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F ed er a l R e s e r v e Ba n k
DALLAS. TEXAS

of

Dallas

75222
Circular No. 81-121
June 16, 1981

REGULATIONS Z AND M PAMPHLETS

TO ALL MEMBER BANKS, OTHER CREDITORS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
Enclosed is a copy of the Regulation Z pamphlet, Truth in Lending,
effective July 1, 1969 and amended to April 1, 1981. Also enclosed is a copy
of the Regulation M pamphlet, Consumer Leasing, effective April 1, 1981. The
pamphlets have been punched for insertion in the upper two rings of your Reg­
ulations Binder.
The revised Regulation Z pamphlet and the new Regulation M pam­
phlet replace the Regulation Z pamphlet (effective July 1, 1969 and amended
to March 23, 1977), which is currently filed in your Regulations Binder. That
pamphlet, as well as the slip-sheet amendments, dated May 1980 and September
1980, and Circular No. 80-142, dated July 23, 1980, should be removed from
your binder.
Questions regarding these regulations should be directed to the Legal
Department of this Bank, Ext. 6171. Additional copies of the pamphlets will
be furnished upon request to the Communications, Financial, and Community
Affairs Department of this Bank, Ext. 6298.
Sincerely yours,
William H. Wallace
First Vice President
Enclosures

Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus 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

Regulation Z
Truth in Lending
12 CFR 226; effective July 1, 1969; amended to April 1, 1981

Contents

•

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Subpart A—G eneral............................

Section 226.1—Authority, purpose,
coverage, organization, enforcement
and liability......................................
(a) A uthority..................................
(b) P u rp o se ....................................
(c) C overage..................................
(d) O rganization............................
(e) Enforcement and liability........
Section 226.2—Definitions and rules of
construction......................................
(a) Definitions................................
(b) Rules of construction..............
Section 226.3—Exempt transactions ..
(a) Business, commercial,
agricultural, or organizational
c r e d it........................................
(b) Credit over $25,000 not secured
by real property or a dwelling .
(c) Public utility c re d it..................
(d) Securities or commodities
accounts....................................
(e) Home fuel budget p la n s ..........
Section 226.4— Finance c h a rg e ............
(a) Definition................................
(b) Examples of finance charges. . .
(c) Charges excluded from the
finance c h a rg e ..........................
(d) Insurance ..................................
(e) Certain security interest
charges......................................
(f) Prohibited offsets......................
Subpart B—Open-End C re d it............
Section 226.5—General disclosure
requirem ents....................................
(a) Form of disclosures..................
(b) Time of disclosures..................
(c) Basis of disclosures and use of
estimates ..................................
(d) Multiple creditors; multiple
consum ers................................
(e) Effect of subsequent events----

Section 226.6—Initial disclosure
statem ent..........................................
(a) Finance c h a rg e .........................
(b) Other charges ...........................
1
(c) Security interests.......................
1
(d) Statement of billing rights..........
1
Section 226.7—Periodicstatement . . .
1
(a) Previous b alan ce.......................
1
(b) Identification of transactions ..
1
(c) C red its.......................................
(d ) Periodic rates.............................
1
(e) Balance on which finance
j
charge com puted......................
4
(f) Amount of finance charge..........
4
(g) Annual percentage ra te ..............
(h) Other charges ...........................
(i) Closing date of billing cycle;
4
new balance................................
(j) Free-ride period..........................
4
(k) Address for notice of billing
4
e rro rs ..........................................
Section 226.8—Identification of
^
transactions.......................................
^
(a) Sale credit ........................... ..
(b) Nonsale c re d it............................
,Section 226.9—Subsequent disclosure
requirem ents....................................
(a) Furnishing statement of billing
r ig h ts ........................................
(b) Disclosures for supplemental
^
credit devices and additional
features......................................
®
(c) Change in terms .......................
^
(d) Finance charge imposed at time
of transaction............................
6
Section 226.10—Prompt crediting of
paym ents..........................................
(a) General ru le................................
6
(b) Specific requirements for
6
paym ents....................................
6
(c) Adjustment of accou n t..............
Section 226.11—Treatment of credit
7
balances.............................................
Section 226.12—Special credit card
7
provisions...........................................
7
(a) Issuance of credit cards..............

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Contents
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(b) Liability of cardholder for
unauthorized u se ......................
(c) Right of cardholder to assert
claims or defenses against card
issuer ........................................
(d) Offsets by card issuer
prohibited..................................
(e) Prompt notification of returns
and crediting of refu n d s..........
Discounts;
tie-in arrangements.
( 0
(g) Relation to Electronic Fund
Transfer Act and Regulation E
Section 226.13—Billing-error
resolution..........................................
(a) Definition of billing e rro r........
(b) Billing-error n o tic e ..................
(c) Time for resolution; general
procedures................................
(d) Rules pending resolution ........
(e) Procedures if billing error
occurred as asse rte d ................
Procedures if different billing
( 0
error or no billing error
occurred....................................
(g) Creditor’s rights and duties
after resolution ........................
(h) Reassertion of billing error . . . .
(i) Relation to Electronic Fund
Transfer Act and Regulation E
Section 226.14— Determination of
annual percentage r a t e ....................
(a) General ru le..............................
(b) Annual percentage rate for
initial disclosures and for
advertising purposes................
(c) Annual percentage rate for
periodic statem ents..................
(d) Calculations where daily
periodic rate applied................
Section 226.15 —Right of rescission. . .
(a) Consumer’s right to rescind . . .
(b) Notice of right to rescin d ........
(c) Delay of creditor’s performance
(d) Effects of rescission..................
(e) Consumer’s waiver of right to
rescin d ......................................
Exempt transactions................
( 0
Section 226.16—A dvertising..............
(a) Actually available te rm s..........
(b) Advertisement of terms that
require additional disclosures ..

11

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(c) Catalogs and multiple-page
advertisements..........................

18

Subpart C—Closed-End C re d it..........

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Section 226.17—General disclosure
requirem ents....................................
(a) Form of disclosures..................
(b) Time of disclosures..................
(c) Basis of disclosures and use of
estimates ..................................
(d) Multiple creditors; multiple
consum ers................................
(e) Effect of subsequent events . . . .
(f) Early disclosures......................
(g) Mail or telephone orders—
delay in disclosures..................
(h) Series of sales—delay in
disclosures................................
(i) Interim student credit
extensions..................................
Section 226.18—Content of disclosures
(a) C red ito r....................................
(b) Amount financed......................
(c) Itemization of amount financed
(d) Finance charge ........................
(e) Annual percentage rate ............
( 0 Variable r a t e ............................
(g) Payment schedule....................
(h) Total of paym ents....................
(i) Demand feature........................
(j) Total sale p r ic e ........................
(k) Prepaym ent..............................
(/) Late payment............................
(m) Security interest........................
(n) Insurance ..................................
(o) Certain security interest
charges......................................
(p) Contract reference....................
(q) Assumption policy ..................
(r) Required deposit......................
Section 226.19—Certain residential
mortgage transactions......................
(a) Time of disclosure....................
(b) Redisclosure required..............
Section 226.20—Subsequent disclosure
requirem ents....................................
(a) Refinancings ............................
(b) A ssum ptions............................
Section 226.21—Treatment of credit
balances............................................

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Contents
Page
Section 226.22—Determination of
annual percentage r a t e ....................
(a) Accuracy of annual percentage
r a te ............................................
(b) Computation tools...................
(c) Single add-on rate transactions
(d) Certain transactions involving
ranges of balances....................
Section 226.23—Right of rescission. . .
(a) Consumer’s right to rescind . . .
(b) Notice of right to rescin d .......
(c) Delay of creditor’s performance
(d) Effects of rescission..................
(e) Consumer’s waiver of right to
rescin d ......................................
(f) Exempt transactions...............
Section 226.24—A dvertising.............
(a) Actually available term s..........
(b) Advertisement of rate of
finance c h a rg e ..........................
(c) Advertisement of terms that
require additional disclosures..
(d) Catalogs and multiple-page
advertisements..........................

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25
25
25
25
25
25
25

Appendix A—Effect on state law s----Appendix B—State exemptions..........
Appendix C—Issuance of staff
interpretations..................................
Appendix D—Multiple-advance
construction loans............................
Appendix E—Rules for card issuers
that bill on a transaction-bytransaction b a s is ..............................
Appendix F—Annual percentage rate
computations for certain open-end
credit plans ......................................
Appendix G—Open-end model forms
and clauses........................................
Appendix H—Closed-end model
forms and clau ses............................
Appendix I—Federal enforcement
agencies............................................
Appendix J—Annual percentage rate
computations for closed-end credit
transactions......................................

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29
30
30

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34
35
41
53

53

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26

Subpart D—Miscellaneous..................

26

Section 226.25—Record retention . . . .
(a) General ru le..............................
(b) Inspection of records................
Section 226.26—Use of annual
percentage rate in oral disclosures ..
(a) Open-end credit........................
(b) Closed-end credit......................
Section 226.27—Spanish language
disclosures........................................
Section 226.28—Effect on state laws ..
(a) Inconsistent disclosure
requirem ents............................
(b) Equivalent disclosure
requirem ents............................
(c) Request for determ ination----Section 226.29—State exemptions---(a) General ru le..............................
(b) Civil liability............................
(c) Applications ............................

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TRUTH IN LENDING A C T ............

63

Regulation Z
Truth in Lending
12 CFR 226; effective July 1, 1969; amended to April 1, 1981

^ S U B P A R T A—GENERAL
SECTION 226.1—Authority, Purpose,
Coverage, Organization, Enforcement
and Liability
(a) Authority. This regulation, known as
Regulation Z, is issued by the Board of Gov­
ernors of the Federal Reserve System to im­
plement the federal Truth in Lending and
Fair Credit Billing Acts, which are contained
in title I of the Consumer Credit Protection
Act, as amended (15 USC 1601 et seq.).

•

(b) Purpose. The purpose of this regulation
is to promote the informed use of consumer
credit by requiring disclosures about its terms
and cost. The regulation also gives consumers
the right to cancel certain credit transactions
that involve a lien on a consumer’s principal
dwelling, regulates certain credit card prac­
tices, and provides a means for fair and timely
resolution of credit billing disputes. The regu­
lation does not govern charges for consumer
credit.
(c) Coverage. (1) In general, this regulation
applies to each individual or business that
offers or extends credit when four condi­
tions are met: (i) the credit is offered or
extended to consumers; (ii) the offering or
extension of credit is done regularly; 1 (iii)
the credit is subject to a finance charge or is
payable by a written agreement in more
than four installments; and (iv) the credit
is primarily for personal, family, or house­
hold purposes.
(2) If a credit card is involved, however,
certain provisions apply even if the credit is
not subject to a finance charge, or is not
payable by a written agreement in more
than four installments, or if the credit card
is to be used for business purposes.
(d) Organization. The regulation is divided
into subparts and appendices as follows:
1 The meaning of “regularly” is explained in the definition of “creditor” in section 226.2(a).

(1) Subpart A contains general informa­
tion. It sets forth: (i) the authority, pur­
pose, coverage, and organization of the reg­
ulation; (ii) the definitions of basic terms;
(iii) the transactions that are exempt from
coverage; and (iv) the method of determin­
ing the finance charge.
(2) Subpart B contains the rules for openend credit. It requires that initial disclo­
sures and periodic statements be provided.
It also describes special rules that apply to
credit card transactions, treatment of pay­
ments and credit balances, procedures for
resolving credit billing errors, annual per­
centage rate calculations, rescission require­
ments, and advertising rules.
(3) Subpart C relates to closed-end credit.
It contains rules on disclosures, treatment
of credit balances, annual percentage rate
calculations, rescission requirements, and
advertising.
(4) Subpart D contains rules on oral dis­
closures, Spanish language disclosure in
Puerto Rico, record retention, effect on
state laws, and state exemptions.
(5) There are several appendices contain­
ing information such as the procedures for
determinations about state laws, state ex­
emptions and issuance of staff interpreta­
tions, special rules for certain kinds of cred­
it plans, a list of enforcement agencies, and
the rules for computing annual percentage
rates in closed-end credit transactions.
(e) Enforcement and liability. Section 108 of
the act contains the administrative enforce­
ment provisions. Sections 112, 113, 130, 131,
and 134 contain provisions relating to liability
for failure to comply with the requirements of
the act and the regulation.

SECTION 226.2—Definitions and Rules
of Construction
(a) Definitions. For purposes of this regula­
tion, the following definitions apply:
1

§ 226.2
(1) “A ct” means the Truth in Lending Act
(15 USC 1601 et seq.).
( 2 ) “Advertisement” means a commercial
message in any medium that promotes, di­
rectly or indirectly, a credit transaction.
(3) “Arranger o f credit” means a person
who regularly arranges for the extension of
consumer credit 2 by another person if:
(i) A finance charge may be imposed for
that credit, or the credit is payable by
written agreement in more than four in­
stallments (not including a downpay­
ment); and
(ii) The person extending the credit is
not a creditor.
(4) “Billing cycle" or “cycle” means the
interval between the days or dates of regu­
lar periodic statements. These intervals
shall be equal and no longer than a quarter
of a year. An interval will be considered
equal if the number of days in the cycle
does not vary more than four days from
the regular day or date of the periodic
statement.
(5) “Board” means the Board of Gover­
nors of the Federal Reserve System.
( 6 ) ‘Business day” means a day on which
a creditor’s offices are open to the public for
carrying on substantially all of its business
functions. However, for purposes of rescis­
sion under sections 226.15 and 226.23, the
term means all calendar days except Sun­
days and the legal public holidays specified
in 5 USC 6103(a), such as New Year’s
Day, Washington’s Birthday, Memorial
Day, Independence Day, Labor Day, Co­
lumbus Day, Veterans Day, Thanksgiving
Day, and Christmas Day.
(7) “Card issuer” means a person that is­
sues a credit card or that person’s agent
with respect to the card.
( 8 ) “Cardholder” means a natural person
to whom a credit card is issued for consum­
er credit purposes, or a natural person who
has agreed with the card issuer to pay con­
2 A person regularly arranges for the extension of con­
sumer credit only if it arranged credit more than 23 times
(or more than 5 times for transactions secured by a dwell­
ing) in the preceding calendar year. If a person did not
meet these numerical standards in the preceding calendar
year, the numerical standards shall be applied to the cur­
rent calendar year.
2

Regulation Z
sumer credit obligations arising from the is­
suance of a credit card to another natural
person. For purposes of section 226.12(a)
and (b), the term includes any person to I
whom a credit card is issued for any pur­
pose, including business, commercial, or ag­
ricultural use, or a person who has agreed
with the card issuer to pay obligations aris­
ing from the issuance of such a credit card
to another person.
(9) “Cash price" means the price at which
a creditor, in the ordinary course of busi­
ness, offers to sell for cash the property or
service that is the subject of the transaction.
At the creditor’s option, the term may in­
clude the price of accessories, services relat­
ed to the sale, service contracts and taxes
and fees for license, title, and registration.
The term does not include any finance
charge.
(10) “Closed-end credit” means consumer
credit other than “open-end credit” as de­
fined in this section.
( 1 1 ) “Consumer ” means a cardholder or a
natural person to whom consumer credit is
offered or extended. However, for purposes
of rescission under sections 226.15 and
226.23, the term also includes a natural per­
son in whose principal dwelling a security
interest is or will be retained or acquired, if
that person’s ownership interest in the
dwelling is or will be subject to the security
interest.
(12) “Consumer credit” means credit of­
fered or extended to a consumer primarily
for personal, family, or household purposes.
(13) “Consummation" means the time
that a consumer becomes contractually ob­
ligated on a credit transaction.
(14) “Credit" means the right to defer
payment of debt or to incur debt and defer
its payment.
(15) “Credit card” means any card, plate,
coupon book, or other single credit device
that may be used from time to time to ob­
tain credit.
(16) “Credit sale" means a sale in which
the seller is a creditor. The term includes a
bailment or lease (unless terminable with­
out penalty at any time by the consumer)
under which the consumer—
(i) Agrees to pay as compensation for

Regulation Z
use a sum substantially equivalent to, or
in excess of, the total value of the proper­
ty and services involved; and
(ii) Will become (or has the option to
become), for no additional consideration
or for nominal consideration, the owner
of the property upon compliance with the
agreement.
(17) “Creditor” means:
(i) A person (A ) who regularly extends
consumer credit 3 that is subject to a fi­
nance charge or is payable by written
agreement in more than four installments
(not including a downpayment), and
(B) to whom the obligation is initially
payable, either on the face of the note or
contract, or by agreement when there is
no note or contract.
(ii) An arranger of credit.
(iii) For purposes of sections 226.4(c)
( 8 ) (Discounts), 226.9(d)
(Finance
Charge Imposed at Time of Transac­
tion), and 226.12(e) (Prompt Notifica­
tion of Returns and Crediting of Re­
funds), a person that honors a credit
card.
(iv) For purposes of subpart B, any card
issuer that extends either open-end credit
or credit that is not subject to a fi­
nance charge and is not payable by writ­
ten agreement in more than four
installments.
(v) For purposes of subpart B (except
for the finance charge disclosures con­
tained in sections 226.6(a) and 226.7(d)
through (g) and the right of rescission
set forth in section 226.15) and subpart
C, any card issuer that extends closedend credit that is subject to a finance
charge or is payable by written agree­
ment in more than four installments.
(18) “Downpayment” means an amount,
including the value of any property used as
a trade-in, paid to a seller to reduce the
cash price of goods or services purchased in
a credit sale transaction. A deferred portion
3 A person regularly extends consumer credit only if it
extended credit more than 25 times (or more than 5 times
for transactions secured by a dwelling) in the preceding
calendar year. If a person did not meet these numerical
standards in the preceding calendar year, the numerical
standards shall be applied to the current calendar year.

