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F ederal

Ba n k o f Da lla s
DALLAS, TEXAS 75222
reserve

C i r c u l a r No. 70-203
A u g u s t 27, 1970

REGULATION Z
AMENDMENTS AND INTERPRETATIONS

To A l l M em ber B a n k s a n d O t h e r s C o n c e r n e d
in th e E le v e n th F e d e r a l R eserv e D i s t r i c t :

The Board of Governors of the Federal Reserve System
has printed a pamphlet containing the amendments and interpreta­
tions of Regulation Z issued during the period September 12,

1969,

to

July 31, 1970.
A copy of this pamphlet is enclosed.

Yours very truly,
P. E.

C o ld w e ll

President
E n c lo su re

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
REGULATION Z
AMENDMENTS
and
INTERPRETATIONS

This pamphlet contains all amendments and interpretations of Regulation Z issued during the period
September 12, 1969, to July 31, 1970. Three interpretations in this pamphlet (§§ 226.404, 226,811
and 226.903) supersede previously issued interpretations.

TABLE OF CONTENTS

AM ENDM ENTS
Page

Page

I.

II. Section 226.9—Right to Rescind Certain
Transactions

Section 226.8—Credit Other Than Open
End—Specific Disclosures
§ 226.8(p)

Agricultural credit — information
not determ inable............................

§ 226.9(g)(4)

Exceptions to the general rule .

3

III. Section 226.12—Exemption of Certain State
Regulated Transactions
Entire section is a m e n d e d ..............................

3

3

INTERPRETATIONS
I.

§

Section 226.3—Exempted Transactions
§ 226.302

Credit for business or commercial
purposes—more than 4 family
units ..........

Premiums for vendor’s single inter­
est insurance required by creditor

Renewals of n o te s ..........................

§ 226.812

Advances under open end real es­
tate mortgages for agricultural
purposes ...........................................

226.814 Premiums for insurance added to
an existing b a la n c e ........................

8

§

226.815 Disclosure for demand loans . . . .

9

§
5

III. Section 226.8—Credit Other Than Open
End—Specific Disclosures
§ 226.811

6

§

226.816 Mortgages with demand features .

9

§

226.817 Reduction in annual percentage
rate ...................................................

9

5

II. Section 226.4—Determination of Finance
Charge
§ 226.404

226.813 Disclosures on multiple advance
loans .................................................

IV.

Section 226.9—Right to Rescind Certain
Transactions

5
§ 226.903
6

Refinancing and increasing—dis­
closures and effects on the right
of rescission....................................

10

AMENDMENTS

REGULATION Z

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 pay­
ment or delinquency charges.

TRUTH IN LENDING
AMENDMENTS TO REGULATION Z

Effective November 6, 1969, Section 226.8 is
amended by the addition of paragraph (p) as
follows:
SECTION 226.8— CRED IT OTHER THAN
OPEN EN D — SPECIFIC DISCLOSURES

Effective November 6, 1969, Section 226.9(g)
(4) is amended as follows:

(p) Agricultural credit— information not de­
terminable. (1) In any transaction subject to this
section, if the amount 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 agree­
ment, disclosures may be made at the creditor’s
option in accordance with this paragraph, provided
the use of this paragraph is not for the purpose
of circumvention or evasion of this Part.

SECTION 226.9— R IG H T TO RESCIND
CERTAIN TRANSACTIONS
*

*

*

*

*

(g) Exceptions to general rule
* * * * *
(4)
Any advance for agricultural purposes
made pursuant to either:
(i) Paragraph (j) of § 226.8 under an open
end real estate mortgage or similar lien, pro­
vided the disclosure required under paragraph
(b) of this section was made at the time the
security interest was acquired by the creditor or
at any time prior to the first advance made on
or following the effective date of this Part, or

(2) If a creditor elects to make disclosures un­
der this paragraph, he shall disclose the following
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”:

(ii) Paragraph (p) of § 226.8 under a
written agreement, provided the disclosure re­
quired under paragraph (b) of this section was
made at the time the written agreement was
executed by the customer.

(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.

Effective March 12, 1970, Section 226.12 is
amended to read as follows:
SECTION 226.12— EXEM PTION OF CERTAIN
STATE REGULATED TRANSACTIONS

(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).

(a) Exemption for State regulated transactions.
In accordance with the provisions of Supplement
II to Regulation Z (§ 226.12— Supplement), any
State may make application to the Board for ex­
emption of any class of transactions within that
State from the requirements of Chapter 2 of the
Act and the corresponding provisions of this P a rt:
Provided, That

(iv) The disclosures, as applicable, required
under § 226.8( g ) ( 1), (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).

