erty is subject to the advertis ing provisions of R eg u latio n Z. Q: W hat k in ds o f advertisin g are affected? A: All types o f advertising: television, radio, new spapers, m agazines, leaflets, flyers, catalogs, public a d dress an n o u n ce m e n ts, direct mail literature, w in d ow displays, billboards, etc. (Reg. Z /2 2 6 .2 ( d )) Q: H o w d o e s R eg u la tio n Z a ffect y o u r advertisin g as a creditor? A: G enerally, y o u m a y n ot advertise th at the d o w n p a y m e n t, instalm ent plan o r a m o u n t of c red it c an be arran g e d unless you usually a rra n g e te rm s o f this type. (Reg. Z /2 2 6 .1 0 (a )(1 )) Q: A: H o w else is credit advertisin g affected? If it is open en d credit, see Reg. Z /2 2 6 .1 0 ( c ). F o r credit o th e r th a n o p en end, see Reg. Z /2 2 6 .1 0 ( d ). If you advertise in catalogs, see Reg. Z /2 2 6 .1 0 ( b ). If you im pose no specific finance ch a rg e a n d a d vertise in stalm ent credit, see Reg. Z /2 2 6 .1 0 ( f). But generally you are not p erm itted to advertise any specific cred it term unless all o th e r term s involved are stated clearly a n d ca n be easily d e te r mined. Q: H o w d o es R e g u la tio n Z affect y o u r adv ertisin g as a lessor? A: G en erally , y o u m a y n o t advertise that a specific lease at specific a m o u n ts o r term s c an be a rra n g e d unless you usually a rra n g e leases at those terms. (Reg. Z /2 2 6 .1 0 (a )(2 )) Q: H o w else is lease a dvertisin g affected? A: G en e ra lly , you a re not p erm itte d to advertise any specific lease te rm unless all o th e r relevant te rm s are stated an d c an be easily d eterm in ed . (Reg. Z /2 2 6 .1 0 ( g )) If you advertise in catalogs, see Reg. Z /2 2 6 .1 0 ( b ). If you are a m ultiple-item lessor w h o em ploys m erch an d ise tags, see Reg. Z / 226.10(h). SO M E Q U E ST IO N S A N D A N SW E R S A B O U T F A IR C R E D IT B IL L IN G Q: M u st all creditors c o m p ly w ith the F a ir C redit B illing provisions? A: N o. G e n erally, only o p en en d creditors, including all credit c ard issuers, m ust com ply. (Reg. Z / APPENDIX A 2 2 6 .2(s) a nd (x)) But creditors w ho offer o the r tha n open end credit by use o f a cred it ca rd are also subject to its requirem ents. (Reg. Z /2 2 6 .8 ( q ) an d 226.14(g)) Q: H o w sh ould a c u sto m e r n o tify the cred ito r o f su sp ec ted errors o n a period ic statem en t? A: Send a w ritten notice to the c reditor so th at it is received at the address specified fo r this p u rp o se within 60 days o f the d ate the periodic sta tem e n t on w hich the suspected e rr o r first a p p e a re d was sent. T h e notice should c on tain the c u s to m e r’s n a m e and a cc o u n t n u m b e r (if any), the a m o u n t b e lieved to be in erro r, and the reasons (to the extent k no w n) why the cu sto m er believes there is an error. (Reg. Z /2 2 6 .2 (c c )) Q: W h a t is a b illin g error? A: A m o n g o th e r things, a billing e rr o r is any m istake m a d e by the cre d ito r in billing o r identifying a transaction on a periodic statem ent, o r it m ay be a c re d ito r’s failure to send a periodic state m e n t to the c u s to m e r’s c o rrect address. A cu sto m er m ay also allege as a billing e rr o r tha t th e item w hich was p urch ased was not delivered as was agreed by the m e rch a n t. T h e c u sto m e r m a y ask for info rm atio n or clarification a b ou t an item o n the periodic s tate m e n t or fo r d o c u m e n ta ry p ro o f that the item is correct. This, too, is a billing erro r, even th ou g h a m istake m ay not, in fact, have b een made. (Reg. Z /2 2 6 .2 ( j)) Q: W h at m ust I do in resp o n se to a proper w ritten notifica tion o f a billing error? A: In general, you m u st a ck n ow led g e th e inq u iry w ithin 30 days an d give a co m p lete w ritten response b ased o n y o u r findings w ithin tw o co m p le te billing cycles (in n o case m o re th a n 9 0 days). If you agree with the c u sto m e r as