§ 226.2
of a downpayment may be treated as part of
the downpayment if it is payable not later
than the due date of the second otherwise
regularly scheduled payment and is not
subject to a finance charge.
(19) “Dwelling” means a residential struc­
ture that contains one to four units, wheth­
er or not that structure is attached to real
property. The term includes an individual
condominium unit, cooperative unit, mo­
bile home, and trailer, if it is used as a
residence.
( 2 0 ) “Open-end credit" means consumer
credit extended by a creditor under a plan
in which—
(i) The creditor reasonably contem­
plates repeated transactions;
(ii) The creditor may impose a finance
charge from time to time on an outstand­
ing unpaid balance; and
(iii) The amount of credit that may be
extended to the consumer during the
term of the plan (up to any limit set by
the creditor) is generally made available
to the extent that any outstanding bal­
ance is repaid.
(21) “Periodic rate” means a rate of fi­
nance charge that is or may be imposed by
a creditor on a balance for a day, week,
month, or other subdivision of a year.
( 2 2 ) “Person ” means a natural person or
an organization, including a corporation,
partnership, proprietorship, association, co­
operative, estate, trust, or government unit.
(23) “Prepaid finance charge” means any
finance charge paid separately in cash or by
check before or at consummation of a
transaction, or withheld from the proceeds
of the credit at any time.
(24) “Residential mortgage transaction"
means a transaction in which a mortgage,
deed of trust, purchase money security in­
terest arising under an installment sales
contract, or equivalent consensual security
interest is created or retained in the con­
sumer’s principal dwelling to finance the ac­
quisition or initial construction of that
dwelling.
(25) “Security interest” means an interest
in property that secures performance of a
consumer credit obligation and that is rec­
ognized by state or federal law. It does not
3

§ 226.2

Regulation Z

include incidental interests such as interests
in proceeds, accessions, additions, fixtures,
insurance proceeds (whether or not the
creditor is a loss payee or beneficiary), pre­
mium rebates, or interests in after-acquired
property. For purposes of disclosure under
sections 226.6 and 226.18, the term does
not include an interest that arises solely by
operation of law. However, for purposes of
the right of rescission under sections 226.15
and 226.23, the term does include interests
that arise solely by operation of law.
(26) “State” means any state, the District
of Columbia, the Commonwealth of Puerto
Rico, and any territory or possession of the
United States.
(b) Rules o f construction. For purposes of
this regulation, the following rules of con­
struction apply:
(1) Where appropriate, the singular form
of a word includes the plural form and plu­
ral includes singular.
(2) Where the words “obligation” and
“transaction” are used in this regulation,
they refer to a consumer credit obligation
or transaction, depending upon the context.
Where the word “credit” is used in this reg­
ulation, it means “consumer credit” unless
the context clearly indicates otherwise.
(3) Unless defined in this regulation, the
words used have the meanings given to
them by state law or contract.
(4) Footnotes have the same legal effect as
the text of the regulation.

natural person, including credit to govern­
ment agencies or instrumentalities.
(b) Credit oyer $25,000 not secured by real
property or a dwelling. An extension of credit
not secured by real property, or by personal
property used or expected to be used as the
principal dwelling of the consumer, in which
the amount financed exceeds $25,000 or in
which there is an express written commitment
to extend credit in excess of $25,000.
(c) Public utility credit. An extension of cred­
it that involves public utility services provided
through pipe, wire, other connected facilities,
or radio or similar transmission (including ex­
tensions of such facilities), if the charges for
service, delayed payment, or any discounts for
prompt payment are filed with or regulated by
any government unit. The financing of dura­
ble goods or home improvements by a public
utility is not exempt.
(d) Securities or commodities accounts.
Transactions in securities or commodities ac­
counts in which credit is extended by a bro­
ker-dealer registered with the Securities and
Exchange Commission or the Commodity Fu­
tures Trading Commission.
(e) Home fu el budget plans. An installment
agreement for the purchase of home fuels in
which no finance charge is imposed.

SEC T IO N 226.4— Finance C harge
SEC TIO N 226.3— E xem pt T ransactions
This regulation does not apply
following:

to the

(a) Business, commercial, agricultural, or or­
ganizational credit. 4 (1) An extension of
credit primarily for a business, commercial
or agricultural purpose.
(2) An extension of credit to other than a

4 Extensions of credit that are exempt under paragraph
(a)(1 ) and (2) remain subject to section 226.12(a) and
(b) governing the issuance of credit cards and the liability
for their unauthorized use.
4

(a) Definition. The finance charge is the cost
of consumer credit as a dollar amount. It in­
cludes any charge payable directly or indirect­
ly by the consumer and imposed directly or
indirectly by the creditor as an incident to or a
condition of the extension of credit. It does
not include any charge of a type payable in a
comparable cash transaction.
(b) Examples o f finance charges. The finance
charge includes the following types of
charges, except for charges specifically exclud­
ed by paragraphs (c) through (e) of this
section:

Regulation Z

§ 226.4

credit plan, whether assessed on an annual
(1) Interest, time price differential, and
any amount payable under an add-on or
or other periodic basis.
(5) Seller’s points.
discount system of additional charges.
( 6 ) Interest forfeited as a result of an inter­
(2) Service, transaction, activity, and car­
rying charges, including any charge im­
est reduction required by law on a time de­
posit used as security for an extension of
posed on a checking or other transaction
account to the extent that the charge ex­
credit.
(7) The following fees in a transaction se­
ceeds the charge for a similar account with­
out a credit feature.
cured by real property or in a residential
mortgage transaction, if the fees are bona
(3) Points, loan fees, assumption fees, find­
fide and reasonable in amount:
er’s fees, and similar charges.
(i) Fees for title examination, abstract of
(4) Appraisal, investigation, and credit re­
port fees.
title, title insurance, property survey, and
similar purposes.
(5) Premiums or other charges for any
(ii) Fees for preparing deeds, mortgages,
guarantee or insurance protecting the credi­
tor against the consumer’s default or other
and reconveyance, settlement, and simi­
credit loss.
lar documents.
(iii) Notary, appraisal, and credit report
( 6 ) Charges imposed on a creditor by an­
other person for purchasing or accepting a
fees.
consumer’s obligation, if the consumer is
(iv) Amounts required to be paid into
escrow or trustee accounts if the amounts
required to pay the charges in cash, as an
would not otherwise be included in the
addition to the obligation, or as a deduction
from the proceeds of the obligation.
finance charge.
( 8 ) Discounts offered to induce payment
(7) Premiums or other charges for credit
for a purchase by cash, check, or other
life, accident, health, or loss-of-income in­
means, as provided in section 167(b) of the
surance, written in connection with a credit
transaction.
act.
( 8 ) Premiums or other charges for insur­
ance against loss of or damage to property, (d) Insurance. (1) Premiums for credit life,
accident, health, or loss-of-income insur­
or against liability arising out of the owner-'
ance may be excluded from the finance
ship or use of property, written in connec­
charge if the following conditions are met:
tion with a credit transaction.
(i) The insurance coverage is not re­
(9) Discounts for the purpose of inducing
quired by the creditor, and this fact is
payment by a means other than the use of
credit.
disclosed.
(ii) The premium for the initial term of
insurance coverage is disclosed. If the
(c) Charges excluded from the finance
charge. The following charges are not finance
term of insurance is less than the term of
the transaction, the term of insurance
charges:
also shall be disclosed. The premium may
(1) Application fees charged to all appli­
be disclosed on a unit-cost basis only in
cants for credit, whether or not credit is ac­
open-end credit transactions, closed-end
tually extended.
credit transactions by mail or telephone
(2) Charges for actual unanticipated late
under section 226.17(g), and certain
payment, for exceeding a credit limit, or
closed-end credit transactions involving
for delinquency, default, or a similar
an insurance plan that limits the total
occurrence.
amount of indebtedness subject to
(3) Charges imposed by a financial institu­
coverage.
tion for paying items that overdraw an ac­
(iii) The consumer signs or initials an
count, unless the payment of such items
affirmative written request for the insur­
and the imposition of the charge were pre­
ance after receiving the disclosures speci­
viously agreed upon in writing.
fied in this paragraph. Any consumer in
(4) Fees charged for participation in a
5

§ 226.4
the transaction may sign or initial the
request.
(2) Premiums for insurance against loss of
or damage to property, or against liability
arising out of the ownership or use of prop­
erty , 6 may be excluded from the finance
charge if the following conditions are met:
(i) The insurance coverage may be ob­
tained from a person of the consumer’s
choice, 6 and this fact is disclosed.
(ii) If the coverage is obtained from or
through the creditor, the premium for
the initial term of insurance coverage
shall be disclosed. If the term of insur­
ance is less than the term of the transac­
tion, the term of insurance shall also be
disclosed. The premium may be disclosed
on a unit-cost basis only in open-end
credit transactions, closed-end credit
transactions by mail or telephone under
section 226.17(g), and certain closed-end
credit transactions involving an insur­
ance plan that limits the total amount of
indebtedness subject to coverage.

(e) Certain security interest charges. If item­
ized and disclosed, the following charges may
be excluded from the finance charge:
(1) Taxes and fees prescribed by law that
actually are or will be paid to public offi­
cials for determining the existence of or for
perfecting, releasing, or satisfying a security
interest.
(2) The premium for insurance in lieu of
perfecting a security interest to the extent
that the premium does not exceed the fees
described in paragraph ( e ) ( 1 ) of this sec­
tion that otherwise would be payable.

(f) Prohibited offsets. Interest, dividends, or
other income received or to be received by the
consumer on deposits or investments shall not
be deducted in computing the finance charge.

5 This includes single interest insurance if the insurer
waives all right of subrogation against the consumer.
6 A creditor may reserve the right to refuse to accept, for
reasonable cause, an insurer offered by the consumer.
6

Regulation Z
SU B PA R T B— O PE N -E N D C R E D IT

SEC T IO N 226.5— G eneral D isclosure
R equirem ents
(a) Form o f disclosures. (1) The creditor
shall make the disclosures required by this
subpart clearly and conspicuously in writ­
ing, 7 in a form that the consumer may
keep. 8
(2) The terms “finance charge” and “an­
nual percentage rate,” when required to be
disclosed with a corresponding amount or
percentage rate, shall be more conspicuous
than any other required disclosure. 9
(b) Time o f disclosures. (1) Initial disclo­
sures. The creditor shall furnish the initial
disclosure statement required by section
226.6 before the first transaction is made
under the plan.
(2) Periodic statements, (i) The creditor
shall mail or deliver a periodic statement
as required by section 226.7 for each bill­
ing cycle at the end of which an account
has a debit or credit balance of more than
SI or on which a finance charge has been
imposed. A periodic statement need not
be sent for an account if the creditor
deems it uncollectible, or if delinquency
collection proceedings have been institut­
ed, or if furnishing the statement would
violate federal law.
(ii) The creditor shall mail or deliver the
periodic statement at least 14 days prior
to any date or the end of any time period
required to be disclosed under section
226.7 (j) in order for the consumer to
avoid an additional finance or other
charge. 1 0 A creditor that fails to meet
’ The disclosure required by section 226.9(d) when a
finance charge is imposed at the time of a transaction need
not be written.
8 The alternative summary billing rights statement pro­
vided for in section 226.9(a)(2), and the disclosures made
under section 226.10(b) about payment requirements need
not be in a form that the consumer can keep.
9 The terms need not be more conspicuous when used
under section 226.7(d) on periodic statements and under
section 226.16 in advertisements.
10 This timing requirement does not apply if the creditor
is unable to meet the requirement because of an act of God,
war, civil disorder, natural disaster, or strike.

Regulation Z
this requirement shall not collect any fi­
nance or other charge imposed as a result
of such failure.
(c) Basis o f disclosures and use o f estimates.
Disclosures shall reflect the terms of the legal
obligation between the parties. If any informa­
tion necessary for accurate disclosure is un­
known to the creditor, it shall make the
disclosure based on the best information rea­
sonably available and shall state clearly that
the disclosure is an estimate.
(d) Multiple creditors; multiple consumers. If
the credit plan involves more than one credi­
tor, only one set of disclosures shall be given,
and the creditors shall agree among them­
selves which creditor must comply with the
requirements that this regulation imposes on
any or all of them. If there is more than one
consumer, the disclosures may be made to any
consumer who is primarily liable on the ac­
count. If the right of rescission under section
226.15 is applicable, however, the disclosures
required by sections 226.6 and 226.15(b)
shall be made to each consumer having the
right to rescind.
(e) Effect o f subsequent events. If a disclosure
becomes inaccurate because of an event that
occurs after the creditor mails or delivers the
disclosures, the resulting inaccuracy is not a
violation of this regulation, although new dis­
closures may be required under section
226.9(c).

SECTION 226.6—Initial Disclosure
Statement
The creditor shall disclose to the consumer, in
terminology consistent with that to be used on
the periodic statement, each of the following
items, to the extent applicable:
(a) Finance charge. The circumstances under
which a finance charge will be imposed and an
explanation of how it will be determined, as
follows:
(1) A statement of when finance charges
begin to accrue, including an explanation of
whether or not any time period exists with­

§ 226.7
in which any credit extended may be repaid
without incurring a finance charge. If such
a time period is provided, a creditor may, at
its option and without disclosure, impose
no finance charge when payment is received
after the time period’s expiration.
(2) A disclosure of each periodic rate that
may be used to compute the finance charge,
the range of balances to which it is applica­
ble, 1 1 and the corresponding annual per­
centage rate . 1 2 When different periodic
rates apply to different types of transac­
tions, the types of transactions to which the
periodic rates apply shall also be disclosed.
(3) An explanation of the method used to
determine the balance on which the finance
charge may be computed.
(4) An explanation of how the amount of
any finance charge will be determined, 1 3 in­
cluding a description of how any finance
charge other than the periodic rate will be
determined.
(b) Other charges. The amount of any charge
other than a finance charge that may be im­
posed as part of the plan, or an explanation of
how the charge will be determined.
(c) Security interests. The fact that the credi­
tor has or will acquire a security interest in
the property purchased under the plan, or in
other property identified by item or type.
(d) Statement o f billing rights. A statement
that outlines the consumer’s rights and the
creditor’s responsibilities under sections
226.12(c) and 226.13 and that is substantially
similar to the statement found in appendix G.

SECTION 226.7—Periodic Statement
The creditor shall furnish the consumer with
11 A creditor is not required to adjust the range of bal­
ances disclosure to reflect the balance below which only a
minimum charge applies.
12 If a creditor is offering a variable rate plan, the credi­
tor shall also disclose: (1) the circumstances under which
the rate(s) may increase; (2) any limitations on the in­
crease; and (3) the effect(s) of an increase.
13 If no finance charge is imposed when the outstanding
balance is less than a certain amount, no disclosure is re­
quired of that fact or of the balance below which no finance
charge will be imposed.

§ 226.7
a periodic statement that discloses the follow­
ing items, to the extent applicable:
(a) Previous balance. The account balance
outstanding at the beginning of the billing
cycle.
(b) Identification o f transactions. An identifi­
cation of each credit transaction in accord­
ance with section 226.8.
(c) Credits. Any credit to the account during
the billing cycle, including the amount and
the date of crediting. The date need not be
provided if a delay in crediting does not result
in any finance or other charge.
(d) Periodic rates. Each periodic rate that
may be used to compute the finance charge,
the range of balances to which it is
applicable, 1 4 and the corresponding annual
percentage rate . 1 5 If different periodic rates
apply to different types of transactions, the
types of transactions to which the periodic
rates apply shall also be disclosed.
(e) Balance on which finance charge comput­
ed. The amount of the balance to which a pe­
riodic rate was applied and an explanation of
how that balance was determined. When a
balance is determined without first deducting
all credits and payments made during the bill­
ing cycle, that fact and the amount of the
credits and payments shall be disclosed.
(f) Amount o f finance charge. The amount of
any finance charge debited or added to the
account during the billing cycle, using the
term “finance charge.” The components of the
finance charge shall be individually itemized
and identified to show the amount(s) due to
the application of any periodic rates and the
amount (s) of any other type of finance
charge. If there is more than one periodic rate,
the amount of the finance charge attributable
to each rate need not be separately itemized
and identified.

14 See footnotes 11 and 13.
16 If a variable rate plan is involved, the creditor shall
disclose the fact that the periodic rate(s) may vary.
8

Regulation Z
(g) Annual percentage rate. When a finance
charge is imposed during the billing cycle, the
annual percentage rate(s) determined under
section 226.14, using the term “annual per­
centage rate.”
(h) Other charges. The amounts, itemized
and identified by type, of any charges other
than finance charges debited to the account
during the billing cycle.
(i) Closing date o f billing cycle; new bal­
ance. The closing date of the billing cycle and
the account balance outstanding on that date.
(j) Free-ride period. The date by which or
the time period within which the new balance
or any portion of the new balance must be
paid to avoid additional finance charges. If
such a time period is provided, a creditor
may, at its option and without disclosure, im­
pose no finance charge when payment is re­
ceived after the time period’s expiration.
(k) Address fo r notice o f billing errors. The
address to be used for notice of billing errors.
Alternatively, the address may be provided on
the billing rights statement permitted by sec­
tion 226.9(a)(2).

SE C T IO N 226.8— Identification of
T ransactions
The creditor shall identify credit transactions
on or with the first periodic statement that
reflects the transaction by furnishing the fol­
lowing information, as applicable. 1 6
(a) Sale credit. For each credit transaction
involving the sale of property or services, the
following rules shall apply:
16
Failure to disclose the information required by this
section shall not be deemed a failure to comply with the
regulation if: (1) the creditor maintains procedures reason­
ably adapted to obtain and provide the information; and
(2) the creditor treats an inquiry for clarification or docu­
mentation as a notice of a billing error, including correcting
the account in accordance with section 226.13(e). This ap­
plies to transactions that take place outside a state, as de­
fined in section 226.2(a), whether or not the creditor main­
tains procedures reasonably adapted to obtain the required
information.

§ 226.9

Regulation Z
(1) Copy o f credit document provided.
When an actual copy of the receipt or other
credit document is provided with the first
periodic statement reflecting the transac­
tion, the transaction is sufficiently identified
if the amount of the transaction and either
the date of the transaction or the date of
debiting the transaction to the consumer’s
account are disclosed on the copy or on the
periodic statement.
(2) Copy o f credit document not provided—
creditor and seller same or relatedperson(s).
When the creditor and the seller are the
same person or related persons, and an ac­
tual copy of the receipt or other credit doc­
ument is not provided with the periodic
statement, the creditor shall disclose the
amount and date of the transaction, and a
brief identification 1 7 of the property or ser­
vices purchased. 1 8
(3) Copy o f credit document not provided—
creditor and seller not same or related person(s). When the creditor and seller are not
the same person or related persons, and an
actual copy of the receipt or other credit
document is not provided with the periodic
statement, the creditor shall disclose the
amount and date of the transaction; the
seller’s name; and the city, and state or for­
eign country where the transaction took
place. 1 9
(b) Nonsale credit. A nonsale credit transac­
tion is sufficiently identified if the first periodic
17 As an alternative to the brief identification, the credi­
tor may disclose a number or symbol that also appears on
the receipt or other credit document given to the consumer,
if the number or symbol reasonably identifies that transac­
tion with that creditor, and if the creditor treats an inquiry
for clarification or documentation as a notice of a billing
error, including correcting the account in accordance with
section 226.13(e).
18 An identification of property or services may be re­
placed by the seller's name and location of the transaction
when: (1) the creditor and the seller are the same person;
(2) the creditor’s open-end plan has fewer than 15,000 ac­
counts; (3) the creditor provides the consumer with pointof-sale documentation for that transaction; and (4) the
creditor treats an inquiry for clarification or documentation
as a notice of a billing error, including correcting the ac­
count in accordance with section 226.13(e).
19 The creditor may omit the address or provide any suit­
able designation that helps the consumer to identify the
transaction when the transaction (1) took place at a loca­
tion that is not fixed; (2) took place in the consumer’s
home; or (3) was a mail or telephone order.
20 See footnote 17.

statement reflecting the transaction discloses a
brief identification of the transaction; 2 0 the
amount of the transaction; and at least one of
the following dates: the date of the transac­
tion, the date of debiting the transaction to the
consumer’s account, or, if the consumer
signed the credit document, the date appear­
ing on the document. If an actual copy of the
receipt or other credit document is provided
and that copy shows the amount and at least
one of the specified dates, the brief identifica­
tion may be omitted.