(1)
Under the law of that State, that class of
transactions is subject to requirements substan­
tially similar to those imposed under Chapter 2

(4) If a creditor making disclosures pursuant
to this paragraph transmits a periodic billing state­

3

AMENDMENTS

REGULATION Z

of the Act and the corresponding provisions of
this Part; and

(1) No such exemption shall be deemed to
extend to the civil liability provisions of sections
(2)
There is adequate provision for enforce­ 130 and 131; and
ment.
(2) After an exemption has been granted, the
(b) Procedures and criteria. The procedures
disclosure requirements of the applicable State
and criteria under which any State may apply for
law shall constitute the disclosure requirements
the determination provided for in paragraph (a)
of this Act, except to the extent that such State
of this section are set forth in Supplement II to
law imposes disclosure requirements not imposed
Regulation Z (§ 226.12— Supplement).
by this Act. Information required under such
State law with the exception of those provisions
(c) Civil liability. In order to assure that the
which impose disclosure requirements not imposed
concurrent jurisdiction of Federal and State courts
by this Act shall, accordingly, constitute the “in­
created in section 130(e) of the Act shall con­
formation required under this Chapter” (Chapter
tinue to have substantive provisions to which such
2 of the Act) for the purpose of section 130(a).
jurisdiction shall apply, and generally to aid in
implementing the Act with respect to any class of
(d) Exemptions granted. Exemptions granted
transactions exempted pursuant to paragraph (a)
by the Board to particular classes of credit trans­
of this section, the Board pursuant to sections 105
actions within specified States are set forth in
and 123 hereby prescribes that:
Supplement III to Regulation Z.
□

4

REGULATION Z

INTERPRETATIONS

TRUTH IN LENDING
INTERPRETATIONS OF REGULATION Z

such policy of insurance, the charges or premiums
shall be included in the finance charge.

SECTION 226.3

1 /2 8 /7 0

SECTION 2 2 6 .3 0 2 — CREDIT FOR BUSINESS OR
COMMERCIAL PURPOSES— MORE
THAN 4 FAMILY UNITS

* Supersedes interpretation § 226.404 issued
8 /1 /6 9 .

Under § 226.3(a), extensions of credit for
business or commercial purposes, other than agri­
cultural purposes, are not subject to Regulation Z.
The question arises as to whether an extension
of credit relating to a dwelling (as defined in
§ 226.2 (p )) which contains more than 4 family
housing units is an extension of credit for business
or commercial purposes.

SECTION 226.8
♦SECTION

2 2 6 .8 1 1 — RENEWALS OF NOTES

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
ing under § 226.8(j), and no disclosures need be
made in connection with such renewal, provided:

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 pur­
poses.

(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 amount of the renewal does not exceed
the amount of the unpaid balance plus any accrued
and unpaid finance charge;

1 /2 8 /7 0

(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 prin­
cipal payment, all disclosures should be made on
the basis of the resulting new amount 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. For example, if a single pay­

SECTION 226.4

♦SECTION 2 2 6 .4 0 4 — PREMIUMS FOR
VENDOR’S SINGLE INTEREST INSURANCE
REQUIRED BY CREDITOR

The question arises whether charges or premi­
ums for single interest insurance (Vendor’s Single
Interest Insurance) written in connection with a
credit transaction may be excluded from the
finance charge under § 2 2 6 .4 (a)(6 ) if the insurer
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
§ 2 2 6 .4 (a )(6 ), charges or premiums for such
insurance may be excluded from the amount of
the finance charge on that transaction. However,
if the insurer does not so waive subrogation in

5

REGULATION Z

INTERPRETATIONS

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 amount financed of $ 1,000 with
a finance charge of $20, and may, in addition,
disclose that with a principal payment of $300 the
amount financed would be $700 with a finance
charge of $14, and with a principal payment of
$500 the amount financed would be $500 with a
finance charge of $10.

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
estimate the information to be disclosed under
§ 226 .8 (b )(2 ) and (3) and ( d ) ( 3 ) .

1 /2 8 /7 0

(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:

In such cases, at the creditor’s option, required
information may be estimated and disclosed as
follows:

* Supersedes interpretation § 226.811 issued
8 /1 /6 9

SECTION 2 2 6 .8 1 2 — ADVANCES UNDER OPEN
END REAL ESTATE MORTGAGES FOR
AGRICULTURAL PURPOSES

(1) Symbols
L = Amount of loan commitment,
r = Stated annual interest rate expressed
as a decimal figure,
n = Number of interest payments to be
made to maturity,
m = Number of interest periods (unitperiods) in 1 year.
P = Total amount of any prepaid finance
charge under § 226.8(e).
B = Amount of any required deposit bal­
ance under § 226.8(e).

Under § 226.8(p) disclosures are permitted in
connection with certain extensions of credit for
agricultural purposes which may involve advances
under an open end real estate mortgage or similar
lien. Section 226.8(j) in part treats advances for
agricultural purposes under an open end real es­
tate 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 ad­
vances, whether or not under an open end mort­
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 § 226.8(j). Conversely, extensions 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 § 226.8(p) are subject to the relevant pro­
visions of § 226.8(j) dealing with such advances.