to the existence o f an erro r, then w ithin the time limits you m ust m a k e co rre c tio n s o n the acco u nt. If y o u do n ot com p letely agree with the custom er, then within the time limits you m u s t explain in w riting w hy y ou do not agree and send any d o c u m e n ta ry p r o o f o f the inde btedness that th e c u sto m e r m a y have requested. (Reg. Z /2 2 6 .1 4 ( a ) an d (b)) Q: H o w sh o u ld the a m o u n t a lleg ed to be a b illin g error and any fin an ce ch a r g es or oth er c h a rg es o n that a m o u n t be treated du rin g the error r esolu tion process? A: N e ith e r the a m o u n t in dispute n o r any c h arg es im posed on that a m o u n t need be set a p a rt o r se p a rately identified d u rin g the tim e you are resolving the alleged error. It is sufficient if y o u indicate on the periodic statem en t that p a y m e n t of the a m o u n t in dispute is n o t req uired p en d in g y o u r c o m pliance with the billing e rro r provisions o f the F a ir C redit Billing Act. (Reg. Z /2 2 6 .1 4 ( b )) Q: M u st I c o m p ly w ith an y sp ecia l req u irem en ts regarding credit rep orting a fte r a b illin g error n o tic e is received? A: Yes. U n til you have c om p leted the response p ro c e d u re , yo u m a y not rep ort o r th rea te n to re p o rt to an y o n e adversely ab o u t the c u s to m e r’s credit standing. In som e cases you m ust indicate on any re ports m a d e th a t th e re is a dispute an d rep o rt any resolution of a dispute. (Reg. Z /2 2 6 .1 4 ( e )) Q: A r e there a n y prohib itio n s o n c lo sin g o r restricting an a c c o u n t b eca u se a c u sto m e r fails to pa y a d isp uted am oun t? A: Yes. A c u s to m e r’s a cc o u n t m a y not be closed or restricted d u rin g th e tim e the e rr o r resolution p r o ce d u re is pending, solely because the disputed a m o u n t is not paid. (Reg. Z /2 2 6 .1 4 ( d )) Q: A fte r c o m p le tio n o f the error resolu tio n p ro ced u re, h o w m ust finance c h a rg es be adjusted? A: If there was an e rr o r o f an y kind o n the periodic statem ent, then n o finance ch arg es m a y be co l lected o n the tran sactio n w h ich was the subject o f the dispute, fo r any period befo re th e e rr o r reso lution p r o c e d u r e is com pleted. In a d dition , yo u m u s t give the c u sto m e r a period for p ay m e n t w ith o u t in c u rrin g additional finance charges, if y o u n o rm ally allow one, b efore you m ay begin calculating a n d collecting finance charges. If th e re was no e rr o r o f any k in d o n the periodic statem ent, all APPENDIX A finance charges m ay be collected and no p erio d for p a y m e n t w ith ou t inc urring additional finance charges need be provided. (Reg. Z /2 2 6 .1 4 ( b )) Q: H o w are m in im u m p a y m e n ts to be treated? A : D u rin g the e rr o r resolution pro ced u re, you m a y no t re q u ire the cu sto m e r to m a k e a m in im u m p a y m e n t calculated o n the a m o u n t in dispute. A fte r the e rr o r is resolved, y o u m a y requ ire th e cu sto m e r to m a k e up missed m in im u m p ay m en ts, but you ca n n o t accelerate the entire debt because the cus to m e r asserted a billing error. (Reg. Z /2 2 6 .1 4 ( b )) Q: M a y a c u sto m e r assert against the card issuer any c la im s and d e fe n se s regarding un sa tisfa cto ry m er c h a n d ise or services ob ta in ed by use o f a credit card? I f so, under w h at co n d itio n s? A : Yes, a cu sto m e r m ay d o so if 1. 2. 