SECTION 226.9—Subsequent
Disclosure Requirements
(a) Furnishing statement o f billing rights.
(1) Annual statement. The creditor shall
mail or deliver the billing rights statement
required by section 226.6(d) at least once
per calendar year, at intervals of not less
than 6 months nor more than 18 months,
either to all consumers or to each consumer
entitled to receive a periodic statement un­
der section 226.5(b)(2) for any one billing
cycle.
(2) Alternative summary statement. As an
alternative to paragraph ( a ) ( 1 ) of this sec­
tion, the creditor may mail or deliver, on or
with each periodic statement, a statement
substantially similar to that in appendix G.
(b) Disclosures fo r supplemental credit devic­
es and additional features. (1) If a creditor,
within 30 days after mailing or delivering
the initial disclosures under section
226.6(a), adds a credit feature to the con­
sumer’s account or mails or delivers to the
consumer a credit device for which the fi­
nance charge terms are the same as those
previously disclosed, no additional disclo­
sures are necessary. After 30 days, if the
creditor adds a credit feature or furnishes a
credit device (other than as a renewal, re­
supply, or the original issuance of a credit
card) on the same finance charge terms, the
creditor shall disclose, before the consumer
uses the feature or device for the first time,
that it is for use in obtaining credit under
the terms previously disclosed.
9

§ 226.9
(2) Whenever a credit feature is added or a
credit device is mailed or delivered, and the
finance charge terms for the feature or de­
vice differ from disclosures previously giv­
en, the disclosures required by section
226.6(a) that are applicable to the added
feature or device shall be given before the
consumer uses the feature or device for the
first time.
(c) Change in terms. (1) Written notice re­
quired. Whenever any term required to be
disclosed under section 226.6 is changed or
the required minimum periodic payment is
increased, the creditor shall mail or deliver
written notice of the change to each con­
sumer who may be affected. The notice
shall be mailed or delivered at least 15 days
prior to the effective date of the change.
The 15-day timing requirement does not
apply if the change has been agreed to by
the consumer, or if a periodic rate or other
finance charge is increased because of the
consumer’s delinquency or default; the no­
tice shall be given, however, before the ef­
fective date of the change.
(2) Notice not required. No notice under
this section is required when the change in­
volves late-payment charges, charges for
documentary evidence, or over-the-limit
charges; a reduction of any component of a
finance or other charge; suspension of fu­
ture credit privileges or termination of an
account or plan; or when the change results
from an agreement involving a court pro­
ceeding, or from the consumer’s default or
delinquency (other than an increase in the
periodic rate or other finance charge).
(d) Finance charge imposed at time o f trans­
action. (1) Any person, other than the card
issuer, who imposes a finance charge at the
time of honoring a consumer’s credit card,
shall disclose the amount of that finance
charge prior to its imposition.
(2) The card issuer, if other than the per­
son honoring the consumer’s credit card,
shall have no responsibility for the disclo­
sure required by paragraph ( d ) ( 1 ) of this
section, and shall not consider any such
charge for purposes of sections 226.6 and
226.7.
10

Regulation Z
SEC T IO N 226.10— P rom p t Crediting of
Paym ents
(a) General rule. A creditor shall credit a|
payment to the consumer’s account as of the
date of receipt, except when a delay in credit­
ing does not result in a finance or other charge
or except as provided in paragraph (b) of this
section.
(b) Specific requirements fo r payments. If a
creditor specifies, on or with the periodic
statement, requirements for the consumer to
follow in making payments, but accepts a pay­
ment that does not conform to the require­
ments, the creditor shall credit the payment
within five days of receipt.
(c) Adjustment o f account. If a creditor fails
to credit a payment, as required by para­
graphs (a) or (b) of this section, in time to
avoid the imposition of finance or other
charges, the creditor shall adjust the consum­
er’s account so that the charges imposed are
credited to the consumer’s account during the
next billing cycle.

S E C T IO N 226.11— T reatm ent o f Credit
Balances
When a credit balance in excess of $1 is creat­
ed on a credit account (through transmittal of
funds to a creditor in excess of the total bal­
ance due on an account, through rebates of
unearned finance charges or insurance premi­
ums, or through amounts otherwise owed to
or held for the benefit of a consumer), the
creditor shall—
(a) Credit the amount of the credit balance
to the consumer’s account;
(b) Refund any part of the remaining credit
balance within seven business days from re­
ceipt of a written request from the consumer;
and
(c) Make a good faith effort to refund to the
consumer by cash, check, or money order, or
credit to a deposit account of the consumer,
any part of the credit balance remaining in the

Regulation Z
account for more than six months. No further
action is required if the consumer’s current
location is not known to the creditor and can­
not be traced through the consumer’s last
known address or telephone number.

SECTION 226.12—Special Credit Card
Provisions
(a) Issuance o f credit cards. Regardless of
the purpose for which a credit card is to be
used, including business, commercial, or agri­
cultural use, no credit card shall be issued to
any person except—
(1) In response to an oral or written re­
quest or application for the card; or
(2) As a renewal of, or substitute for, an
accepted credit card . 2 1
(b) Liability o f cardholder fo r unauthorized
use. (1) Limitation on am ount The liability
of a cardholder for unauthorized use 22 of a
credit card shall not exceed the lesser of $50
or the amount of money, property, labor, or
services obtained by the unauthorized use
before notification to the card issuer under
paragraph (b) (3) of this section.
(2) Conditions o f liability. A cardholder
shall be liable for unauthorized use of a
credit card only if—
(i) The credit card is an accepted credit
card;
(ii) The card issuer has provided ade­
quate notice 2 3 of the cardholder’s maxi­
mum potential liability and of means by
which the card issuer may be notified of
loss or theft of the card. The notice shall
state that the cardholder’s liability shall
21 For purposes of this section, “accepted credit card”
means any credit card that a cardholder has requested or
applied for and received, or has signed, used, or authorized
another person to use to obtain credit. Any credit card
issued as a renewal or substitute in accordance with this
paragraph becomes an accepted credit card when received
by the cardholder.
22 “Unauthorized use” means the 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.
23 “Adequate notice” means a printed notice to a card­
holder that sets forth clearly the pertinent facts so that the
cardholder may reasonably be expected to have noticed it
and understood its meaning. The notice may be given by
any means reasonably assuring receipt by the cardholder.

§226.12
not exceed $50 (or any lesser amount)
and that the cardholder may give oral or
written notification, and shall describe a
means of notification (for example, a tel­
ephone number, an address, or both);
and
(iii) The card issuer has provided a
means to identify the cardholder on the
account or the authorized user of the
card.
(3) Notification to card issuer. Notification
to a card issuer is given when steps have
been taken as may be reasonably required
in the ordinary course of business to pro­
vide the card issuer with the pertinent in­
formation about the loss, theft, or possible
unauthorized use of a credit card, regard­
less of whether any particular officer, em­
ployee, or agent of the card issuer does, in
fact, receive the information. Notification
may be given, at the option of the person
giving it, in person, by telephone, or in writ­
ing. Notification in writing is considered
given at the time of receipt or, whether or
not received, at the expiration of the time
ordinarily required for transmission, which­
ever is earlier.
(4) Effect o f other applicable law or agree­
ment. If state law or an agreement between
a cardholder and the card issuer imposes
lesser liability than that provided in this
paragraph, the lesser liability shall govern.
(5) Business use o f credit cards. If 10 or
more credit cards are issued by one card
issuer for use by the employees of an orga­
nization, this section does not prohibit the
card issuer and the organization from
agreeing to liability for unauthorized use
without regard to this section. However, li­
ability for unauthorized use may be im­
posed on an employee of the organization,
by either the card issuer or the organiza­
tion, only in accordance with this section.
(c) Right o f cardholder to assert claims or de­
fenses against card issuerl2 4 (1) General
rule. When a person who honors a credit
card fails to resolve satisfactorily a dispute
24 This paragraph does not apply to the use of a check
guarantee card or a debit card in connection with an over­
draft credit plan, or to a check guarantee card used in con­
nection with cash advance checks.
11

§226.12
as to property or services purchased with
the credit card in a consumer credit trans­
action, the cardholder may assert against
the card issuer all claims (other than tort
claims) and defenses arising out of the
transaction and relating to the failure to re­
solve the dispute. The cardholder may
withhold payment up to the amount of
credit outstanding for the property or ser­
vices that gave rise to the dispute and any
finance or other charges imposed on that
amount. 2 5
(2) Adverse credit reports prohibited. If, in
accordance with paragraph ( c ) ( 1 ) of this
section, the cardholder withholds payment
of the amount of credit outstanding for the
disputed transaction, the card issuer shall
not report that amount as delinquent until
the dispute is settled or judgment is
rendered.
(3) Limitations. The rights stated in para­
graphs ( c ) ( 1 ) and ( 2 ) of this section apply
only if—
(i) The cardholder has made a good
faith attempt to resolve the dispute with
the person honoring the credit card; and
(ii) The amount of credit extended to
obtain the property or services that result
in the assertion of the claim or defense by
the cardholder exceeds $50, and the dis­
puted transaction occurred in the same
state as the cardholder’s current de­
signated address or, if not within the
same state, within 1 0 0 miles from that
address. 2 6
25 The amount of the claim or defense that the cardhold­
er may assert shall not exceed the amount of credit out­
standing for the disputed transaction at the time the card­
holder first notifies the card issuer or the person honoring
the credit card of the existence of the claim or defense. To
determine the amount of credit outstanding for purposes of
this section, payments and other credits shall be applied to:
(1) late charges in the order of entry to the account; then
to (2) finance charges in the order of entry to the account;
and then to (3) any other debits in the order of entry to the
account. If more than one item is included in a single exten­
sion of credit, credits are to be distributed pro rata accord­
ing to prices and applicable taxes.
26 The limitations stated in paragraph (c) (3) (ii) of this
section shall not apply when the person honoring the credit
card: (1) is the same person as the card issuer; (2) is con­
trolled by the card issuer directly or indirectly; (3) is under
the direct or indirect control of a third person that also
directly or indirectly controls the card issuer; (4) controls
the card issuer directly or indirectly; (5) is a franchised
dealer in the card issuer’s products or services; or (6) has
12

Regulation Z
(d) Offsets by card issuer prohibited. (1) A
card issuer may not take any action, either
before or after termination of credit card
privileges, to offset a cardholder’s indebted­
ness arising from a consumer credit trans­
action under the relevant credit card plan
against funds of the cardholder held on de­
posit with the card issuer.
(2) This paragraph does not alter or affect
the right of a card issuer acting under state
or federal law to do any of the following
with regard to funds of a cardholder held
on deposit with the card issuer if the same
procedure is constitutionally available to
creditors generally: obtain or enforce a con­
sensual security interest in the funds; attach
or otherwise levy upon the funds; or obtain
or enforce a court order relating to the
funds.
(3) This paragraph does not prohibit a
plan, if authorized in writing by the card­
holder, under which the card issuer may
periodically deduct all or part of the card­
holder’s credit card debt from a deposit ac­
count held with the card issuer (subject to
the limitations in section 226.13(d)(1)).
(e) Prompt notification o f returns and credit­
ing o f refunds. (1) When a creditor other than
the card issuer accepts the return of proper­
ty or forgives a debt for services that is to be
reflected as a credit to the consumer’s credit
card account, that creditor shall, within
seven business days from accepting the re­
turn or forgiving the debt, transmit a credit
statement to the card issuer through the
card issuer’s normal channels for credit
statements.
(2) The card issuer shall, within three
business days from receipt of a credit state­
ment, credit the consumer’s account with
the amount of the refund.
(3) If a creditor other than a card issuer
routinely gives cash refunds to consumers
paying in cash, the creditor shall also give
credit or cash refunds to consumers using
credit cards, unless it discloses at the time
the transaction is consummated that credit
or cash refunds for returns are not given.
obtained the order for the disputed transaction through a
mail solicitation made or participated in by the card issuer.

Regulation Z
This section does not require refunds for re­
turns nor does it prohibit refunds in kind.
(f) Discounts: tie-in arrangements. No card
issuer may, by contract or otherwise—
(1) Prohibit any person who honors a
credit card from offering a discount to a
consumer to induce the consumer to pay by
cash, check, or similar means rather than
by use of a credit card or its underlying ac­
count for the purchase of property or ser­
vices; or
(2) Require any person who honors the
card issuer’s credit card to open or main­
tain any account or obtain any other service
not essential to the operation of the credit
card plan from the card issuer or any other
person, as a condition of participation in a
credit card plan. If maintenance of an ac­
count for clearing purposes is determined to
be essential to the operation of the credit
card plan, it may be required only if no
service charges or minimum balance re­
quirements are imposed.
(g) Relation to Electronic Fund Transfer Act
and Regulation E. For guidance on whether
Regulation Z or Regulation E applies in in­
stances involving both credit and electronic
fund transfer aspects, refer to Regulation E,
12 CFR 205.5(c) regarding issuance and
205.6(d) regarding liability for unauthorized
use. On matters other than issuance and liabil­
ity, this section applies to the credit aspects of
combined credit/electronic fund transfer
transactions, as applicable.

SECTION 226.13—Billing-Error
Resolution 27
(a) Definition o f billing error. For purposes of
this section, the term “billing error” means:
(1) A reflection on or with a periodic
statement of an extension of credit that is

§226.13
not made to the consumer or to a person
who has actual, implied, or apparent au­
thority to use the consumer’s credit card or
open-end credit plan.
(2) A reflection on or with a periodic
statement of an extension of credit that is
not identified in accordance with the re­
quirements of sections 226.7(b) and 226.8.
(3) A reflection on or with a periodic
statement of an extension of credit for prop­
erty or services not accepted by the con­
sumer or the consumer’s designee, or not
delivered to the consumer or the consum­
er’s designee as agreed.
(4) A reflection on a periodic statement of
the creditor’s failure to credit properly a
payment or other credit issued to the con­
sumer’s account.
(5) A reflection on a periodic statement of
a computational or similar error of an ac­
counting nature that is made by the
creditor.
( 6 ) A reflection on a periodic statement of
an extension of credit for which the con­
sumer requests additional clarification, in­
cluding documentary evidence.
(7) The creditor’s failure to mail or deliver
a periodic statement to the consumer’s last
known address if that address was received
by the creditor, in writing, at least 2 0 days
before the end of the billing cycle for which
the statement was required.
(b) Billing-error notice.2* A billing-error no­
tice is a written notice 2 9 from a consumer
that—
(1) Is received by a creditor at the address
disclosed under section 226.7(k) no later
than 60 days after the creditor transmitted
the first periodic statement that reflects the
alleged billing error;
(2) Enables the creditor to identify the
consumer’s name and account number; and
(3) To the extent possible, indicates the

28 The creditor need not comply with the requirements of
paragraphs (c) through (g) of this section if the consumer
27 A creditor shall not accelerate any part of the consum­ concludes that no billing error occurred and voluntarily
withdraws the billing-error notice.
er’s indebtedness or restrict or close a consumer’s account
29 The creditor may require that the written notice not be
solely because the consumer has exercised in good faith
made on the payment medium or other material accompa­
rights provided by this section. A creditor may be subject
nying the periodic statement if the creditor so stipulates in
to the forfeiture penalty under section 161 (e) of the act for
the billing rights statement required by sections 226.6(d)
failure to comply with any of the requirements of this
section.
and 226.9(a).

§226.13
consumer’s belief and the reasons for the
belief that a billing error exists, and the
type, date, and amount of the error.
(c) Time fo r resolution; general procedures.
(1) The creditor shall mail or deliver writ­
ten acknowledgment to the consumer with­
in 30 days of receiving a billing-error no­
tice, unless the creditor has complied with
the appropriate resolution procedures of
paragraphs (e) and (f) of this section, as
applicable, within the 30-day period; and
(2) The creditor shall comply with the ap­
propriate resolution procedures of para­
graphs (e) and (f) of this section, as appli­
cable, within two complete billing cycles
(but in no event later than 90 days) after
receiving a billing-error notice.
(d) Rules pending resolution. Until a billing
error is resolved under paragraphs (e) or (f)
of this section, the following rules apply:
(1) Consumer’s right to withhold disputed
amount; collection action prohibited. The
consumer need not pay (and the creditor
may not try to collect) any portion of any
required payment that the consumer be­
lieves is related to the disputed amount (in­
cluding related finance or other charges) . 3 0
If the cardholder maintains a deposit ac­
count with the card issuer and has agreed to
pay the credit card indebtedness by periodic
deductions from the cardholder’s deposit
account, the card issuer shall not deduct
any part of the disputed amount or related
finance or other charges if a billing error
notice is received any time up to three busi­
ness days before the scheduled payment
date.
(2) Adverse credit reports prohibited. The
creditor or its agent shall not (directly or
indirectly) make or threaten to make an ad­
verse report to any person about the con30 A creditor is not prohibited from taking action to col­
lect any undisputed portion of the item or bill; from de­
ducting any disputed amount and related finance or other
charges from the consumer’s credit limit on the account; or
from reflecting a disputed amount and related finance or
other charges on a periodic statement, provided that the
creditor indicates on or with the periodic statement that
payment of any disputed amount and related finance or
other charges is not required pending the creditor’s compli­
ance with this section.
14

Regulation Z
sumer’s credit standing, or report that an
amount or account is delinquent, because
the consumer failed to pay the disputed
amount or related finance or other charges.
(e) Procedures i f billing error occurred as as­
serted. If a creditor determines that a billing
error occurred as asserted, it shall within the
time limits in paragraph ( c )( 2 ) of this sec­
tion—
(1) Correct the billing error and credit the
consumer’s account with any disputed
amount and related finance or other
charges, as applicable; and
(2) Mail or deliver a correction notice to
the consumer.
(f) Procedures i f different billing error or no
billing error occurred. If, after conducting a
reasonable investigation, 3 1 a creditor deter­
mines that no billing error occurred or that a
different billing error occurred from that as­
serted, the creditor shall within the time limits
in paragraph (c) ( 2 ) of this section—
(1) Mail or deliver to the consumer an ex­
planation that sets forth the reasons for the
creditor’s belief that the billing error al­
leged by the consumer is incorrect in whole
or in part;
(2) Furnish copies of documentary evi­
dence of the consumer’s indebtedness, if the
consumer so requests; and
(3) If a different billing error occurred,
correct the billing error and credit the con­
sumer’s account with any disputed amount
and related finance or other charges, as
applicable.
(g) Creditor's rights and duties after resolu­
tion. If a creditor, after complying with all of
the requirements of this section, determines
that a consumer owes all or part of the disput­
ed amount and related finance or other
charges, the creditor—
31 If a consumer submits a billing error notice alleging
either the nondelivery of property or services under para­
graph (a)(3 ) of this section or that information appearing
on a periodic statement is incorrect because a person hon­
oring the consumer’s credit card has made an incorrect
report to the card issuer, the creditor shall not deny the
assertion unless it conducts a reasonable investigation and
determines that the property or services were actually de­
livered, mailed, or sent as agreed or that the information
was correct.