(ii) If interest is computed from the date of
each advance on only the amounts advanced:
Estimated annual percentage rate =

n(L — 2P

— 2B)

Estimated interest finance charge =

(iii) If interest is computed on the full amount
of the commitment without regard for the dates
of disbursements or actual amounts disbursed:
Estimated annual percentage rate = 2nrL + 2mP
n(JL — 2 P

Estimated interest finance charge =

11 /6 /6 9

— 2

d

)

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
sures required under § 2 2 6 .8 (b )(3 ); however, if
the equations under subdivision (iii) of para­
graph (1) are utilized, then the amount of each
scheduled interest payment shall be disclosed as
required under § 2 2 6 .8 (b )(3 ).

SECTION 2 2 6 .8 1 3 — DISCLOSURES ON
MULTIPLE ADVANCE LOANS

In connection with construction and other mul­
tiple advance loans under § 226.8(i), which are
payable in a single sum or permanently financed

6

REGULATION Z

INTERPRETATIONS

(3)
In the case of a combination construction (2 X 9 X .06 X 20,000) + (2 X 12 X 200) _
loan and permanent financing provided by the
9 X [(20,000 - (2 X 200)]
same creditor:
.1497 or 14.97% or 15% estimated annual per­
centage rate.
(i) The amount of interest finance charge to
be paid prior to the due date of the first amorti­
9 X .06 x 20,000
900 or $900 estimated interest
zation payment shall be estimated as prescribed
finance charge component of
12
under subdivisions (ii) or (iii) of paragraph (1)
the finance charge. This interest
as the case may be and shall be treated as pre­
would be payable in 9 monthly
payments of $100 each.
paid finance charge for computational purposes;
and
(ii) Estimation of the annual percentage rate
shall be made without regard to the number of
interest only payments to be made, assuming the
first payment period to be that interval between
the date the finance charge begins to accrue and
the date the first amortization payment is due.

Example II

A $20,000 construction loan followed by per­
manent financing in same amount. Six per cent
interest. One point loan fee. Nine months to ma­
4.
Disclosures made in accordance with this turity of construction phase. Nine monthly pay­
interpretation, when made along with the other
ments of interest only during construction phase.
disclosures required under § 226.8(b) and (d ),
Twenty-year maturity on permanent financing to
shall constitute “all other material disclosures
be amortized in 240 equal monthly payments in­
required under this Part” referred to under
cluding interest and principal.
§ 226.9(a):
From mortgage amortization tables:
Example I
Amortization of a $20,000 6% 20-year loan in
A $20,000 construction loan commitment on
240 equal monthly payments including interest
which the precise dates or amounts of advances
and principal requires each monthly payment to
are not determinable. The obligation bears a
be $143.29.
stated 6% interest rate and interest is to be paid
monthly on the amounts advanced, and the total
Total of 240 payments =
of the amounts advanced under the commitment
240 X $143.29 = $34,389.60
plus any unpaid interest is due and payable at the
Subtract amount of
end of nine months from the date the finance
loan principal
$20,000.00
charge begins to accrue. There is a loan fee of
Interest finance charge on
1% ($200), but there is no required deposit bal­
permanent financing
$14,389.60
ance. Substituting these terms for the symbols, the
Add: Estimated interest finance
equations become:
charge on construction
(9 X .06 X 20,000) + (2 X 12 X 200) _
phase (pursuant to sub­
9 X [(20,000 - (2 X 200)]
division (ii))
450.00
.0884 or 8.84% or 834 % estimated annual percentage
rate.
9 X .0 6 X

2

X

20,000
12

Add: Loan fee 1 point

450 or $450 estimated interest
finance charge component of
the finance charge.

Estimated finance charge

200.00
$15,039.60

(If the interest on the construction phase is com­
puted on the full amount 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.)

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 regard for
the dates of disbursements or actual amounts of
funds disbursed, the equations under (iii) above
become:

7

INTERPRETATIONS

REGULATION Z

Loan fee 1 point prepaid finance
charge

$

nance charge per $100 of estimated amount
financed for computational purposes.

200.00

For computational purposes con­
sider interest to be paid on con­
struction phase as prepaid (not to
be disclosed as prepaid)

$

450.00

Total amount treated as prepaid
finance charge for computational
purposes

$

Refer to page 309M of Volume I, read down
number 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.

650.00

Computational
Purposes
Amount of loan

$ 20,000

Deduct total of esti­
mated finance charge
treated as prepaid

$

Amount financed to
be disclosed

Disclosure
Purposes
$ 20,000

650

Deduct actual amount
of prepaid finance
charge
Estimated amount fi­
nanced for computa­
tional purposes

In the example where the interest on the con­
struction phase is computed on the full amount
of the commitment without regard for the dates
of advances or actual amounts advanced, the esti­
mated finance charge per $100 of amount 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 amount to $81.96,
and read up to 6.50% which is the estimated
annual percentage rate to be disclosed.