3. the c u sto m e r first a ttem p ts to settle the p ro b lem with the m e rc h a n t involved; the original transcation w as in excess o f $50; and the tran sa ction took place w ithin the c u s to m e r’s h o m e State or, if outside the c u s to m e r’s h o m e State, w ithin 100 miles o f th e c u sto m e r’s h o m e address. T h e se a m o u n t a nd distance limitations d o n o t ap ply in som e cases, such as w h en the c a rd issuer and the m e rc h a n t are the sam e entity o r related entities. (Reg. Z / 226.1 3(i)) Q: A: M u st I in fo r m the c u sto m er o f his rights and duties under the error r esolu tion proced ure? Yes. T w o notices are provided. T h e lo n ge r fo r m (Reg. Z /2 2 6 .7 (a )(9 )) m u st be given to all n ew cu s to m ers w h en they o p en an account. T his sam e form m a y be used fo r the sem iann u al notice req u ired to be sent to the custom ers. (Reg. Z /2 2 6 .7 ( d )) As an alternative to the sem iann u al disclosure, a sh o rter fo rm is provided (Reg. Z /2 2 6 .7 (d )(5 )) w hich can be sent with each periodic statem ent. If you choose to use the sh o rte r form, you m u st also p rovide y o u r cu sto m e r a cop y of th e longer fo r m upon request an d each time a p ro p e r w ritten notification o f a billing e rr o r is subm itted. Q: C a n fu n d s held in a d e p o sit a c c o u n t fo r a c u sto m e r be app lied against the c u sto m e r ’s d eb t o n a credit card acco u n t? A: Q: A: O n ly if th e cu sto m er agrees in his bill. Otherw ise, you c an d o so o n ly creditors generally. (Reg. Z / 2 2 6 . 13(j)) w riting to allow you to do so as a m e th o d p u rs u a n t to a c o u rt o r d e r u n d e r a p ro c ed u re available to all W h a t sh o u ld I do if a c u sto m e r p ay s m ore than is ow ed ? Y o u m ay credit the excess ($1 o r m o re) own volition re tu rn o w ed an d re tu rn th e c u s to m e r’s ac co u n t with the entire a m o u n t sent. If you do, y o u m u s t re tu rn the to th e c u sto m e r if requested to d o so and, at any later time, you m a y of y o u r the excess. Y o u m ay also credit the c u s to m e r’s ac co u n t with only the a m o u n t excess w ithin five business days o f receipt. (Reg. Z /2 2 6 .7 ( b )) Q: A r e there a n y req u irem en ts c o n c er n in g h o w q u ick ly p a y m e n ts and o th er credits m u st be credited to a c u sto m e r ’s accou nt? A: Yes. Specific re q u ire m e n ts reg ard in g ho w p ro m p tly y o u r c u s to m e r’s p a y m e n ts m ust be credited a re set fo r th in the R egulation. (Reg. Z /2 2 6 .7 ( g )) T h e re are also re q u irem en ts regarding ho w p ro m p tly re fu n d credits fo r re tu rn s m ust be credited to a credit c ard account. (Reg. Z /2 2 6 .1 3 ( k )) Q: A r e there a n y oth er p r o v isio n s o f w h ic h a credit card issuer sh ould be particularly aware? A : C re d it c ard issuers c a n n o t p rohibit m e rc h a n ts w ho h o n o r their c ards fro m offering a disco un t to cu s to m ers w h o p a y cash, n o r can card issuers re q u ire m e rc h an ts w ho h o n o r th e ir c ards to p ro c u re fr o m the issuers any services n o t essential to the c red it card plan, such as u n re la te d b a n k in g serv ices. (Reg. Z / 2 2 6 . 13(1)) o f periodic p a y m APPENDIX A SO M E Q U E S T IO N S A N D A N S W E R S A B O U T C O N S U M E R L E A S IN G Q: W ha t ty p e s o f leases are co vered ? A: Q: A: Leases of personal p ro p e rty prim arily fo r p ersonal, family o r h ou seh o ld use for a period o f tim e exceeding fo u r m o n th s and fo r a total co ntra ctu al obligation o f less th a n $25,000. It includes both p u rc h ase option an d n o n -p u rc h ase option leases. E x am p les of c o n su m e r leases are long-term a u t o m obile leases and h o m e fu rn itu re leases. W hat m u st the lessee be told in these ty p e s o f transactions? Y o u m u st present to the lessee in writing the following in form ation as applicable: (Reg. Z / 226.15(b)) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. A b rie f description o f the leased property. T h e total a m o u n t o f an y pay m en t to be paid by the lessee at the beginning of the lease. T h e n u m b e r, a m o u n t and d u e dates or periods o f p ay m e n ts u n d e r the lease an d the total a m o u n t o f such periodic paym ents. T h e total am o u n t payable by the lessee d u rin g the lease te rm fo r official fees a n d taxes. T h e total a m o u n t o f all o th e r charges payable by