Regulation Z
(1) Shall promptly notify the consumer in
writing of the time when payment is due
and the portion of the disputed amount and
related finance or other charges that the
consumer still owes;
(2) Shall allow any time period disclosed
under sections 226.6(a)(1) and 226.7(j),
during which the consumer can pay the
amount due under paragraph (g) ( 1 ) of this
section without incurring additional finance
or other charges;
(3) May report an account or amount as
delinquent because the amount due under
paragraph ( g ) ( 1 ) of this section remains
unpaid after the creditor has allowed any
time period disclosed under sections
226.6(a)(1) and 226.7(j) or 10 days
(whichever is longer) during which the
consumer can pay the amount; but
(4) May not report that an amount or ac­
count is delinquent because the amount due
under paragraph ( g ) ( 1 ) of the section
remains unpaid, if the creditor receives
(within the time allowed for payment in
paragraph (g )(3 ) of this section) further
written notice from the consumer that any
portion of the billing error is still in dis­
pute, unless the creditor also—
(i) Promptly reports that the amount or
account is in dispute;
(ii) Mails or delivers to the consumer
(at the same time the report is made) a
written notice of the name and address of
each person to whom the creditor makes
a report; and
(iii) Promptly reports any subsequent
resolution of the reported delinquency to
all persons to whom the creditor has
made a report.
(h) Reassertion o f billing error. A creditor
that has fully complied with the requirements
of this section has no further responsibilities
under this section (other than as provided in
paragraph (g)(4 ) of this section) if a con­
sumer reasserts substantially the same billing
error.
(i) Relation to Electronic Fund Transfer Act
and Regulation E. If an extension of credit is
incident to an electronic fund transfer, under
an agreement between a consumer and a fi­

§226.14
nancial institution to extend credit when the
consumer’s account is overdrawn or to main­
tain a specified minimum balance in the con­
sumer’s account, the creditor shall comply
with the requirements of Regulation E, 12
CFR 205.11, governing error resolution rath­
er than those of paragraphs (a), (b), (c), (e),
(f), and (h) of this section.

SECTION 226.14—Determination of
Annual Percentage Rate
(a) General rule. The annual percentage rate
is a measure of the cost of credit, expressed as
a yearly rate. An annual percentage rate shall
be considered accurate if it is not more than £
of 1 percentage point above or below the an­
nual percentage rate determined in accord­
ance with this section. 3 1 4
(b) Annual percentage rate fo r initial disclo­
sures and fo r advertising purposes. Where one
or more periodic rates may be used to com­
pute the finance charge, the annual percentage
rate(s) to be disclosed for purposes of sections
226.6(a)(2) and 226.16(b)(2) shall be com­
puted by multiplying each periodic rate by the
number of periods in a year.
(c) Annual percentage rate fo r periodic state­
ments. The annual percentage rate(s) to be
disclosed for purposes of section 226.7(d)
shall be computed by multiplying each period­
ic rate by the number of periods in a year and,
for purposes of section 226.7(g), shall be de­
termined as follows:
(1) If the finance charge is determined
solely by applying one or more periodic
rates, at the creditor’s option, either—
(i) By multiplying each periodic rate by
the number of periods in a year; or
(ii) By dividing the total finance charge
31a An error in disclosure of the annual percentage rate or
finance charge shall not, in itself, be considered a violation
of this regulation if: (1) the error resulted from a corre­
sponding error in a calculation tool used in good faith by
the creditor; and (2) upon discovery of the error, the credi­
tor promptly discontinues use of that calculation tool for
disclosure purposes, and notifies the Board in writing of the
error in the calculation tool. This footnote shall cease to be
effective on April 1, 1982.
15

§226.14
for the billing cycle by the sum of the
balances to which the periodic rates were
applied and multiplying the quotient (ex­
pressed as a percentage) by the number
of billing cycles in a year.
(2) If the finance charge imposed during
the billing cycle is or includes a minimum,
fixed, or other charge not due to the appli­
cation of a periodic rate, other than a
charge with respect to any specific transac­
tion during the billing cycle, by dividing the
total finance charge for the billing cycle by
the amount of the balance (s) to which it is
applicable 3 2 and multiplying the quotient
(expressed as a percentage) by the number
of billing cycles in a year. 3 3
(3) If the finance charge imposed during
the billing cycle is or includes a charge re­
lating to a specific transaction during the
billing cycle (even if the total finance
charge also includes any other minimum,
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 a finance charge
was imposed during the billing cycle with­
out duplication, and multiplying the quo­
tient (expressed as a percentage) by the
number of billing cycles in a year, 3 4 except
that the annual percentage rate shall not be
less than the largest rate determined by
multiplying each periodic rate imposed dur­
ing the billing cycle by the number of peri­
ods in a year. 3 5
(4) If the finance charge imposed during
the billing cycle is or includes a minimum,
fixed, or other charge not due to the appli­
cation of a periodic rate and the total fi­
nance charge imposed during the billing cy­
cle does not exceed 50 cents for a monthly
or longer billing cycle, or the pro rata part
of 50 cents for a billing cycle shorter than
32 If there is no balance to which the finance charge is
applicable, an annual percentage rate cannot be determined
under this section.
33 Where the finance charge imposed during the billing
cycle is or includes a loan fee, points, or similar charge that
relates to the opening of the account, the amount of such
charge shall not be included in the calculation of the annual
percentage rate.
34 See appendix F regarding determination of the denom­
inator of the fraction under this paragraph.
35 See footnote 33.
16

Regulation Z
monthly, at the creditor’s option, by multi­
plying each applicable periodic rate by the
number of periods in a year, notwithstand­
ing the provisions of paragraphs ( c )( 2 )
and (3) of this section.
(d) Calculations where daily periodic rate ap­
plied If the provisions of paragraphs (c)(1 )
(ii) or ( 2 ) of this section apply and 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 de­
termined either—
(1) By dividing the total finance charge by
the average of the daily balances and multi­
plying the quotient by the number of billing
cycles in a year; or
(2) By dividing the total finance charge by
the sum of the daily balances and multiply­
ing the quotient by 365.

SE C T IO N 226.15— R ight o f Rescission
(a) Consumer's right to rescind. ( l ) ( i) Ex­
cept as provided in paragraph ( a ) ( l) ( ii)
of this section, in a credit plan in which a
security interest is or will be retained or
acquired in a consumer’s principal dwell­
ing, each consumer whose ownership in­
terest is or will be subject to the security
interest shall have the right to rescind:
each credit extension made under the
plan; the plan when the plan is opened; a
security interest when added or increased
to secure an existing plan; and the in­
crease when a credit limit on the plan is
increased.
(ii) As provided in section 125(e) of the
act, the consumer does not have the right
to rescind each credit extension made un­
der the plan if such extension is made in
accordance with a previously established
credit limit for the plan.
(2) To exercise the right to rescind, the
consumer shall notify the creditor of the re­
scission by mail, telegram, or other means
of written communication. Notice is consid­
ered given when mailed, or when filed for
telegraphic transmission, or, if sent by other
means, when delivered to the creditor’s des­
ignated place of business.

Regulation Z
(3) The consumer may exercise the right
to rescind until midnight of the third busi­
ness day following the occurrence described
in paragraph ( a ) ( 1 ) of this section that
gave rise to the right of rescission, delivery
of the notice required by paragraph (b) of
this section, or delivery of all material dis­
closures, 3 6 whichever occurs last. If the re­
quired notice and material disclosures are
not delivered, the right to rescind shall ex­
pire three years after the occurrence giving
rise to the right of rescission, or upon trans­
fer of all of the consumer’s interest in the
property, or upon sale of the property,
whichever occurs first. In the case of certain
administrative proceedings, the rescission
period shall be extended in accordance with
section 125(f) of the act.
(4) When more than one consumer has the
right to rescind, the exercise of the right by
one consumer shall be effective as to all
consumers.
(b) Notice o f right to rescind. In any transac­
tion or occurrence subject to rescission, a
creditor shall deliver two copies of the notice
of the right to rescind to each consumer enti­
tled to rescind. The notice shall identify the
transaction or occurrence and clearly and
conspicuously disclose the following:
(1) The retention or acquisition of a secu­
rity interest in the consumer’s principal
dwelling.
(2) The consumer’s right to rescind, as de­
scribed in paragraph (a) ( 1 ) of this section.
(3) How to exercise the right to rescind,
with a form for that purpose, designating
the address of the creditor’s place of
business.
(4) The effects of rescission, as described
in paragraph (d ) of this section.
(5) The date the rescission period expires.
(c) Delay o f creditor's performance. Unless a
consumer waives the right to rescind under
36 The term “material disclosures” means the informa­
tion that must be provided to satisfy the requirements in
section 226.6 with regard to the method of determining the
finance charge and the balance upon which a finance charge
will be imposed, the anmml percentage rate, and the
amount or method of determining the amount of any mem­
bership or participation fee that may be imposed as part of
the plan.

§226.15
paragraph (e) of this section, no money shall
be disbursed other than in escrow, no services
shall be performed, and no materials delivered
until after the rescission period has expired
and the creditor is reasonably satisfied that
the consumer has not rescinded. A creditor
does not violate this section if a third party
with no knowledge of the event activating the
rescission right does not delay in providing
materials or services, as long as the debt in­
curred for those materials or services is not
secured by the property subject to rescission.
(d) Effects o f rescission. (1) When a consum­
er rescinds a transaction, the security inter­
est giving rise to the right of rescission be­
comes void, and the consumer shall not be
liable for any amount, including any finance
charge.
(2) Within 20 calendar days after receipt
of a notice of rescission, the creditor shall
return any money or property that has been
given to anyone in connection with the
transaction and shall take any action neces­
sary to reflect the termination of the securi­
ty interest.
(3) If the creditor has delivered any mon­
ey or property, the consumer may retain
possession until the creditor has met its ob­
ligation under paragraph (d ) ( 2 ) of this
section. When the creditor has complied
with that paragraph, the consumer shall
tender the money or property to the credi­
tor or, where the latter would be impracti­
cable or inequitable, tender its reasonable
value. At the consumer’s option, tender of
property may be made at the location of the
property or at the consumer’s residence.
Tender of nioney must be made at the cred­
itor’s designated place of business. If the
creditor does not take possession of the
money or property within 2 0 calendar days
after the consumer’s tender, the consumer
may keep it without further obligation.
(4) The procedures outlined in paragraphs
(d) (2) and (3) of this section may be mod­
ified by court order.
(e) Consumer’s waiver o f right to rescind. The
consumer may modify or waive the right to
rescind if the consumer determines that the
extension of credit is needed to meet a bona
17

§226.15
fide personal financial emergency. To modify
or waive the right, the consumer shall give the
creditor a dated written statement that de­
scribes the emergency, that specifically modi­
fies or waives the right to rescind, and that
bears the signatures of the consumers entitled
to rescind. Printed forms for this purpose are
prohibited.
(f) Exempt transactions. The right to rescind
does not apply to the following:
(1) A residential mortgage transaction.
(2) A credit plan in which a state agency is
a creditor.

SECTION 226.16—Advertising
(a) Actually available terms. If an advertise­
ment for credit states specific credit terms, it
shall state only those terms that actually are
or will be arranged or offered by the creditor.
(b) Advertisement o f terms that require addi­
tional disclosures. If any of the terms required
to be disclosed under section 226.6 is set forth
in an advertisement, the advertisement shall
also clearly and conspicuously set forth the
following:
(1) Any minimum, fixed, transaction, ac­
tivity or similar charge that could be
imposed.
(2) Any periodic rate that may be applied
expressed as an annual percentage rate as
determined under section 226.14(b). If the
plan provides for a variable periodic rate,
that fact shall be disclosed.
(3) Any membership or participation fee
that could be imposed.
(c) Catalogs and multiple-page advertise­
ments. (1) If a catalog or other multiple-page
advertisement gives information in a table
or schedule in sufficient detail to permit de­
termination of the disclosures required by
paragraph (b) of this section, it shall be
considered a single advertisement if—
(i) The table or schedule is clearly and
conspicuously set forth; and
(ii) Any statement of terms set forth in
section 226.6 appearing anywhere else in
the catalog or advertisement clearly re­
18

Regulation Z
fers to that page on which the table or
schedule begins.
(2) A catalog or multiple-page advertise­
ment complies with this paragraph if the
table or schedule of terms includes all ap­
propriate disclosures for a representative
scale of amounts up to the level of the more
commonly sold higher-priced property or
services offered.

SUBPART C—CLOSED-END
CREDIT
SECTION 226.17—General Disclosure
Requirements
(a) Form o f disclosures. (1) The creditor
shall make the disclosures required by this
subpart clearly and conspicuously in writ­
ing, in a form that the consumer may keep.
The disclosures shall be grouped together,
shall be segregated from everything else,
and shall not contain any information not
directly related 3 7 to the disclosures re­
quired under section 226.18.38 The itemiza­
tion of the amount financed under section
226.18(c)(1) must be separate from the
other disclosures under that section.
(2) The terms “finance charge” and “an­
nual percentage rate,” when required to be
disclosed under section 226.18(d) and (e)
together with a corresponding amount or
percentage rate, shall be more conspicuous
than any other disclosure, except the credi­
tor’s identity under section 226.18(a).
(b) Time o f disclosures. The creditor shall
make disclosures before consummation of the
transaction. In certain residential mortgage
transactions, special timing requirements are
set forth in section 226.19. In certain transac­
tions involving mail or telephone orders or a
series of sales, the timing of the disclosures
37 The disclosures may include an acknowledgment of
receipt, the date of the transaction, and the consumer’s
name, address, and account number.
38 The following disclosures may be made together or
separately from other required disclosures: the creditor’s
identity under section 226.18(a), the variable rate example
under section 226.18(f)(4), insurance under section
226.18 (n), and certain security interest charges under sec­
tion 226.18 (o).

Regulation Z
may be delayed in accordance with para­
graphs (g) and (h ) of this section.
(c) Basis o f disclosures and use o f estimates.
(1) The disclosures shall reflect the terms
of the legal obligation between the parties.
(2) If any information necessary for an ac­
curate disclosure is unknown to the credi­
tor, it shall make the disclosure based on
the best information reasonably available
and shall state that the disclosure is an
estimate.
(3) The creditor may disregard the effects
of the following in making calculations and
disclosures:
(i) That payments must be collected in
whole cents.
(ii) That dates of scheduled payments
and advances may be changed because
the scheduled date is not a business day.
(iii) That months have different num­
bers of days.
(iv) The occurrence of leap year.
(4) In making calculations and disclo­
sures, the creditor may disregard any irreg­
ularity in the first period that falls within
the limits described below and any payment
schedule irregularity that results from the
irregular first period—
(i) For transactions in which the term is
less than 1 year, a first period not more
than 6 days shorter or 13 days longer
than a regular period;
(ii) For transactions in which the term
is at least 1 year and less than 1 0 years, a
first period not more than 1 1 days shorter
or 2 1 days longer than a regular period;
and
(iii) For transactions in which the term
is at least 1 0 years, a first period shorter
than or not more than 32 days longer
than a regular period.
(5) If an obligation is payable on demand,
the creditor shall make the disclosures
based on an assumed maturity of one year.
If an alternate maturity date is stated in the
legal obligation between the parties, the dis­
closures shall be based on that date.
( 6 )(i) A series of advances under an
agreement to extend credit up to a cer­
tain amount may be considered as one
transaction.

§226.17
(ii) When a multiple-advance loan to fi­
nance the construction of a dwelling may
be permanently financed by the same
creditor, the construction phase and the
permanent phase may be treated as either
one transaction or more than one
transaction.
(d) Multiple creditors; multiple consumers. If
a transaction involves more than one creditor,
only one set of disclosures shall be given and
the creditors shall agree among themselves
which creditor must comply with the require­
ments that this regulation imposes on any or
all of them. If there is more than one consum­
er, the disclosures may be made to any con­
sumer who is primarily liable on the obliga­
tion. If the transaction is rescindable under
section 226.23, however, the disclosures shall
be made to each consumer who has the right
to rescind.
(e) Effect o f subsequent events. If a disclosure
becomes inaccurate because of an event that
occurs after the creditor delivers the required
disclosures, the inaccuracy is not a violation
of this regulation, although new disclosures
may be required under paragraph (f) of this
section, section 226.19, or section 226.20.
(f) Early disclosures. If disclosures are given
before the date of consummation of a transac­
tion and a subsequent event makes them inac­
curate, the creditor shall disclose the changed
terms before consummation, if the annual per­
centage rate in the consummated transaction
varies from the annual percentage rate dis­
closed under section 226.18(e) by more than
| of 1 percentage point in a regular transac­
tion, or more than J of 1 percentage point in
an irregular transaction, as defined in section
226.22(a).
(g) M ail or telephone orders—delay in disclo­
sures. If a creditor receives a purchase order
or a request for an extension of credit by mail,
telephone, or any other written or electronic
communication without face-to-face or direct
telephone solicitation, the creditor may delay
the disclosures until the due date of the first
payment, if the following information for rep19

§226.17
resentative amounts or ranges of credit is
made available in written form to the consum­
er or to the public before the actual purchase
order or request:
(1) The cash price or the principal loan
amount.
(2) The total sale price.
(3) The finance charge.
(4) The annual percentage rate, and if the
rate may increase after consummation, the
following disclosures:
(i) The circumstances under which the
rate may increase.
(ii) Any limitations on the increase.
(iii) The effect of an increase.
(5) The terms of repayment.