$

1 /28/70

200

SECTION 2 2 6 .8 1 4 — PREMIUMS FOR
INSURANCE ADDED TO AN
EXISTING BALANCE

$19,350
$19,800

Subsequent to the consummation of a consumer
credit transaction the customer may wish to pur­
chase optional insurance in connection with the
obligation. Typically, mortgage life and disability
insurance may be offered to the customer at some
date after consummation under a plan in which
the lender will advance the amount of the pre­
mium due and add that amount to the existing
unpaid balance of the obligation. Generally, each
instalment on the original obligation paid during
the period before the next premium is due will be
increased proportionately to liquidate the amount
of the additional advance plus any finance charge.
Additional advances are made automatically for
renewal premiums as they become due unless the
borrower requests discontinuance of the coverage.
The question arises as to the required disclosures.

Adjust first payment period (period of con­
struction loan plus period from maturity date of
construction loan to due date of first amortization
payment) 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 payment is due.
9 months divided by 2 = 4Vi months plus
1 month = 5Vi months
From 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 month) read + 9.0. This adjustment
should be added to the number of regular amorti­
zation payments to determine the number of pay­
ments in utilizing the Annual Percentage Rate
Tables:

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. For 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

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 amount financed for computational
purposes:
$1,503,960 -r- 19,350 = $77.72 estimated fi­

8

REGULATION Z

INTERPRETATIONS

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 amount of finance charge which
would accrue on the advance until paid in full.

If an alternative maturity date is specified, all
disclosures required under § 22 6 .8 (b )(3 ) shall be
made, using that date.
1/2 8 /7 0
SECTION 2 2 6 .8 1 6 — MORTGAGES WITH
DEMAND 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
mand 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. The 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 amortiza­
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 shall
be based upon the earliest date demand for pay­
ment in full may be made under the terms of the
mortgage showing the unpaid balance due at that
time as a “balloon payment.”
The disclosure requirements of this interpreta­
tion shall become effective May 1, 1970.

In some cases the advance is secured by a secu­
rity interest in real property which is used or ex­
pected to be used as the principal residence of the
customer. In those cases the premium advance
agreement is rescindable under § 226.9, and
notice of 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

SECTION 2 2 6 .8 1 5 — DISCLOSURE FOR
DEMAND LOANS

Section 2 2 6 .8 (b )(3 ) requires a creditor to dis­
close the number, amount and due dates or peri­
ods of payments scheduled to repay an extension
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, demand loans are considered to have
a one-half year maturity unless the obligation is
alternatively payable upon a stated maturity, in
which case the stated maturity shall be used.

1 /2 8 /7 0

SECTION 2 2 6 .8 1 7 — REDUCTION IN ANNUAL
PERCENTAGE RATE

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
interest payments for the first one-half year. In
such cases, the creditor need not disclose the num­
ber, amounts or total of payments or identify any
balloon payment. Effective May 1, 1970, creditors
shall disclose the fact that the obligation is pay­
able on demand.

Section 226.8(j) specifies that if any existing
extension of credit is refinanced, such transac­
tion shall be considered a new transaction sub­
ject 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 ) .

9

REGULATION Z

INTERPRETATIONS

the obligation is already secured by a security
interest in real property which is used or expected
to be used as the principal residence of that
customer.

When no other credit terms are changed, a
reduction in the annual percentage rate applica­
ble to an existing extension of credit does not con­
stitute a refinancing under § 226.8(j), and no
disclosures are required.

If the amount of such new transaction does not
exceed the amount of the unpaid balance plus
any accrued and unpaid finance charge on the
existing obligation, § 226.9 does not apply to the
transaction.

3 /3 1 /7 0

SECTION 226.9

If, however, such new transaction is for an
increased amount, that is, for an amount in excess
of the amount of the unpaid balance plus any
accrued and unpaid finance charge on the exist­
ing obligation, § 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.

^SECTION 2 2 6 .9 0 3 — REFINANCING AND
INCREASING— DISCLOSURES AND
EFFECTS ON THE RIGHT
OF RESCISSION

In some cases the creditor of an obligation will
refinance that obligation at the request of a cus­
tomer 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. Ex­
cept as provided in § 226.811, such refinancing
constitutes a new transaction, and all disclosures
required under § 226.8 must be made. The ques­
tion arises as to whether that transaction is sub­
ject to the right of rescission under § 226.9 where

If a transaction is refinanced by a creditor
other than the creditor of the existing obligation,
the entire transaction is subject to § 226.9.
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* Supersedes interpretation § 226.903 issued
6 /2 0 /6 9 .

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