the lessee to th e lessor. A b rief identification o f in su ran ce in co nn e ctio n with the lease. A statem e n t identifying any express w arra n ties available to the lessee. Identification of the party responsible fo r m a in te n a n c e an d servicing o f the p rop erty , and a sta tem en t o f reason ab le sta n d ard s fo r w e a r an d use if th e lessor sets such stand ard s. A description o f any security interest retained by th e lessor. A description o f an y penalty ch a rg e for delin qu en cy , default or late paym ents. A sta tem en t w h e th er o r not the lessee has the option to p u rch a se the leased p ro p e rty and w hen the lessee m a y exercise th e op tio n and at w h at price. A statem en t o f the conditions and c h arg es fo r early term inatio n. Q: A r e there an y o th er things that lessees m u st be told? A: In the case o f closed end o r net leases, w h ere th e lessee b ears no responsibility fo r the value o f the p ro p e rty at the end o f the term , o the r th a n fo r depreciatio n caused by a b n o rm a l w ea r an d tear, n o fu rth e r disclosures are required. In th e case o f o p e n end o r finance leases, where the lessee’s liabil ity is based u p o n the value o f the p ro p e rty at the end o f the te rm , certain o th e r disclosures m ust be made. Q: In the case o f an o p e n end lease w h at d o I have to tell the lessee? A: In a ddition to the in form atio n given the lessee, as previously indicated, you m u st also provide the following in fo rm a tio n : (Reg. Z / 2 2 6 .1 5(b)( 13),( 14),(1 5 » 1. A statem en t th a t the lessee shall be liable for the difference betw een the estim ated value of the p ro p e rty an d its realized value at early te rm ina tio n or the end o f the lease term . 2. W h e re the lessee’s liability at early te rm in a tio n o r at the end of the term is based o n the estim ated value o f the p ro p erty , a statem e n t tha t the lessee m a y o bta in at his o r h e r expense a professional appraisal o f the v alu e o f the p ro p e rty by an in d ep e n d en t third party. 3. T h e disclosure o f the value of the pro p erty at th e beginning o f the lease te rm , the total lease obligation an d the difference betw een them. 4. T h a t th ere is a reb u ttab le p re su m p tio n th a t the estim ated value o f th e p ro p e rty at th e en d o f the te rm is u n re a s o n a b le to th e ex ten t th at it exceeds the actual value by m o r e th a n three times the average m on th ly p ay m en t, a n d th a t yo u c a n n o t collect the a m o u n t o f excess liability unless you bring a successful c o u rt action in w hich y ou p a y th e lessee’sa tto rn e y ’s fees. 5. A sta te m en t th at th e lessee m a y m a k e a n y m utually agreeable final a d ju stm en t reg ardin g th e excess liability. APPENDIX A Q: W h e n m u st lessees r ec eiv e this in fo r m a tio n on leases? A: Before the lease is co n su m m ated . (Reg. Z /2 2 6 .1 5 ( a )) Q: M u st this in fo r m a tio n be g iv en to lesse es in writing? A: Yes. Y ou m ust include all the in fo rm a tio n on the fro n t an d back o f the lease or o th e r in s tru m e n t evidencing the obligation o r o n a sep arate statem en t th a t identifies the transaction. T h e re a re ex ceptions to this re q u ire m e n t in the case of m ultiple-item leases. (Reg. Z /2 2 6 .1 5 ( a )) 106 APPENDIX B NOTICE OF RIGHT OF RESCISSION T h e following fo rm is the fo rm o f notice o f th e rig h t to rescind a tra n sac tio n re q u ire d to be given to cu sto m ers u n d er ce rtain c ircum stances set fo r th in S ection 226.9 o f R e g ulatio n Z. W h e re th e p ro p e rty o n w h ich the security interest m a y arise does n o t include a dwelling, th e cre d ito r m a y substitute the w o rds “ the p ro p e rty y o u are p u rc h a s in g ” fo r “ y o u r h o m e ” o r “ lo t” fo r “h o m e ” w h ere these w o rd s a p p e a r in th e fo r m o f notice. T h is exhibit is set in capital an d low er case letters o