(h) Series o f sales—delay in disclosures. If a
credit sale is one of a series made under an
agreement providing that subsequent sales
may be added to an outstanding balance, the
creditor may delay the required disclosures
until the due date of the first payment for the
current sale, if the following two conditions
are met:
(1) The consumer has approved in writing
the annual percentage rate or rates, the
range of balances to which they apply, and
the method of treating any unearned fi­
nance charge on an existing balance.
(2) The creditor retains no security inter­
est in any property after the creditor has
received payments equal to the cash price
and any finance charge attributable to the
sale of that property. For purposes of this
provision, in the case of items purchased on
different dates, the first purchased is
deemed the first item paid for; in the case of
items purchased on the same date, the low­
est priced is deemed the first item paid for.

(i) Interim student credit extensions. For
each transaction involving an interim credit
extension under a student credit program, the
creditor need not make the following disclo­
sures: the finance charge under section
226.18(d), the payment schedule under sec­
tion 226.18(g), the total of payments under
section 226.18(h), or the total sale price un­
der section 226.18 (j).
20

Regulation Z

SECTION 226.18— Content of
Disclosures
For each transaction, the creditor shall dis­
close the following information as applicable:
(a) Creditor. The identity of the creditor
making the disclosures.
(b) Amount financed. The “amount fi­
nanced,” using that term, and a brief descrip­
tion such as “the amount of credit provided to
you or on your behalf.” The amount financed
is calculated by—
(1) Determining the principal loan
amount or the cash price (subtracting any
downpayment);
(2) Adding any other amounts that are fi­
nanced by the creditor and are not part of
the finance charge; and
(3) Subtracting any prepaid finance
charge.
(c) Itemization o f amount financed. (1) A
separate written itemization of the amount
financed, including: 3 9
(i) The amount of any proceeds distrib­
uted directly to the consumer.
(ii) The amount credited to the consum­
er’s account with the creditor.
(iii) Any amounts paid to other per­
sons by the creditor on the consumer’s
behalf. The creditor shall identify those
persons. 4 0
(iv) The prepaid finance charge.
(2) The creditor need not comply with
paragraph (c) ( 1 ) of this section if the cred­
itor provides a statement that the consumer
has the right to receive a written itemiza­
tion of the amount financed, together with a
space for the consumer to indicate whether
it is desired, and the consumer does not re­
quest it.
(d) Finance charge. The “finance charge,”
39 Good faith estimates of settlement costs provided for
transactions subject to the Real Estate Settlement Proce­
dures Act (12 USC 2601 et seq.) may be substituted for the
disclosures required by paragraph (c) of this section.
40 The following payees may be described using generic
or other general terms and need not be further identified:
public officials or government agencies, credit reporting
agencies, appraisers, and insurance companies.

Regulation Z
using that term, and a brief description such
as “the dollar amount the credit will cost
you.” 4 1
(e) Annual percentage rate. The “annual per­
centage rate,” using that term, and a brief de­
scription such as “the cost of your credit as a
yearly rate.” 4 2
(f) Variable rate. If the annual percentage
rate may increase after consummation, the
following disclosures: 4 3
(1) The circumstances under which the
rate may increase.
(2) Any limitations on the increase.
(3) The effect of an increase.
(4) An example of the payment terms that
would result from an increase.
(g) Payment
schedule.
The
number,
amounts, and timing of payments scheduled
to repay the obligation.
(1) In a demand obligation with no alter­
nate maturity date, the creditor may com­
ply with this paragraph by disclosing the
due dates or payment periods of any sched­
uled interest payments for the first year.
(2) In a transaction in which a series of
payments varies because a finance charge is
applied to the unpaid principal balance, the
creditor may comply with this paragraph
by disclosing the following information:
(i) The dollar amounts of the largest
and smallest payments in the series.
(ii) A reference to the variations in the
other payments in the series.
(h) Total o f payments. The “total of pay­
ments,” using that term, and a descriptive ex­
planation such as “the amount you will have
41 The finance charge shall be considered accurate if it is
not more than $5 above or below the exact finance charge
in a transaction involving an amount financed of $1,000 or
less, or not more than $ 10 above or below the exact finance
charge in a transaction involving an amount financed of
more than $1,000.
42 For any transaction involving a finance charge of $5 or
less on an amount financed of $75 or less, or a finance
charge of $7.50 or less on an amount financed of more than
$75, the creditor need not disclose the annual percentage
rate.
43 Information provided in accordance with variable rate
regulations of other federal agencies may be substituted for
the disclosures required by paragraph (f) of this section.

§ 226.18
paid when you have made all scheduled pay­
ments.” 4 4
(i) Demand feature. If the obligation has a
demand feature, that fact shall be disclosed.
When the disclosures are based on an as­
sumed maturity of one year as provided in
section 226.17(c)(5), that fact shall also be
disclosed.
(j) Total sale price. In a credit sale, the “total
sale price,” using that term, and a descriptive
explanation (including the amount of any
downpayment) such as “the total price of
your purchase on credit, including your
downpayment of $________ ” The total sale
price is the sum of the cash price, the items
described in paragraph (b )( 2 ), and the fi­
nance charge disclosed under paragraph (d)
of this section.
(k) Prepayment. (1) When an obligation in­
cludes a finance charge computed from
time to time by application of a rate to the
unpaid principal balance, a statement indi­
cating whether or not a penalty may be im­
posed if the obligation is prepaid in full.
(2) When an obligation includes a finance
charge other than the finance charge de­
scribed in paragraph ( k ) ( l) of this section,
a statement indicating whether or not the
consumer is entitled to a rebate of any fi­
nance charge if the obligation is prepaid in
full.
(/) Late paym ent Any dollar or percentage
charge that may be imposed before maturity
due to a late payment, other than a deferral or
extension charge.
(m ) Security interest. The fact that the credi­
tor has or will acquire a security interest in
the property purchased as part of the transac­
tion, or in other property identified by item or
type.
(n) Insurance. The items required by section
226.4(d) in order to exclude certain insurance
premiums from the finance charge.
44 In any transaction involving a single payment, the
creditor need not disclose the total of payments.
21

§226.18
(o) Certain security interest charges. The dis­
closures required by section 226.4(e) in order
to exclude from the finance charge certain
fees prescribed by law or certain premiums
for insurance in lieu of perfecting a security
interest.
(p) Contract reference. A statement that the
consumer should refer to the appropriate con­
tract document for information about nonpay­
ment, default, the right to accelerate the ma­
turity of the obligation, and prepayment re­
bates and penalties. At the creditor’s option,
the statement may also include a reference to
the contract for further information about se­
curity interests and, in a residential mortgage
transaction, about the creditor’s policy re­
garding assumption of the obligation.
(q) Assumption policy. In a residential mort­
gage transaction, a statement whether or not a
subsequent purchaser of the dwelling from the
consumer may be permitted to assume the re­
maining obligation on its original terms.
(r) Required deposit. If the creditor requires
the consumer to maintain a deposit as a condi­
tion of the specific transaction, a statement
that the annual percentage rate does not re­
flect the effect of the required deposit. 4 5

SECTION 226.19—Certain Residential
Mortgage Transactions
(a) Time o f disclosure. In a residential mort­
gage transaction subject to the Real Estate
Settlement Procedures Act (12 USC 2601 et
seq.) the creditor shall make good faith esti­
mates of the disclosures required by section
226.18 before consummation, or shall deliver
or place them in the mail not later than three
business days after the creditor receives the
consumer’s written application, whichever is
earlier.
(b) Redisclosure required. If the annual per­
centage rate in the consummated transaction
45 A required deposit need not include, for example: (1)
an escrow account for items such as taxes, insurance or
repairs; (2) a deposit that earns not less than 5 percent per
year; or (3) payments under a Morris Plan.
22

Regulation Z
varies from the annual percentage rate dis­
closed under section 226.18(e) by more than
£ of 1 percentage point in a regular transac­
tion or more than £ of 1 percentage point in
an irregular transaction, as defined in section
226.22, the creditor shall disclose the changed
terms no later than consummation or
settlement.

SECTION 226.20—Subsequent
Disclosure Requirements
(a) Refinancings. A refinancing occurs when
an existing obligation that was subject to this
subpart is satisfied and replaced by a new obli­
gation undertaken by the same consumer. A
refinancing is a new transaction requiring new
disclosures to the consumer. The new finance
charge shall include any unearned portion of
the old finance charge that is not credited to
the existing obligation. The following shall
not be treated as a refinancing:
(1) A renewal of a single payment obliga­
tion with no change in the original terms.
(2) A reduction in the annual percentage
rate with a corresponding change in the
payment schedule.
(3) An agreement involving a court
proceeding.
(4) A change in the payment schedule or a
change in collateral requirements as a result
of the consumer’s default or delinquency,
unless the rate is increased, or the new
amount financed exceeds the unpaid bal­
ance plus earned finance charge and premi­
ums for continuation of insurance of the
types described in section 226.4(d).
(5) The renewal of optional insurance pur­
chased by the consumer and added to an
existing transaction, if disclosures relating
to the initial purchase were provided as re­
quired by this subpart.
(b) Assumptions. An assumption occurs
when a creditor expressly agrees in writing
with a subsequent consumer to accept that
consumer as a primary obligor on an existing
residential mortgage transaction. Before the
assumption occurs, the creditor shall make
new disclosures to the subsequent consumer,
based on the remaining obligation. If the fi­

Regulation Z
nance charge originally imposed on the exist­
ing obligation was an add-on or discount fi­
nance charge, the creditor need only disclose:
(1) The unpaid balance of the obligation
assumed.
(2) The total charges imposed by the cred­
itor in connection with the assumption.
(3) The information required to be dis­
closed under section 226.18 (k), (/), (m ),
and (n).
(4) The annual percentage rate originally
imposed on the obligation.
(5) The payment schedule under section
226.18(g) and the total of payments under
section 226.18(h), based on the remaining
obligation.

S E C T IO N 226.21— T reatm ent o f C redit
Balances
When a credit balance in excess of $1 is creat­
ed in connection with a transaction (through
transmittal of funds to a creditor in excess of
the total balance due on an account, through
rebates of unearned finance charges or insur­
ance premiums, or through amounts other­
wise owed to or held for the benefit of a con­
sumer), the creditor shall—
(a) Credit the amount of the credit balance
to the consumer’s account;
(b) Refund any part of the remaining credit
balance, upon the written request of the con­
sumer; and
(c) Make a good faith effort to refund to the
consumer by cash, check, or money order, or
credit to a deposit account of the consumer,
any part of the credit balance remaining in the
account for more than 6 months, except that
no further action is required if the consumer’s
current location is not known to the creditor
and cannot be traced through the consumer’s
last known address or telephone number.

S E C T IO N 226.22— D eterm ination o f
A nnual Percentage R ate
(a) Accuracy o f annual percentage rate. (1)

§ 226.22
The annual percentage rate is a measure of
the cost of credit, expressed as a yearly rate,
that relates the amount and timing of value
received by the consumer to the amount
and timing of payments made. The annual
percentage rate shall be determined in ac­
cordance with either the actuarial method
or the United States Rule method. Explana­
tions, equations and instructions for deter­
mining the annual percentage rate in ac­
cordance with the actuarial method are set
forth in appendix J to this regulation.45®
(2) As a general rule, the annual percent­
age rate shall be considered accurate if it
is not more than J of 1 percentage point
above or below the annual percentage rate
determined in accordance with paragraph
( a ) ( 1 ) of this section.
(3) In an irregular transaction, the annual
percentage rate shall be considered accurate
if it is not more than J of 1 percentage point
above or below the annual percentage rate
determined in accordance with paragraph
( a ) ( 1 ) of this section. 4 6
(b) Computation tools. (1) The Regulation Z
Annual Percentage Rate Tables produced
by the Board may be used to determine the
annual percentage rate, and any rate deter­
mined from those tables in accordance with
the accompanying instructions complies
with the requirements of this section. Vol­
ume I of the tables applies to single-advance
transactions involving up to 480 monthly
payments or 104 weekly payments. It may
be used for regular transactions and for
transactions with any of the following irreg­
ularities: an irregular first period, an irregu­
lar first payment, and an irregular final pay­
ment. Volume II of the tables applies to
45a An error in disclosure of the annual percentage rate or
finance charge shall not, in itself, be considered a violation
of this regulation if (1) the error resulted from a corre­
sponding error in a calculation tool used in good faith by
the creditor; and (2) upon discovery of the error, the credi­
tor promptly discontinues use of that calculation tool for
disclosure purposes and notifies the Board in writing of the
error in the calculation tool. This footnote shall cease to be
effective on April 1, 1982.
46 For purposes of paragraph (a) (3) of this section, an
irregular transaction is one that includes one or more of the
following features: multiple advances, irregular payment
periods, or irregular payment amounts (other than an ir­
regular first period or an irregular first or final payment).
23

§ 226.22
transactions involving multiple advances
and any type of payment or period
irregularity.
(2) Creditors may use any other computa­
tion tool in determining the annual percent­
age rate if the rate so determined equals the
rate determined in accordance with appen­
dix J, within the degree of accuracy set
forth in paragraph (a) of this section.
(c) Single add-on rate transactions. If a single
add-on rate is applied to all transactions with
maturities up to 60 months and if all pay­
ments are equal in amount and period, a sin­
gle annual percentage rate may be disclosed
for all those transactions, so long as it is the
highest annual percentage rate for any such
transaction.
(d) Certain transactions involving ranges o f
balances. For purposes of disclosing the annu­
al percentage rate referred to in section
226.17(g) (4) (Mail or Telephone Orders—
Delay in Disclosures) and (h) (Series of
Sales—Delay in Disclosures), if the same fi­
nance charge is imposed on all balances with­
in a specified range of balances, the annual
percentage rate computed for the median bal­
ance may be disclosed for all the balances.
However, if the annual percentage rate com­
puted for the median balance understates the
annual percentage rate computed for the low­
est balance by more than 8 percent of the lat­
ter rate, the annual percentage rate shall be
computed on whatever lower balance will pro­
duce an annual percentage rate that does not
result in an understatement of more than 8
percent of the rate determined on the lowest
balance.

Regulation Z
(2) To exercise the right to rescind, the
consumer shall notify the creditor of the re­
scission by mail, telegram or other means of
written communication. Notice is consid­
ered given when mailed, when filed for tele­
graphic transmission or, if sent by other
means, when delivered to the creditor’s des­
ignated place of business.
(3) The consumer may exercise the right
to rescind until midnight of the third busi­
ness day following consummation, delivery
of the notice required by paragraph (b) of
this section, or delivery of all material dis­
closures, 4 8 whichever occurs last. If the re­
quired notice or material disclosures are not
delivered, the right to rescind shall expire
three years after consummation, upon
transfer of all of the consumer’s interest in
the property, or upon sale of the property,
whichever occurs first. In the case of certain
administrative proceedings, the rescission
period shall be extended in accordance with
section 125(f) of the act.
(4) When more than one consumer in a
transaction has the right to rescind, the ex­
ercise of the right by one consumer shall be
effective as to all consumers.
(b) Notice o f right to rescind. In a transaction
subject to rescission, a creditor shall deliver
two copies of the notice of the right to rescind
to each consumer entitled to rescind. The no­
tice shall be on a separate document that iden­
tifies the transaction and shall clearly and
conspicuously disclose the following:
(1) The retention or acquisition of a secu­
rity interest in the consumer’s principal
dwelling.
(2) The consumer’s right to rescind the
transaction.
(3) How to exercise the right to rescind,

SE C T IO N 226.23— R ight o f Rescission
(a) Consumer’s right to rescind. (1) In a
credit transaction in which a security inter­
est is or will be retained or acquired in a
consumer’s principal dwelling, each con­
sumer whose ownership interest is or will
be subject to the security interest shall have
the right to rescind the transaction, except
for transactions described in paragraph (f)
of this section. 4 7
24

47 For purposes of this section, the addition to an existing
obligation of a security interest in a consumer’s principal
dwelling is a transaction. The right of rescission applies
only to the addition of the security interest and not the
existing obligation. The creditor shall deliver the notice re­
quired by paragraph (b) of this section but need not deliver
new material disclosures. Delivery of the required notice
shall begin the rescission period,
48 The term “material disclosures” means the required
disclosures of the annual percentage rate, the finance
charge, the amount financed, the total of payments, and the
payment schedule.

Regulation Z
with a form for that purpose, designating
the address of the creditor’s place of
business.
(4) The effects of rescission, as described
in paragraph (d) of this section.
(5) The date the rescission period expires.
(c) Delay o f creditor's performance. Unless a
consumer waives the right of rescission under
paragraph (e) of this section, no money shall
be disbursed other than in escrow, no services
shall be performed and no materials delivered
until the rescission period has expired and the
creditor is reasonably satisfied that the con­
sumer has not rescinded.
(d) Effects o f rescission. (1) When a consum­
er rescinds a transaction, the security inter­
est giving rise to the right of rescission be­
comes void and the consumer shall not be
liable for any amount, including any finance
charge.
(2) Within 20 calendar days after receipt
of a notice of rescission, the creditor shall
return any money or property that has been
given to anyone in connection with the
transaction and shall take any action neces­
sary to reflect the termination of the securi­
ty interest.
(3) If the creditor has delivered any mon­
ey or property, the consumer may retain
possession until the creditor has met its ob­
ligation under paragraph (d ) ( 2 ) of this
section. When the creditor has complied
with that paragraph, the consumer shall
tender the money or property to the credi­
tor or, where the latter would be impracti­
cable or inequitable, tender its reasonable
value. At the consumer’s option, tender of
property may be made at the location of the
property or at the consumer’s residence.
Tender of money must be made at the cred­
itor’s designated place of business. If the
creditor does not take possession of the
money or property within 2 0 calendar days
after the consumer’s tender, the consumer
may keep it without further obligation.
(4) The procedures outlined in paragraphs
(d )(2 ) and (3) of this section may be mod­
ified by court order.
(e) Consumer’s waiver o f right to rescind. The

§ 226.24
consumer may modify or waive the right to
rescind if the consumer determines that the
extension of credit is needed to meet a bona
fide personal financial emergency. To modify
or waive the right, the consumer shall give the
creditor a dated written statement that de­
scribes the emergency, specifically modifies or
waives the right to rescind, and bears the sig­
nature of all of the consumers entitled to re­
scind. Printed forms for this purpose are
prohibited.
(f) Exem pt transactions. The right to rescind
does not apply to the following:
(1) A residential mortgage transaction.
(2) A refinancing or consolidation by the
same creditor of an extension of credit al­
ready secured by the consumer’s principal
dwelling. If the new amount financed ex­
ceeds the unpaid principal balance plus any
earned unpaid finance charge on the exist­
ing debt, this exemption applies only to the
existing debt and its security interest.
(3) A transaction in which a state agency
is a creditor.
(4) An advance, other than an initial ad­
vance, in a series of advances or in a series
of single-payment obligations that is treated
as a single transaction under section 226.17
(c) ( 6 ), if the notice required by paragraph
(b) of this section and all material disclo­
sures have been given to the consumer.
(5) A renewal of optional insurance premi­
ums that is not considered a refinancing un­
der section 226.20(a)(5).