f 12 point bold faced type, th e m in im u m size perm issible u n d e r R eg u latio n Z. (Id e n tific a tio n of T ra n sa c tio n ) Notice To Customer Required By Federal Law: You have entered into a transaction o n ___________________ which may (D ate ) result in a lien, mortgage, or other security interest on your home. You have a legal right under Federal law to cancel this transaction, if you desire to do so, without any penalty or obligation within three business days from the above date or any later date on which all material disclosures required under the Truth in Lending Act have been given to you. If you so cancel the transac tion, any lien, mortgage, or other security interest on your home arising from this transaction is automatically void. You are also entitled to receive a re fund of any downpayment or other consideration if you cancel. If you decide to cancel this transaction, you may do so by notifying ( N a m e of C reditor) a t ____________________________________ _______________________________ _ (A d d res s of C re d ito r's P lac e of B us ines s ) by mail or telegram sent not later than midnight o f ___________________ You (D ate ) may also use any other form of written notice identifying the transaction if it is delivered to the above address not later than that time. This notice may be used for that purpose by dating and signing below. I hereby cancel this transaction. (D ate) ( C u s t o m e r ’s s i g n a t u r e ) APPENDIX B T h e following p a ra g r a p h shall a p p e a r o n th e face o r the reverse side o f th e notice show n o n the opposite page. I f it ap p e ars o n th e reverse side o f the n o tice, th e face o f the notice shall state, “See reverse side f o r im p o rta n t in fo rm a tio n a b o u t y o u r rig h t o f rescission.” EFFECT OF RESCISSION. When a customer exercises his right to rescind under paragraph (a) of this section, he is not liable fo r any finance or other charge, and any security interest becomes void upon such a rescission. Within 10 days a fter receipt of a notice of rescission, the creditor shall return to the customer any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the term ination of any security interest created under th e transaction. If the cred itor has delivered any property to the customer, th e custom er may retain pos session of it. Upon the perform ance of th e creditor’s obligations under this section, th e customer shall te n d e r th e property to the creditor, except th a t if return of th e property in kind would be im practicable or inequitable, the cus to m e r shall tender its reasonable value. T e n d e r shall be m ade at the location of the property or at the residence of the customer, at the option of th e customer. If th e creditor does not take possession of th e property within 10 days after te n d e r by the customer, ownership of th e property vests in th e custom er w ith out obligation on his part to pay fo r it. 108 APPENDIX C NOTICE OF BILLING ERROR RIGHTS T h e follow ing text, o r on e substantially similar, m u s t a c c o m p a n y the T r u t h in L e n d in g disclosures, w here re q u ired by Sections 226.7(a), (d), o r (i) o f R e gu lation Z. It m a y a p p e ar on th e face o r reverse o f th e state m e n t on w h ich the T r u t h in L en d ing disclosures are m ad e, o r on one o r bo th sides o f a separate a c c o m p a n y in g statem ent. E x c ep t as p ro v id ed by S ection 226.6(a), th e text n e e d n o t be p rin te d in a p a rtic u la r type face o r size, b u t m u st be show n clearly an d conspicuously. C re d ito rs m a y delete a n y p o rtio n o f th e text w hich is n ot applicable to th eir credit plans. I N C A S E O F E R R O R S O R I N Q U I R I E S A B O U T Y O U R B IL L T h e F ed era l T r u th in L e n d in g A c t requires p r o m p t correction o f billing m ista kes. 1. I f y o u w ant to preserve y o u r rights u nd er the A c t, h e re ’s w hat to d o if y o u th in k y o u r bill is w ro n g or