SE C T IO N 226.24— A dvertising
(a) Actually available terms. If an advertise­
ment for credit states specific credit terms, it
shall state only those terms that actually are
or will be arranged or offered by the creditor.
(b) Advertisement o f rate o f finance charge. If
an advertisement states a rate of finance
charge, it shall state the rate as an “annual
percentage rate,” using that term. If the annu­
al percentage rate may be increased after con­
summation, the advertisement shall state that
fact. The advertisement shall not state any
other rate, except that a simple annual rate or
25

§ 226.24
periodic rate that is applied to an unpaid bal­
ance may be stated in conjunction with, but
not more conspicuously than, the annual per­
centage rate.

Regulation Z

SUBPART D—MISCELLANEOUS

SECTION 226.25—Record Retention
(c) Advertisement o f terms that require addi­
tional disclosures. (1) If any of the following
terms is set forth in an advertisement, the
advertisement shall meet the requirements
of paragraph (c) ( 2 ) of this section:
(i) The amount or percentage of any
downpayment.
(ii) The number of payments or period
of repayment.
(iii) The amount of any payment.
(iv) The amount of any finance charge.
(2) An advertisement stating any of the
terms in paragraph ( c ) ( 1 ) of this section
shall state the following terms, 4 9 as
applicable:
(i) The amount or percentage of the
downpayment.
(ii) The terms of repayment.
(iii) The “annual percentage rate,” us­
ing that term, and, if the rate may be in­
creased after consummation, that fact.
(d) Catalogs and multiple-page advertise­
ments. (1) If a catalog or other multiple-page
advertisement gives information in a table
or schedule in sufficient detail to permit de­
termination of the disclosures required by
paragraph (c) ( 2 ) of this section, it shall be
considered a single advertisement if—
(i) The table or schedule is clearly set
forth; and
(ii) Any statement of the credit terms in
paragraph ( c ) ( 1 ) of this section appear­
ing anywhere else in the catalog or adver­
tisement clearly refers to the page on
which the table or schedule begins.
(2) A catalog or multiple-page advertise­
ment complies with paragraph ( c )( 2 ) of
this section if the table or schedule of terms
includes all appropriate disclosures for a
representative scale of amounts up to the
level of the more commonly sold higherpriced property or services offered.
49 An example of one or more typical extensions of credit
with a statement of all Che terms applicable to each may be
used.

(a) General rule. A creditor shall retain evi­
dence of compliance with this regulation (oth­
er than advertising requirements under sec­
tions 226.16 and 226.24) for two years after
the date disclosures are required to be made
or action is required to be taken. The adminis­
trative agencies responsible for enforcing the
regulation may require creditors under their
jurisdictions to retain records for a longer pe­
riod if necessary to carry out their enforce­
ment responsibilities under section 108 of the
act.
(b) Inspection o f records. A creditor shall
permit the agency responsible for enforcing
this regulation with respect to that creditor to
inspect its relevant records for compliance.

SECTION 226.26—Use of Annual
Percentage Rate in Oral Disclosures
(a) Open-end credit. In an oral response to a
consumer’s inquiry about the cost of open-end
credit, only the annual percentage rate or
rates shall be stated, except that the periodic
rate or rates also may be stated. If the annual
percentage rate cannot be determined in ad­
vance because there are finance charges other
than a periodic rate, the corresponding annual
percentage rate shall be stated, and other cost
information may be given.
(b) Closed-end credit In an oral response to
a consumer’s inquiry about the cost of closedend credit, only the annual percentage rate
shall be stated, except that a simple annual
rate or periodic rate also may be stated if it is
applied to an unpaid balance. If the annual
percentage rate cannot be determined in ad­
vance, the annual percentage rate for a sample
transaction shall be stated, and other cost in­
formation for the consumer’s specific transac­
tion may be given.

Regulation Z

SECTION 226.27—Spanish Language
Disclosures
All disclosures required by this regulation
shall be made in the English language, except
in the Commonwealth of Puerto Rico, where
creditors may, at their option, make disclo­
sures in the Spanish language. If Spanish dis­
closures are made, English disclosures shall be
provided on the consumer’s request, either in
substitution for or in addition to the Spanish
disclosures. This requirement for providing
English disclosures on request shall not apply
to advertisements subject to sections 226.16
and 226.24 of this regulation.

SECTION 226.28—Effect on State Laws
(a) Inconsistent disclosure requirements. (1)
State law requirements that are inconsistent
with the requirements contained in chapter
1 (General Provisions), chapter 2 (Credit
Transactions), or chapter 3 (Credit Adver­
tising) of the act and the implementing pro­
visions of this regulation are preempted to
the extent of the inconsistency. A state law
is inconsistent if it requires a creditor to
make disclosures or take actions that con­
tradict the requirements of the federal law.
A state law is contradictory if it requires
the use of the same term to represent a dif­
ferent amount or a different meaning than
the federal law, or if it requires the use of a
term different from that required in the fed­
eral law to describe the same item. A credi­
tor, state, or other interested party may re­
quest the Board to determine whether a
state law requirement is inconsistent. After
the Board determines that a state law is in­
consistent, a creditor may not make disclo­
sures using the inconsistent term or form.
(2 )(i) State law requirements are incon­
sistent with the requirements contained
in sections 161 (Correction of Billing Er­
rors) or 162 (Regulation of Credit Re­
ports) of the act and the implementing
provisions of this regulation and are pre­
empted if they provide rights, responsi­
bilities, or procedures for consumers or
creditors that are different from those re­

§ 226.28
quired by the federal law. However, a
state law that allows a consumer to in­
quire about an open-end credit account
and imposes on the creditor an obligation
to respond to such inquiry after the time
allowed in the federal law for the con­
sumer to submit written notice o f a bill­
ing error shall not be preempted in any
situation where the time period for mak­
ing written notice under this regulation
has expired. If a creditor gives written
notice of a consumer’s rights under such
state law, the notice shall state that reli­
ance on the longer time period available
under state law may result in the loss of
important rights that could be preserved
by acting more promptly under federal
law; it shall also explain that the state
law provisions apply only after expiration
of the time period for submitting a prop­
er written notice of a billing error under
the federal law. If the state disclosures
are made on the same side of a page as
the required federal disclosures, the state
disclosures shall appear under a demar­
cation line below the federal disclosures,
and the federal disclosures shall be iden­
tified by a heading indicating that they
are made in compliance with federal law.
(ii) State law requirements are incon­
sistent with the requirements contained
in chapter 4 (Credit Billing) of the act
(other than sections 161 or 162) and the
implementing provisions of this regula­
tion and are preempted if the creditor
cannot comply with state law without vi­
olating federal law.
(iii) A state may request the Board to
determine whether its law is inconsistent
with chapter 4 of the act and its imple­
menting provisions.
(b) Equivalent disclosure requirements. If the
Board determines that a disclosure required
by state law (other than a requirement relat­
ing to the finance charge or annual percentage
rate) is substantially the same in meaning as a
disclosure required under the act or this regu­
lation, creditors in that state may make the
state disclosure in lieu of the federal disclo­
sure. A creditor, state, or other interested par­
ty may request the Board to determine wheth27

§ 226.28
er a state disclosure is substantially the same
in meaning as a federal disclosure.
(c) Request for determination. The proce­
dures under which a request for a determina­
tion may be made under this section are set
forth in appendix A.

SEC T IO N 226.29— State Exem ptions
(a) General rule. Any state may apply to the
Board to exempt a class of transactions within
the state from the requirements of chapter 2
(Credit Transactions) or chapter 4 (Credit
Billing) of the act and the corresponding pro­
visions of this regulation. The Board shall
grant an exemption if it determines that—
(1) The state law is substantially similar to
the federal law or, in the case of chapter 4,
affords the consumer greater protection
than the federal law; and
(2 ) There is adequate provision for
enforcement.
(b) Civil liability. (1) No exemptions grant­
ed under this section shall extend to the civ­
il liability provisions of sections 130 and
131 of the act.
(2 ) If an exemption has been granted, the
disclosures required by the applicable state
law (except any additional requirements
not imposed by federal law) shall constitute
the disclosures required by this act.
(c) Applications. The procedures under
which a state may apply for an exemption un­
der this section are set forth in appendix B.

Regulation Z
Supporting Documents
A request for a determination shall include
the following items:
(1) The text of the state statute, regula­
tion, or other document that is the subject
of the request.
(2) Any other statute, regulation, or judi­
cial or administrative opinion that imple­
ments, interprets, or applies the relevant
provision.
(3) A comparison of the state law with the
corresponding provision of the federal law,
including a full discussion of the basis for
the requesting party’s belief that the state
provision is either inconsistent or substan­
tially the same.
(4) Any other information that the re­
questing party believes may assist the Board
in its determination.
Public Notice o f Determination
Notice that the Board intends to make a de­
termination (either on request or on its own
motion) will be published in the Federal Reg­
ister, with an opportunity for public comment,
unless the Board finds that notice and oppor­
tunity for comment would be impracticable,
unnecessary, or contrary to the public interest
and publishes its reasons for such decision.
Subject to the Board’s Rules Regarding
Availability of Information (12 CFR part
261), all requests made, including any docu­
ments and other material submitted in sup­
port of the requests, will be made available for
public inspection and copying.
Notice After Determination

A P P E N D IX A — Effect on State Laws
Requestfo r Determination
A request for a determination that a state law
is inconsistent or that a state law is substan­
tially the same as the act and regulation shall
be in writing and addressed to the Secretary,
Board of Governors of the Federal Reserve
System, Washington, D.C. 20551. The request
shall be made pursuant to the procedures
herein and the Board’s Rules of Procedure
(12 CFR part 262).
28

Notice of a final determination will be pub­
lished in the Federal Register and the Board
will furnish a copy of such notice to the party
who made the request and to the appropriate
state official.
Reversal o f Determination
The Board reserves the right to reverse a de­
termination for any reason bearing on the cov­
erage or effect of state or federal law.
Notice of reversal of a determination will be

Appendix B

Regulation Z
published in the Federal Register and a copy
furnished to the appropriate state official.

APPENDIX B—State Exemptions
Application
Any state may apply to the Board for a deter­
mination that a class of transactions subject to
state law is exempt from the requirements of
the act and this regulation. An application
shall be in writing and addressed to the Secre­
tary, Board of Governors of the Federal Re­
serve System, Washington, D.C. 20551, and
shall be signed by the appropriate state offi­
cial. The application shall be made pursuant
to the procedures herein and the Board’s
Rules of Procedure (12 CFR part 262).
Supporting Documents
An application shall be accompanied by:
(1) The text of the state statute or regula­
tion that is the subject of the application,
and any other statute, regulation, or judicial
or administrative opinion that implements,
interprets, or applies it.
(2) A comparison of the state law with the
corresponding provisions of the federal law.
(3) The text of the state statute or regula­
tion that provides for civil and criminal lia­
bility and administrative enforcement of the
state law.
(4) A statement of the provisions for en­
forcement, including an identification of the
state office that administers the relevant
law, information on the funding and the
number and qualifications of personnel en­
gaged in enforcement, and a description of
the enforcemnt procedures to be followed,
including information on examination pro­
cedures, practices, and policies. If an ex­
emption application extends to federally
chartered institutions, the applicant must
furnish evidence that arrangements have
been made with the appropriate federal
agencies to ensure adequate enforcement of
state law in regard to such creditors.
(5) A statement of reasons to support the
applicant’s claim that an exemption should
be granted.

Public Notice o f Application
Notice of an application will be published,
with an opportunity for public comment, in
the Federal Register, unless the Board finds
that notice and opportunity for comment
would be impracticable, unnecessary, or con­
trary to the public interest and publishes its
reasons for such decision.
Subject to the Board’s Rules Regarding
Availability of Information (12 CFR part
261), all applications made, including any
documents and other material submitted in
support of the applications, will be made
available for public inspection and copying. A
copy of the application also will be made
available at the Federal Reserve Bank of each
District in which the applicant is situated.
Favorable Determination
If the Board determines on the basis of the
information before it that an exemption
should be granted, notice of the exemption
will be published in the Federal Register, and
a copy furnished to the applicant and to each
federal official responsible for administrative
enforcement.
The appropriate state official shall inform
the Board within 30 days of any change in its
relevant law or regulations. The official shall
file with the Board such periodic reports as
the Board may require.
The Board will inform the appropriate state
official of any subsequent amendments to the
federal law, regulation, interpretations, or en­
forcement policies that might require an
amendment to state law, regulation, interpre­
tations, or enforcement procedures.
Adverse Determination
If the Board makes an initial determination
that an exemption should not be granted, the
Board will afford the applicant a reasonable
opportunity to demonstrate further that an
exemption is proper. If the Board ultimately
finds that an exemption should not be grant­
ed, notice of an adverse determination will be
published in the Federal Register and a copy
furnished to the applicant.
29

Appendix B
Revocation o f Exemption
The Board reserves the right to revoke an ex­
emption if at any time it determines that the
standards required for an exemption are not
met.
Before taking such action, the Board will
notify the appropriate state official of its in­
tent, and will afford the official such opportu­
nity as it deems appropriate in the circum­
stances to demonstrate that revocation is
improper. If the Board ultimately finds that
revocation is proper, notice of the Board’s in­
tention to revoke such exemption will be pub­
lished in the Federal Register with a reason­
able period of time for interested persons to
comment.
Notice of revocation of an exemption will
be published in the Federal Register. A copy
of such notice will be furnished to the appro­
priate state official and to the federal officials
responsible for enforcement. Upon revocation
of an exemption, creditors in that state shall
then be subject to the requirements of the fed­
eral law.

APPENDIX C—Issuance of Staff
Interpretations
Official S ta ff Interpretations
Officials in the Board’s Division of Consumer
and Community Affairs are authorized to is­
sue official staff interpretations of this regula­
tion. These interpretations provide the protec­
tion afforded under section 130(f) of the act.
Except in unusual circumstances, such inter­
pretations will not be issued separately but
will be incorporated in an official commentary
to the regulation, which will be amended
periodically.
Requests fo r Issuance o f Official S ta ff
Interpretations
A request for an official staff interpretation
shall be in writing and addressed to the Direc­
tor, Division of Consumer and Community
Affairs, Board of Governors of the Federal
Reserve System, Washington, D.C. 20551.
The request shall contain a complete state30

Regulation Z
ment of all relevant facts concerning the issue,
including copies of all pertinent documents.
Scope o f Interpretations
No staff interpretations will be issued approv­
ing creditors’ forms, statements, or calcula­
tion tools or methods. This restriction does
not apply to forms, statements, tools, or meth­
ods whose use is required or sanctioned by a
government agency.

APPENDIX D—Multiple-Advance
Construction Loans
Section 226.17(c)(6) permits creditors to
treat multiple-advance loans to finance con­
struction of a dwelling that may be perma­
nently financed by the same creditor either as
a single transaction or as more than one trans­
action. If the actual schedule of advances is
not known, the following methods may be
used to estimate the interest portion of the fi­
nance charge and the annual percentage rate
and to make disclosures. If the creditor choos­
es to disclose the construction phase separate­
ly, whether interest is payable periodically or
at the end of construction, part I may be used.
If the creditor chooses to disclose the con­
struction and the permanent financing as one
transaction, part II may be used.
Part I — Construction Period Disclosed
Separately
A. If interest is payable only on the amount
actually advanced for the time it is
outstanding:
1. Estimated interest—Assume that onehalf of the commitment amount is out­
standing at the contract interest rate for the
entire construction period.
2. Estimated annual percentage rate—As­
sume a single-payment loan that matures at
the end of the construction period. The fi­
nance charge is the sum of the estimated
interest and any prepaid finance charge.
The amount financed for computation pur­
poses is determined by subtracting any pre­
paid finance charge from one-half of the
commitment amount.

Regulation Z

Appendix D

3. Repayment schedule—The number and
amounts of any interest payments may be
omitted in disclosing the payment schedule
under section 226.18(g). The fact that in­
terest payments are required and the timing
of such payments shall be disclosed.
4. Amount financed—The amount fi­
nanced for disclosure purposes is the entire
commitment amount less any prepaid fi­
nance charge.
B. If interest is payable on the entire commit­
ment amount without regard to the dates or
amounts of actual disbursement:
1. Estimated interest—Assume that the en­
tire commitment amount is outstanding at
the contract interest rate for the entire con­
struction period.

2. Estimated annual percentage rate—As­
sume a single payment loan that matures at
the end of the construction period. The fi­
nance charge is the sum of the estimated
interest and any prepaid finance charge.
The amount financed for computation pur­
poses is determined by subtracting any pre­
paid finance charge from one-half of the
commitment amount.
3. Repayment schedule—Interest pay­
ments shall be disclosed in making the re­
payment schedule disclosure under section
226.18(g).
4. Amount financed—The amount fi­
nanced for disclosure purposes is the entire
commitment amount less any prepaid fi­
nance charge.