if y o u n e e d m o re in fo rm a tio n a b o u t an ite m o n y o u r bill: a. D o n o t w rite on the bill. O n a separate sh e e t o f pa p er w rite [A ltern ate: W rite o n the bill or oth e r sh e e t o f p a p e r] (y o u m a y te lep h o n e y o u r in q u iry b u t doin g so w ill n o t p reserve y o u r rights u n d er this law ) th e fo llow ing: i. Y o u r n a m e a n d a c c o u n t n u m b e r (if any). ii. A description o f th e error and an explanation (to th e e x te n t y o u can explain) w h y y o u believe it is an error. I f y o u o n ly n e e d m o re in fo rm a tio n , explain the item y o u are n o t su re a b o u t and, if y o u wish, ask fo r e vid en ce o f th e charge su ch as a c o p y o f th e charge slip. D o n o t sen d in y o u r co p y o f a sales slip o r o th e r d o c u m e n t unless y o u h a ve a d u p lic a te c o p y fo r y o u r records. iii. b. T h e dollar a m o u n t o f the su sp e c ted error. iv. A n y o th e r in fo rm a tio n (such as y o u r address) w h ich y o u th in k w ill h elp th e cred ito r to iden tify y o u or th e reason f o r y o u r c o m p la in t o r inquiry. S e n d y o u r billing error n otice to th e address o n y o u r bill w h ich is listed a fte r th e w ords: “S e n d In q u irie s T o :” o r sim ilar w ording. [A ltern ate: S e n d y o u r billing error n o tice to: (creditor’s n a m e and address).) M a il it as soon as y o u can, but in a n y case, early en o u g h to reach the creditor w ithin 6 0 days a fter th e bill was m a ile d to y o u . I f y o u h a ve a u th o rize d y o u r b a n k to a u to m a tica lly p a y fr o m y o u r c h e ck in g o r savings a c c o u n t a n y c red it card bills fr o m th a t ba n k, y o u can sto p o r reverse p a y m e n t on a n y a m o u n t y o u th in k is w ro n g b y m a ilin g y o u r n otice so the cred ito r receives it w ithin 1 6 days a fter th e bill was se n t to you. H o w ever, y o u d o n o t have to m e e t this 1 6 -d a y d eadline to g e t the creditor to investigate y o u r billing error claim . 2. T h e creditor m u st acknow ledge all letters p o in tin g o u t possible errors w ithin 3 0 d ays o f receipt, u n less the creditor is able to correct y o u r bill during that 3 0 days. W ith in 9 0 days a fter receiving y o u r letter, th e c reditor m u s t eith e r correct th e error o r explain w h y th e cred ito r believes th e bill was cor rect. O nce the creditor has e xplained the bill, the cred ito r has n o fu r th e r obligation to y o u even though y o u still believe that there is an error, e x c e p t as p ro v id ed in paragraph 5 below. 3. A f t e r the creditor has been notified, n eith er the creditor n o r an a tto rn e y n o r a collection a g ency m a y se n d y o u collection letters o r ta k e o th e r co llectio n a ction w ith respect to th e a m o u n t in dispute; b u t p eriodic sta tem e n ts m a y be sen t to y o u , an d th e d isp u te d a m o u n t can be a p p lied against y o u r credit lim it. Y o u ca n n o t b e th re a te n e d w ith d a m a g e to y o u r credit rating o r su ed fo r th e a m o u n t in question, n o r can th e d isp u te d a m o u n t be rep o rted to a credit b u reau o r to o th e r creditors as d e lin q u en t u n til th e creditor has an sw ere d y o u r in q u iry. H o w e v e r , y o u rem a in oblig a ted to p a y the parts o f y o u r bill n o t in dispute. APPENDIX C 4. I f it is d e te rm in e d that the creditor has m a d e a m ista ke on y o u r bill, y o u w ill n o t have to pay any finance charges on any d isp u te d a m o u n t. I f it tu rn s o u t th e cred ito r has n o t m a d e an error, y o u m a y h ave to pay finance charges on th e a m o u n t in d ispute, a n d y o u will h a ve to m a k e u p a n y m isse d m in im u m or required p a y m e n ts on the d isp u ted a m o u n t. U nless y o u h a ve agreed that y o u r bill was cor rect, the creditor m u s t se n d y o u a w ritten notification o f w h a t y o u ow e; a n d if it is