EXAMPLE:
Assume a $50,000 loan commitment at 10.5 percent interest with a five-month construction period and a
prepaid finance charge of 2 points.
(A)

(B )

Estimated interest:
$25,000 X .105

12 X 5 =

$1,093.75

$50,000 X .105

12 X 5 =

$2,187.50

Estimated APR:
(1,093.75 + 1,000) X 100 + 5 X 12 =
(25,000 - 1,000)
20.94%

(2,187.50 + 1,000) X 100 h- 5 X 12 =
(25,000 - 1,000)
31.88%

Disclosures:
Amount financed

$49,000.00

$49,000.00

Prepaid finance charge

1,000.00

1,000.00

FINANCE CHARGE (estimate)

2,093.75

3,187.50

ANNUAL PERCENTAGE RATE
(estimate)

20.94%

31.88%

Repayment: One payment of prin­
cipal of $50,000 on 12-12-80. Inter­
est on the amount of credit out­
standing will be paid monthly.
Total of payments (estimate)

4 monthly payments of $437.50, be­
ginning 8-12-80, and a final pay­
ment of $50,437.50 on 12-12-80.
$51,093.75

Part I I —Construction and permanent
financing disclosed as one transaction.
A. The creditor shall estimate the interest
payable during the construction period to be
included in the total finance charge as follows:
1. If interest is payable only on the amount

$52,187.50

actually advanced for the time it is out­
standing, assume that one-half of the
commitment amount is outstanding at the
contract interest rate for the entire con­
struction period.
2. If interest is payable on the entire com­
mitment amount without regard to the
31

Appendix D

Regulation Z

dates or amounts of actual disbursement,
assume that the entire commitment amount
is outstanding at the contract rate for the
entire construction period.
B. The creditor shall compute the estimated
annual percentage rate as follows:
1. Estimated interest payable during the
construction period shall be treated for
computation purposes as a prepaid finance
charge (although it shall not be treated as a
prepaid finance charge for disclosure
purposes).
2. The number of payments shall not in­
clude any payments of interest only that are
made during the construction period.
3. The first payment period shall consist of
one-half of the construction period plus the
period between the end of the construction

period and the first amortization payment.
C. The creditor shall disclose the repayment
schedule as follows:
1. For loans under paragraph A .I. of part
II, without reflecting the number or
amounts of payments of interest only that
are made during the construction period.
The fact that interest payments must be
made and the timing of such payments shall
be disclosed.
2. For loans under paragraph A.2. of part
II, including any payments of interest only
that are made during the construction
period.
D. The creditor shall disclose the amount fi­
nanced as the entire commitment amount less
any prepaid finance charge.

EXAMPLE:
Assume a $50,000 loan commitment at 10.5 percent interest with a five-month construction period and a
prepaid finance charge of 2 points, followed by 30-year permanent financing at the same rate with monthly
amortization payments of $457.37.

Computation o f Estimated APR
Interest on
amount advanced

Interest on
entire commitment

Estimated construction interest:
$25,000 X .105 + 12 X 5 =

$1,093.75

$50,000 X .105 t

12 X 5 =

$2,187.50

Estimated total finance charge:
360 X $457.37 =
Principal
Interest on permanent
financing
Construction interest
Points

$164,653.20
—50,000.00

$164,653.20
-50,000.00

114,653.20
+ 1,093.75
+ 1,000.00

114,653.20
+ 2,187.50
+ 1,000.00 $117,840.70

$116,746.95

Estimated amount financed:
Principal
$50,000.00
Construction interest — 1,093.75
Points
- 1,000.00
Number of payments
Payment amount
First payment period (5 + 2) + 1
Estimated APR (Actuarial)

$47,906.25

$50,000.00
2,187.50
- 1,000.00

360

360

$457.37

$457.37

3J months

(5 -r 2) + 1

10.75%

32

: 243.70 = FC/$100

3 | months
11.03%

Estimated APR (Volume I):
11,674,695
47,906.25

$46,812.50

11,784,070
46,812.50

251.73 = FC/$100

Regulation Z

Appendix E

Computation o f Estimated APR (Continued)
Interest on
amount advanced

Interest on
entire commitment

First period adjustment =
3 mo., 15 days = + 5.0

First period adjustment =
3 mo., 15 days = + 5.0

Using 365 payment line, the figure
closest to 243.70 is 247.00, which
corresponds to an APR of

Using 365 payment line, the figure
closest to 251.73 is 253.93, which
corresponds to an APR of

11%

11.25%

Disclosures
Amount financed
Prepaid finance charge
FINANCE CHARGE (estimate)
ANNUAL PERCENTAGE RATE
(estimate)

$49,000.00

$49,000.00

1,000.00

1,000.00

116,746.95

117,840.70

11%

11.25%

Repayment: Interest on the amount
of credit outstanding during the
construction period will be paid
monthly, followed by 360 monthly
payments of $457.37, beginning 1­
12-81.
Total of payments (estimate)

5 monthly payments of $437.50 be­
ginning 8-12-80, followed by 360
monthly payments of $457.37 be­
ginning 1-12-81.

$165,746.95

APPENDIX E—Rules for Card Issuers
That Bill on a Transaction-byTransaction Basis

$166,840.70

mailing or delivering the statement required
by section 226.6(d) (see appendix G-3) to
each consumer receiving a transaction invoice
during a one-month period chosen by the card
issuer or by sending either the statement pre­
scribed by section 226.6(d) or an alternative
billing error rights statement substantially
similar to that in appendix G-4, with each in­
voice sent to a consumer.

The following provisions of subpart B apply if
credit cards are issued and (1) the card issuer
and the seller are the same or related persons;
(2) no finance charge is imposed; (3) con­
sumers are billed in full for each use of the
card on a transaction-by-transaction basis, by
Section 226.9(c).
means of an invoice or other statement reflect­
Section 226.10.
ing each use of the card; and (4) no cumula­
Section 226.11. This section applies when a
tive account is maintained which reflects the card issuer receives a payment or other credit
transactions by each consumer during a peri­ that exceeds by more than $1 the amount due,
od of time, such as a month:
as shown on the transaction invoice. The re­
Section 226.6(d), and, as applicable, section quirement to credit amounts to an account
226.6(b) and (c). The disclosure required by may be complied with by other reasonable
Section 226.6(b) shall be limited to those means, such as by a credit memorandum.
charges that are or may be imposed as a result Since no periodic statement is provided, a no­
of the deferral of payment by use of the card, tice of the credit balance shall be sent to the
such as late payment or delinquency charges. consumer within a reasonable period of time
Section 226.7(b) and section 226.7(k). Cred­ following its occurrence unless a refund of the
itors may comply by placing the required dis­ credit balance is mailed or delivered to the
closures on the invoice or statement sent to consumer within five business days of its re­
the consumer for each transaction.
ceipt by the card issuer.
Section 226 9(a). Creditors may comply by
Section 226.12 including section 226.12(c)
33

Appendix E
and (d), as applicable. Section 226.12(e) is
inapplicable.
Section 226.13, as applicable. All references
to “periodic statement” shall be read to indi­
cate the invoice or other statement for the rel­
evant transaction. All actions with regard to
correcting and adjusting a consumer’s account
may be taken by issuing a refund or a new
invoice, or by other appropriate means consis­
tent with the purposes of the section.
Section 226.15, as applicable.

APPENDIX F—Annual Percentage
Rate Computations for Certain OpenEnd Credit Plans
In determining the denominator of the frac­
tion under section 226.14(c)(3), no amount
will be used more than once when adding the
sum of the balances1 subject to periodic rates
to the sum of the amounts subject to specific
transaction charges. In every case, the full
amount of transactions subject to specific
transaction charges shall be included in the
denominator. Other balances or parts of bal­
ances shall be included according to the man­
ner of determining the balance subject to a
periodic rate, as illustrated in the following
examples of accounts on monthly billing
cycles:
1. Previous balance—none.
A specific transaction of $100 occurs on the
first day of the billing cycle. The average daily
balance is $100. A specific transaction charge
of 3 percent is applicable to the specific trans­
action. The periodic rate is 1^ percent applica­
ble to the average daily balance. The numera­
tor is the amount of the finance charge, which
is $4.50. The denominator is the amount of
the transaction (which is $ 1 0 0 ), plus the
amount by which the balance subject to the
periodic rate exceeds the amount of the specif­
ic transactions (such excess in this case is 0 ),
totaling $ 1 0 0 .
The annual percentage rate is the quotient
(which is 4J percent) multiplied by 1 2 (the
1Where a portion of the finance charge is determined by
application of one or more daily periodic rates, the phrase
“sum of the balances” shall also mean the “average of daily
balances.”
34

Regulation Z
number of months in a year), i.e., 54 percent.
2. Previous balance—$100.
A specific transaction of $100 occurs at the
midpoint of the billing cycle. The average
daily balance is $150. A specific transaction
charge of 3 percent is applicable to the specific
transaction. The periodic rate is 1^ percent
applicable to the average daily balance. The
numerator is the amount of the finance charge
which is $5.25. The denominator is the
amount of the transaction (which is $ 1 0 0 ),
plus the amount by which the balance subject
to the periodic rate exceeds the amount of the
specific transaction (such excess in this case is
$50), totaling $150. As explained in example
1,
the
annual
percentage
rate
is
X 12 = 42%.
3. If, in example 2, the periodic rate applies
only to the previous balance, the numerator is
$4.50 and the denominator is $200 (the
amount of the transaction, $ 1 0 0 , plus the bal­
ance subject only to the periodic rate, the
$100 previous balance). As explained in ex­
ample 1 , the annual percentage rate is
2\% X 12 = 27%.
4. If, in example 2, the periodic rate applies
only to an adjusted balance (previous balance
less payments and credits) and the consumer
made a payment of $50 at the midpoint of the
billing cycle, the numerator is $3.75 and the
denominator is $150 (the amount of the trans­
action, $ 1 0 0 , plus the balance subject to the
periodic rate, the $50 adjusted balance). As
explained in example 1 , the annual percentage
rate is 2£% X 12 = 30%.
5. Previous balance—$100.
A specific transaction (check) of $100 oc­
curs at the midpoint of the billing cycle. The
average daily balance is $150. The specific
transaction charge is $.25 per check. The peri­
odic rate is 1 ^ percent applied to the average
daily balance. The numerator is the amount of
the finance charge, which is $2.50 and in­
cludes the $.25 check charge and the $2.25
resulting from the application of the periodic
rate. The denominator is the full amount of
the specific transaction (which is $ 1 0 0 ) plus
the amount by which the average daily bal­

Regulation Z
ance exceeds the amount of the specific trans­
action (which in this case is $50), totaling
$150. As explained in example 1, the annual
percentage rate would be 1§% X 12 =
20 %.

. Previous balance—none.
A specific transaction of $100 occurs at the
midpoint of the billing cycle. The average
daily balance is $50. The specific transaction
charge is 3 percent of the transaction amount
or $3.00. The periodic rate is 1^ percent per
month applied to the average daily balance.
The numerator is the amount of the finance
charge, which is $3.75, including the $3.00
transaction charge and $.75 resulting from ap­
plication of the periodic rate. The denomina­
tor is the full amount of the specific transac­
tion ($ 1 0 0 ) plus the amount by which the
balance subject to the periodic rate exceeds
the amount of the transaction ($0). Where
the specific transaction amount exceeds the
balance subject to the periodic rate, the result­
ing number is considered to be zero rather
than a negative number ($50 — $100 =
—$50). The denominator, in this case, is
$100. As explained in example 1, the annual
percentage rate is 3J% X 12 = 45%.
6

APPENDIX G—Open-End Model
Forms and Clauses
G -l Balance Computation Methods Model
Clauses (§§ 226.6 and 226.7)
G -2 Liability for Unauthorized Use Model
Clause (§ 226.12)
G -3 Long-Form Billing-Error Rights Model
Form (§§ 226.6 and 226.9)
G -4 Alternative Billing-Error Rights Model
Form (§ 226.9)
G-5 Rescission Model Form (When Opening
an Account) (§ 226.15)
G - 6 Rescission Model Form (For Each
Transaction) (§ 226.15)
G -l Rescission Model Form (When Increas­
ing the Credit Limit) (§ 226.15)
G - 8 Rescission Model Form (When Adding
a Security Interest) (§ 226.15)
G -9 Rescission Model Form (When Increas­
ing the Security) (§ 226.15)

Appendix G -l

G -l—Balance Computation Methods
Model Clauses
(a) Adjusted balance method
We figure [a portion of] the finance charge on
your account by applying the periodic rate to
the “adjusted balance” of your account. We
get the “adjusted balance” by taking the bal­
ance you owed at the end of the previous bill­
ing cycle and subtracting [any unpaid finance
charges and] any payments and credits re­
ceived during the present billing cycle.
(b) Previous balance method
We figure [a portion of] the finance charge on
your account by applying the periodic rate to
the amount you owe at the beginning of each
billing cycle [minus any unpaid finance
charges]. We do not subtract any payments or
credits received during the billing cycle. [The
amount of payments and credits to your ac­
count this billing cycle was $________ ]
(c) Average daily balance method (excluding
current transactions)
We figure [a portion of] the finance charge on
your account by applying the periodic rate to
the “average daily balance” of your account
(excluding current transactions). To get the
“average daily balance” we take the beginning
balance of your account each day and subtract
any payments or credits [and any unpaid fi­
nance charges]. We do not add in any new
[purchases/advances/loans]. This gives us
the daily balance. Then, we add all the daily
balances for the billing cycle together and di­
vide the total by the number of days in the
billing cycle. This gives us the “average daily
balance.”
(d) Average daily balance method (including
current transactions)
We figure [a portion of] the finance charge on
your account by applying the periodic rate to
the “average daily balance” of your account
(including current transactions). To get the
“average daily balance” we take the beginning
balance of your account each day, add any
new [purchases/advances/loans], and sub­
tract any payments or credits, [and unpaid
finance charges]. This gives us the daily bal­
ance. Then, we add up all the daily balances
35

Regulation Z

Appendix G -l
for the billing cycle and divide the total by the
number of days in the billing cycle. This gives
us the “average daily balance.”

G-2—Liability for Unauthorized Use
Model Clause
You may be liable for the unauthorized use of
your credit card [or other term that describes
the credit card]. You will not be liable for
unauthorized use that occurs after you notify
[name of card issuer or its designee] at [ad­
dress], orally or in writing, of the loss, theft,
or possible unauthorized use. In any case,
your liability will not exceed [insert $50 or
any lesser amount under agreement with the
cardholder].

G-3—Long-Form Billing-Error Rights
Model Form
YOUR BILLING RIGHTS KEEP THIS NO­
TICE FOR FUTURE USE

This notice contains important information
about your rights and our responsibilities un­
der the Fair Credit Billing Act.
Notify Us In Case o f Errors or Questions About
Your Bill
If you think your bill is wrong, or if you need
more information about a transaction on your
bill, write us [on a separate sheet] at [ad­
dress] [the address listed on your bill]. Write
to us as soon as possible. We must hear from
you no later than 60 days after we sent you
the first bill on which the error or problem
appeared. You can telephone us, but doing so
will not preserve your rights.
In your letter,
information:

give

us

the

following

• Your name and account number.
• The dollar amount of the suspected error.
• Describe the error and explain, if you can,
why you belive there is an error. If you
need more information, describe the item
you are not sure about.
36

If you have authorized us to pay your credit
card bill automatically from your savings or
checking account, you can stop the payment
on any amount you think is wrong. To stop
the payment your letter must reach us three
business days before the automatic payment is
scheduled to occur.
Your Rights and Our Responsibilities After We
Receive Your Written Notice
We must acknowledge your letter within 30
days, unless we have corrected the error by
then. Within 90 days, we must either correct
the error or explain why we believe the bill
was correct.
After we receive your letter, we cannot try
to collect any amount you question, or report
you as delinquent. We can continue to bill you
for the amount you question, including fi­
nance charges, and we can apply any unpaid
amount against your credit limit. You do not
have to pay any questioned amount while we
are investigating, but you are still obligated to
pay the parts of your bill that are not in
question.
If we find that we made a mistake on your
bill, you will not have to pay any finance
charges related to any questioned amount. If
we didn’t make a mistake, you may have to
pay finance charges, and you will have to
make up any missed payments on the ques­
tioned amount. In either case, we will send
you a statement of the amount you owe and
the date that it is due.
If you fail to pay the amount that we think
you owe, we may report you as delinquent.
However, if our explanation does not statisfy
you and you write to us within ten days telling
us that you still refuse to pay, we must tell
anyone we report you to that you have a ques­
tion about your bill. And, we must tell you the
name of anyone we reported you to. We must
tell anyone we report you to that the matter
has been settled between us when it finally is.
If we don’t follow these rules, we can’t col­
lect the first $50 of the questioned amount,
even if your bill was correct.
Special Rule fo r Credit Card Purchases
If you have a problem with the quality of

Appendix G-5

Regulation Z
property or services that you purchased with a
credit card, and you have tried in good faith
to correct the problem with the merchant, you
may have the right not to pay the remaining
amount due on the property or services. There
are two limitations on this right:
(a) You must have made the purchase in
your home state or, if not within your
home state within 1 0 0 miles of your cur­
rent mailing address; and
(b) The purchase price must have been more
than $50.
These limitations do not apply if we own or
operate the merchant, or if we mailed you the
advertisement for the property or services.

G-4—Alternative Billing-Error Rights
Model Form
BILLING RIGHTS SUMMARY

In Case o f Errors or Questions About Your Bill
If you think your bill is wrong, or if you need
more information about a transaction on your
bill, write us [on a separate sheet] at [ad­
dress] [the address shown on your bill] as
soon as possible. We must hear from you no
later than 60 days after we sent you the first
bill on which the error or problem appeared.
You can telephone us, but doing so will not
preserve your rights.
In your letter,
information:

give

us

the

following

• Your name and account number.
• The dollar amount of the suspected error.
• Describe the error and explain, if you can,
why you believe there is an error. If you
need more information, describe the item
you are unsure about.
You do not have to pay any amount in
question while we are investigating, but you
are still obligated to pay the parts of your bill
that are not in question. While we investigate
your question, we cannot report you as delin­

quent or take any action to collect the amount
you question.
Special Rule fo r Credit Card Purchases
If you have a problem with the quality of
goods or services that you purchased with a
credit card, and you have tried in good faith
to correct the problem with the merchant, you
may not have to pay the remaining amount
due on the goods or services. You have this
protection only when the purchase price was
more than $50 and the purchase was made in
your home state or within 1 0 0 miles of your
mailing address. (If we own or operate the
merchant, or if we mailed you the advertise­
ment for the property or services, all purchas­
es are covered regardless of amount or loca­
tion of purchase.)

G-5—Rescission Model Form (When
Opening An Account)
NOTICE OF RIGHT TO CANCEL

1. Your Right to Cancel
We have agreed to establish an open-end cred­
it account for you, and you have agreed to
give us a [mortgage/lien/security interest]
[on/in] your home as security for the ac­
count. You have a legal right under federal
law to cancel the account, without cost, with­
in three business days after the latest of the
following events:
( 1 ) the opening date of your account which
is
---------------------------------- ; or
(2) the date you received your Truth-inLending disclosures; or
(3) the date you received this notice of your
right to cancel the account.
If you cancel the account, the [mortgage/
lien/security interest] [on/in] your home is
also cancelled. Within 20 days of receiving
your notice, we must take the necessary steps
to reflect the fact that the [mortgage/lien/se­
curity interest] [on/in] your home has been
cancelled. We must return to you any money
37

Appendix G-5

Regulation Z

or property you have given to us or to anyone
else in connection with the account.
You may keep any money or property we
have given you until we have done the things
mentioned above, but you must then offer to
return the money or property. If it is impracti­
cal or unfair for you to return the property,
you must offer its reasonable value. You may
offer to return the property at your home or at
the location of the property. Money must be
returned to the address shown below. If we do
not take possession of the money or property
within 2 0 calendar days of your offer, you
may keep it without further obligation.
2. How to Cancel.
If you decide to cancel the account, you may
do so by notifying us, in writing, at

open-end credit account. This extension of
credit will increase the amount you owe on
your account. We already have a [mortgage/
lien/security interest] [on/in] your home as
security for your account. You have a legal
right under federal law to cancel the extension
of credit, without cost, within three business
days after the latest of the following events:

( 1 ) the date of the additional extension of
credit which is
---------------------------------- ;or
(2) the date you received your Truth-inLending disclosures; or
(3) the date you received this notice of your
right to cancel the additional extension of
credit.