d e te rm in e d that th e credito r d id m a k e a m ista k e in billing th e d isp u ted a m o u n t, y o u m u s t be given the tim e to pay w hich y o u n o rm a lly are g iv en to pay u n d isp u te d a m o u n ts b efo re a n y m o re finance charges or late p a y m e n t charges o n the d isp u te d a m o u n t can be charged to you. 5. I f th e creditor’s explanation does n o t satisfy y o u a n d y o u n o tify the creditor in writing w ithin 1 0 d a ys a fter y o u receive h is explanation that y o u still refu se to pay the d isp u te d a m o u n t, the creditor m a y report y o u to credit bureaus and o th e r creditors a n d m a y p u rsu e regular collection procedures. B u t the creditor m u st also report that y o u th in k y o u d o n o t o w e the m o n e y, a n d the creditor m u st let y o u k n o w to w h o m such reports w ere m ade. O n ce th e m a tte r has been se ttled b e tw e en y o u a n d th e creditor, the creditor m u s t n o tify those to w h o m the creditor rep o rted y o u as d e lin q u e n t o f the su b se q u en t resolution. 6. I f the creditor does not fo llo w these rules, the creditor is n o t allo w ed to collect th e first $ 5 0 o f the d isp u ted a m o u n t a n d finance charges, even if the bill tu rn s o u t to be correct. 7. I f yo u have a p ro b lem w ith p ro p erty or services pu rch a sed with a credit card, y o u m ay have the right n o t to pay th e rem aining a m o u n t d u e o n th e m , if y o u first try in g o o d fa ith to retu rn th e m or g iv e th e m e rc h a n t a chance to correct the p ro b le m . T h e re are tw o lim itations o n this right: a. Y o u m u st have b o u g h t the m in y o u r h o m e S ta te or if n o t w ithin y o u r h o m e S ta te w ithin 1 0 0 m iles o f y o u r current m ailing address; a n d b. T h e purchase price m u s t have been m o re than $ 5 0 . H o w ever, these lim itations do n o t apply if th e m e rc h a n t is o w n e d o r o p era ted b y the creditor, o r if the credito r m aile d y o u the a d ve rtise m e n t f o r the p ro p e rty or services. APPENDIX C A L T E R N A T IV E TO S E M IA N N U A L S T A T E M E N T O F B IL L IN G E R R O R R IG H T S T h e follow ing text, o r one substantially similar, m u st be sent with eac h periodic sta tem en t re q u ire d u n d e r Section 226.7(b)(1), if the cred ito r chooses to use th e provisions o f Section 226.7(d)(5) instead o f mailing the text p ro v id ed in Section 226.7(a)(9) sem iannually. E x cep t as p ro v id ed by Section 226.6(a), the R e g u lation does not specify the ty p e fa ce and size to be used, b u t th e statem e n t m u s t be p rin te d clearly an d conspicuously. IN CA SE O F ER R O R S O R I N Q U I R I E S A B O U T Y O U R B IL L S e n d y o u r inquiry in writing [at c re d ito r’s o p tio n : on a separate sheet] so that the creditor receives it w ithin 6 0 days after the bill was m ailed to yo u . Y o u r written inquiry m u st include: 1. 2. 3. Y o u r n a m e and a cco unt num b er (if any); A description o f the error and w h y (to the ex te n t yo u can explain ) y o u believe it is an error; and T h e dollar am o u n t o f the suspected error. I f y o u have a uthorized y o u r creditor to autom atically pay y o u r bill fr o m y o u r ch eckin g or savings account, you can stop or reverse p a y m e n t on a ny a m o u n t y o u th in k is w ron g by m ailing y o u r notice so that the creditor receives it within 1 6 days after the bill was sent to you. Y o u remain obligated to p ay the parts o f y o u r bill not in dispute, b u t y o u d o n ot have to p a y any a m o u n t in d ispute during th e tim e the creditor is reso lvin g the dispute. D u rin g that sam e tim e, the credi tor m a y not take any action to collect disputed a m o u n ts or report disputed a m ounts as delinquent. I f yo u have a p ro b lem with property or services purchased w ith a credit card, y o u m a y have the right n o t to p a y the rem aining am ount due on them if y o u first try in good fa ith to return th e m or give the m erchant a chance to correct the problem . T here are tw o limitations o n this right: 1. 2. Y o u m u st have b ou ght th e m in y o u r h o m e State or, if n o t w ithin yo u r h o m e State, w ithin 1 0 0 m iles o f y o u r current m ailing address; an d T h e purchase price m u st have been m ore than $ 5 0 . H ow ever, these lim itations do n o t apply i f the m ercha n t is o w n e d or o perated by the creditor, o r if the creditor m ailed y o u the a d v ertisem en t fo r the pro p erty or services. This is a su m m a ry o f yo u r rights; a fu ll sta te m e n t o f y o u r rights a n d the creditor’s responsibilities under the Federal Fair C redit B illing A c t will be sen t to y o u b o th upon request a n d in response to a billing error notice. APPENDIX D SA M P L E P A G E FR O M T A B L E FO R C O M P U T IN G ANNUAL PERCENTAGE RATE FOR LEVEL M O NTHLY PA Y M EN T PLANS EXAM PLE F in a n c e c h a r g e = $35.00; T o ta l a m o u n t fin an ced = $200; N u m b e r o f m o n th ly p a y m e n t s = 2 4 . SO L U T IO N Step 1— D ivide the finance ch a rg e by th e to ta l a m o u n t financed a n d m ultiply by $100. T h is gives th e finance ch a rg e p e r $ 1 0 0 o f a m o u n t financed. T h a t is, $ 3 5.0 0- h $200 = .1 7 5 0 X $ 1 0 0 = $17.50. Step 2— F o llo w d o w n th e left h a n d c o lu m n o f the table to the line fo r 24 m o nths. Follow across this line until y ou find the n earest n u m b e r to $17.50. In this ex am p le $17.51 is closest to $17.50. R ea d in g up th e c olum n of figures shows a n a n n u al perc en tag e rate o f 1 6 % . (This table is o n e page o f th e tables c om p iled b y th e F e d e ra l R eserve B oard to assist creditors in figuring o u t the a n n u a l perc en tag e rate o f th e cost o f credit, o r the a m o u n t o f the finance c harg e fo r a given rate.) APPENDIX E FEDERAL ENFORCEMENT AGENCIES F r o m the list that follows, you will be able to tell which F ed eral agency covers y o u r p artic u la r b usi ness. A n y questions you have should be directed to th at agency. T hese agencies are also responsible fo r en fo rc in g R egulation Z. N a t io n a l B an k s C o m p tro lle r of th e C u rre n c y U n ite d States T re a su ry D e p a rtm e n t W ashing to n , D .C. 2 0 2 2 0 State M e m b e r B a n k s F e d e ra l R eserve B an k serving the area in w h ich th e State m e m b e r b a n k is located. N o n m e m b e r In su red B ank s F e d e ra l Deposit In s u ra n ce C o rp o ra tio n Supervising E x a m in e r for the D istrict in w hich the n o n m e m b e r insured b a n k is located. S avin g s In stitu tio n s In su red by the F S L IC a n d M e m b e r s o f the F H L B S y stem (ex cep t fo r Savin g s B a n k s insu red by F D I C ) T h e F H L B B ’s S upervisory A g e n t in the F e d e ra l H o m e L o a n B an k D istrict in w h ich the institution is located. F ed er a l C redit U n io n s R egional Office o f th e N a tio n a l C red it U n io n A d m in istra tio n , serving th e a re a in w h ich the F e d e ra l C red it U n io n is located. C reditors Su b ject to C ivil A e r o n a u tic s B oa rd D irecto r, B u rea u o f E n fo rc e m e n t Civil A ero n a u tic s B o ard 1825 C o n n e c tic u t A venue, N .W . W ash in g to n , D .C . 20428 C reditors S u b ject to P a ck er s a n d Stock y a rd s A c t N e a re st P a c k e rs and S to ck y ard s A d m in istra tio n are a supervisor. F e d e r a l L a n d B an k s, F ed era l L a n d B a n k A s s o c ia tio n s , F e d e r a l In ter m ed ia te C redit B an k s, a n d P ro d u c tio n C redit A s so c ia tio n s F a r m C redit A dm in istra tio n 4 9 0 L ’E n fa n t P la z a W est W ashington, D .C . 20024 R etail D e p a r tm e n t Stores, C o n su m e r F in a n c e C o m p a n ie s , A ll O ther C reditors, and A ll N o n b a n k C redit C ard Issuers T r u t h in L en din g F e d eral T ra d e C om m ission W ashington, D .C . 2 05 8 0