(creditor’s name and business address).

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice no matter how you notify us be­
cause it contains important information about
your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of
(date)

(or midnight of the third business day follow­
ing the latest of the three events listed above).
If you send or deliver your written notice to
cancel some other way, it must be delivered to
the above address no later than that time.
I WISH TO CANCEL.

Consumer’s Signature

Date

G-6—Rescission Model Form (For
Each Transaction)

If you cancel the additional extension of
credit, your cancellation will only apply to the
additional amount and to any increase in the
[mortgage/lien/security interest] that result­
ed because of the additional amount. It will
not affect the amount you presently owe, and
it will not affect the [mortgage/lien/security
interest] we already have [on/in] your home.
Within 20 calendar days after we receive your
notice of cancellation, we must take the neces­
sary steps to reflect the fact that any increase
in the [mortgage/lien/security interest] [on/
in] your home has been cancelled. We must
also return to you any money or property you
have given to us or to anyone else in connec­
tion with this extension of credit.
You may keep any money or property we
have given you until we have done the things
mentioned above, but you must then offer to
return the money or property. If it is impracti­
cal or unfair for you to return the property,
you must offer its reasonable value. You may
offer to return the property at your home or at
the location of the property. Money must be
returned to the address shown below. If we do
not take possession of the money or property
within 2 0 calendar days of your offer, you
may keep it without further obligation.

NOTICE OF RIGHT TO CANCEL

1. Your Right to Cancel
We have extended credit to you under your
38

2. How to Cancel
If you decide to cancel the additional exten-

Appendix G-7

Regulation Z
sion of credit, you may do so by notifying us,
in writing, at
(creditor’s name and business address).

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice no matter how you notify us be­
cause it contains important information about
your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of
(date)

(or midnight of the third business day follow­
ing the latest of the three events listed above).
I WISH TO CANCEL

Consumer's Signature

Date

G-7—Rescission Model Form (When
Increasing the Credit Limit)

If you cancel, your cancellation will apply
only to the increase in your credit limit and to
the [mortgage/lien/security interest] that re­
sulted from the increase in your credit limit. It
will not affect the amount you presently owe,
and it will not affect the [mortgage/lien/secu­
rity interest] we already have [on/in] your
home. Within 20 calendar days after we re­
ceive your notice of cancellation, we must
take the necessary steps to reflect the fact that
any increase in the [mortgage/lien/security
interest] [on/in] your home has been can­
celled. We must also return to you any money
or property you have given to us or to anyone
else in connection with this increase.
You may keep any money or property we
have given you until we have done the things
mentioned above, but you must then offer to
return the money or property. If it is impracti­
cal or unfair for you to return the property,
you must offer its reasonable value. You may
offer to return the property at your home or at
the location of the property. Money must be
returned to the address shown below. If we do
not take possession of the money or property
within 2 0 calendar days of your offer, you
may keep it without further obligation.

NOTICE OF RIGHT TO CANCEL

1. Your Right to Cancel
We have agreed to increase the credit limit on
your open-end credit account. We have a
[mortgage/lien/security interest] [on/in]
your home as security for your account. In­
creasing the credit limit will increase the
amount of the [mortgage/lien/security inter­
est] [on/in] your home. You have a legal
right under federal law to cancel the increase
in your credit limit, without cost, within three
business days after the latest of the following
events:

2. How to Cancel
If you decide to cancel the increase in your
credit limit, you may do so by notifying us, in
writing, at
(creditor’s name and business address).

( 1 ) the date of the increase in your credit
limit which is

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice no matter how you notify us be­
cause it contains important information about
your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of

---------------------------------- ;or
(2) the date you received your Truth-inLending disclosures; or
(3) the date you received this notice of your
right to cancel the increase in your credit
limit.

(or midnight of the third business day follow­
ing the latest of the three events listed above).
If you send or deliver your written notice to
cancel some other way, it must be delivered to
the above address no later than that time.

(date)

39

Appendix G -7

Regulation Z

I WISH TO CANCEL.

Consumer’s Signature

Date

G-8—Rescission Model Form (When
Adding a Security Interest)

possession of the money or property within 2 0
calendar days of your offer, you may keep it
without further obligation.
2. How to Cancel
If you decide to cancel the [mortgage/lien/se­
curity interest], you may do so by notifying
us, in writing, at
(creditor’s name and business address).

NOTICE OF RIGHT TO CANCEL

1. Your Right to Cancel
You have agreed to give us a [mortgage/lien/
security interest] [on/in] your home as secu­
rity for your existing open-end credit account.
You have a legal right under federal law to
cancel the [mortgage/lien/security interest],
without cost, within three business days after
the latest of the following events:

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice no matter how you notify us be­
cause it contains important information about
your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of
(date)

( 1 ) the date of the [mortgage/lien/security
interest] which is
---------------------------------------------- ;or
(2) the date you received your Truth-inLending disclosures; or
(3) the date you received this notice of your
right to cancel the [mortgage/lien/secu­
rity interest].
If you cancel the [mortgage/lien/security
interest], your cancellation will apply only to
the [mortgage/lien/security interest]. It will
not affect the amount you owe on your ac­
count. Within 20 calendar days after we re­
ceive your notice of cancellation, we must
take the necessary steps to reflect that any
[mortgage/lien/security interest] [on/in]
your home has been cancelled. We must also
return to you any money or property you have
given to us or to anyone else in connection
with this increase.
You may keep any money or property we
have given you until we have done the things
mentioned above, but you must then offer to
return the money or property. If it is impracti­
cal or unfair for you to return the property,
you must offer its reasonable value. You may
make the offer at your home or at the location
of the property. Money must be returned to
the address shown below. If we do not take
40

(or midnight of the third business day follow­
ing the latest of the three events listed above).
If you send or deliver your written notice to
cancel some other way, it must be delivered to
the above address no later than that time.
I WISH TO CANCEL.

Consumer’s Signature

Date

G-9—Rescission Model Form (When
Increasing the Security)
NOTICE OF RIGHT TO CANCEL

1. Your Right to Cancel
You have agreed to increase the amount of
the [mortgage/lien/security interest] [on/in]
your home that we hold as security for your
open-end credit account. You have a legal
right under federal law to cancel the increase,
without cost, within three business days after
the latest of the following events:
( 1 ) the date of the increase in the security
which is
___________________________ ;or
(2) the date you received your Truth-in-

Appendix H

Regulation Z
Lending disclosures; or
(3) the date you received this notice of your
right to cancel the increase in the
security.

cause it contains important information about
your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of

If you cancel the increase in the security,
your cancellation will apply only to the in­
crease in the amount of the [mortgage/lien/
security interest]. It will not affect the amount
you presently owe on your account, and it will
not affect the [mortgage/lien/security inter­
est] we already have [on/in] your home.
Within 20 calendar days after we receive your
notice of cancellation, we must take the neces­
sary steps to reflect the fact that any increase
in the [mortgage/lien/security interest] [on/
in] your home has been cancelled. We must
also return to you any money or property you
have given to us or to anyone else in connec­
tion with this increase.
You may keep any money or property we
have given you until we have done the things
mentioned above, but you must then offer to
return the money or property. If it is impracti­
cal or unfair for you to return the property,
you must offer its reasonable value. You may
offer to return the property at your home or at
the location of the property. Money must be
returned to the address shown below. If we do
not take possession of the money or property
within 2 0 calendar days of your offer, you
may keep it without further obligation.

(or midnight of the third business day follow­
ing the latest of the three events listed above).
If you send or deliver your written notice to
cancel some other way, it must be delivered to
the above address no later than that time.

(date)

2. How to Cancel
If you decide to cancel the increase in securi­
ty, you may do so by notifying us, in writing,
at
(creditor's name and business address).

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice no matter how you notify us be­

I WISH TO CANCEL.

Consumer's Signature

Date

APPENDIX H—Closed-End Model
Forms and Clauses
H -l Credit Sale Model Form (§ 226.18)
H -2 Loan Model Form (§ 226.18)
H -3 Amount Financed Itemization Model
Form (§ 226.18(c))
H -4 Variable-Rate Model Clauses
(§ 226.18(f))
H-S Demand Feature Model Clauses
(§ 226.18(i))
H- 6 Assumption Policy Model Clause
(§ 226.18(q ))
H -7 Required Deposit Model Clause
(§ 226.18(r))
H - 8 Rescission Model Form (General)
(§ 226.23)
H -9 Rescission Model Form (Refinancing)
(§ 226.23)
H -10 Credit Sale Sample
H -l 1 Installment Loan Sample
H-12 Refinancing Sample
H -l 3 Mortgage with Demand Feature
Sample
H -14 Variable-Rate Mortgage Sample
H -l 5 Graduated-Payment Mortgage Sample

Appendix H -l

Regulation Z

H - l — C redit Sale M odel Form

ANNUAL
PERCENTAGE
RATE
T he com o f y o u r c r e d it
as a yearly rate.

FINANCE
CHARGE

Amount
Financed

Total of
Payments

T he d o lla r a m o u n t
th e c r e d it M i l l c o s t
y ou.

T he a m o u n t o f c r e d it

T he a m o u n t y o u will
have p a id a f te r you
have m a d e all p a y m e n ts
as s ch e d u le d .

$

%

p r o v id e d t o y o u or o n
y o u r be h a lf.

$

Total Sale Price

$

T h e to ta l c o st o f y o u r p u r ­
c h a se o n c r e d i t, in c lu d in g
your dow npaym ent of

s
$

Y ou have the rig h t t o receive a t th is tim e an ite m iz a tio n o f th e A m o u n t Fin anced.

G I want

an ite m iz a tio n .

□

I do

n o t w a n t an ite m iz a tio n .

Y o u r p a ym en t schedule w ill be:
N u m b e r o f P a y m e n ts

A m o u n t o f P a y m e nt!

W he n P a y m e n ts A r e D ue

Insurance
C redit life insurance and c re d it d is a b ility insurance are n o t required to o b ta in c re d it, and w ill n o t be p ro vide d unless y o u sign
and agree to pay th e a d d itio n a l cost.____________________
Type

P r e m iu m

S ig n a tu r e

C red it Life

1 w a n t c re d it life
insurance.

C red it D is a b ility

1 w a n t cre d it d is a b ility
insurance.

C re d it L ife and

1 w a n t cre d it life and

D is a b ility

d is a b ility insurance.

S ig n a tu r e

Y ou may o b ta in p ro p e rty insurance fro m anyone y o u w a nt th a t is acceptable to
fro m

(cre d ito r),

( c r e d ito r )

I f yo u g e t th e in surance

you w ill pay $ __________________

Security: Y o u are givin g a s e c u rity interest in:
□

th e goods o r p ro p e rty being purchased.

O

(b rie f d e s c r ip tio n o f o th e r p r o p e r ty ) .

Filing fees $ ______________

N on-filing insurance$ _______________

Late Charge: If a p aym ent is late, y o u w ill be charged $ _____________ / ___________ % o f th e p aym en t.
P repaym ent: If yo u pay o f f e arly, you
□

m ay

□

w ill n ot

have to pay a pen alty.

□

m ay

□

w ill n o t

be e n title d to a re fun d o f p a rt o f the finance charge.

See y o u r c o n tra c t d ocum ents f o r any a d d itio n a l in fo rm a tio n a bo ut n on p a ym e n t, d e fa u lt, any re q uired re p aym e n t in f u ll b efo re
the scheduled date, and p re pa ym e nt refunds and penalties.
e means an e stim ate

42

Appendix H-2

Regulation Z
H -2 — Loan M odel Form

ANNUAL
PERCENTAGE
RATE
T he c ost o f y o u r c r e d it
a t 8 y early rate.

%

FINANCE
CHARGE

Amount
Financed

Total of
Payments

T h e d o lla r a m o u n t
th e c r e d i t will c o s t
you.

T h e a m o u n t o f c r e d it
p ro v id e d t o y o u o r o n
y o u r be h a lf.

T h« m o u n t y o u will
havfl paid a f te r y ou

$

$

have m a d e all p a y m e n ts
as sc h e duled .

$

Y o u have th e righ t to receive at th is tim e an ite m iz a tio n o f th e A m o u n t Financed.
□

I w a n t an ite m iz a tio n .

□

t d o n o t w a n t an ite m iz a tio n .

Y o u r p a ym en t schedule w ill be:
N u m b e r o f P a y m e n ts

A m o u n t o f P a y m e n ts

W h e n P a y m e n ts A re Oue

Insurance
C re d it life insurance and c re d it d is a b ility insurance are n o t required to o b ta in c re d it, and w ill n o t be p ro vid e d unless y o u sign
and agree to pay th e a d d itio n a l cost.________________________________________________________________________________________
Type

S ig na tu re

Pr e m iu m

1 w a n t cre d it life

C re d it Life

insurance.

Signature

1 w a n t c re d it d is a b ility

C red it D is a b ility

insurance.
C re d it L ife and

1 w a n t c re d it life and

D is a b ility

d is a b ility insurance.

S ig n a tu re

Signature

Y ou may o b ta in p ro p e rty insurance fro m anyone yo u w a nt th a t is acceptable to
fro m

{c re d ito r),

( c r e d ito r ) .

If y o u get th e insurance

yo u w ill pay $ ------------------------------

Security: You are giving a security interest in:
□

the goods o r p ro p e rty being purchased.

CD

(b ria f d e sc rip tio n o f o t h e r p ro p o rty ).

Filing feet $ ______________

N on-filing insurance $ ______________

Late Charge: If a p a ym e n t is late, you w ill be charged $ _____________ / ------------------- % o f th e p aym en t.
Prepaym ent: If yo u pay o f f e arly, yo u
□

m ay

□

□

m ay

O w ill n o t

w ill n o t

have to pay a p en alty.
be e n title d to a re fun d o f part o f the finance charge.

See y o u r c o n tra c t d ocum ents fo r any a d d itio n a l in fo rm a tio n a b o u t n on p a ym e n t, d e fa u lt, any re q uired re p aym e n t in f u ll before
th e scheduled date, and p re pa ym e nt refunds and penalties.
e means an estim ate

43

Appendix H-3

Regulation Z

H-3—Amount Financed Itemization
Model Form
Itemization of the Amount Financed of $____
®_____________ Amount given
directly
®-------------------- Amount paid
account

[you will have to m ake_______ addition­
al payments.]
[your final payment will increase to
$-------]]

to you Example based on a typical transaction
[If your loan were for $________ at
________%
for
(term)
and the rate
on your
increased to ________% in
(time period),
[your regular payments would increase by

Amount paid to others on your behalf
^ _____________ to [public officials] [cred­
it bureau] [appraiser]
[insurance company]
—-—-_________tO (name of anothercreditor)

$ ------------------------------------------------]

[you would have to m ake_____ addition­
al payments.]
[your final payment would increase by
$------- ]]

^ _____________ to (other)

H-5—Demand Feature Model Clauses
®_____________ Prepaid finance charge

H-4—Variable-Rate Model Clauses
The annual percentage rate may increase dur­
ing the term of this transaction if:
[the
prime
interest
rate
of
(creditor)
increases.]
[the balance in your deposit account falls
below S __________________________ ]
[you terminate your employment with
(employer)

.]

[The interest rate will not increase
above ______________________ %.]
[The maximum interest rate increase at one
time will be _____________________ %.]
[The rate will not increase more than once
every
(time period)
.]
Any increase will take the form of:
[higher payment amounts.]
[more payments of the same amount.]
[a larger amount due at maturity.]
Example based on the specific transaction
[If the interest rate increases by ______ % in
(time period),

[your regular payments will increase to
$------.]

This obligation [is payable on demand.]
[has a demand feature.]
[All disclosures are based on an assumed ma­
turity of one year.]

H-6—Assumption Policy Model Clause
Assumption: Someone buying your house
[may, subject to conditions, be allowed to]
[cannot] assume the remainder of the mort­
gage on the original terms.

H-7—Required Deposit Model Clause
The annual percentage rate does not take into
account your required deposit.

H-8—Rescission Model Form (General)
NOTICE OF RIGHT TO CANCEL
Your Right to Cancel
You are entering into a transaction that will
result in a [mortgage/lien/security interest]
[on/in] your home. You have a legal right
under federal law to cancel this transaction,
without cost, within three business days from

Appendix H-9

Regulation Z
whichever of the following events occurs last:
( 1 ) the date of the transaction, which is
;or
(2) the date you received your Truth in
Lending disclosures; or
(3) the date you received this notice of your
right to cancel.
If you cancel the transaction, the [mort­
gage/lien/security interest] is also cancelled.
Within 20 calendar days after we receive your
notice, we must take the steps necessary to
reflect the fact that the [mortgage/lien/secu­
rity interest] [on/in] your home has been
cancelled, and we must return to you any
money or property you have given to us or to
anyone else in connection with this
transaction.
You may keep any money or property we
have given you until we have done the things
mentioned above, but you must then offer to
return the money or property. If it is impracti­
cal or unfair for you to return the property,
you must offer its reasonable value. You may
offer to return the property at your home or at
the location of the property. Money must be
returned to the address below. If we do not
take possession of the money or property
within 2 0 calendar days of your offer, you
may keep it without further obligation.
How to Cancel
If you decide to cancel this transaction, you
may do so by notifying us in writing, at
(creditor’s name and business address).

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice because it contains important in­
formation about your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of
(date)

(or midnight of the third business day follow­
ing the latest of the three events listed above).
If you send or deliver your written notice to
cancel some other way, it must be delivered to
the above address no later than that time.

I WISH TO CANCEL

Consumer’s Signature

Date

H-9—Rescission Model Form
(Refinancing)
NOTICE OF RIGHT TO CANCEL

Your Right to Cancel
You are entering into a new transaction to
increase the amount of credit provided to you.
We acquired a [mortgage/lien/security inter­
est] [on/in] your home under the original
transaction and will retain that [mortgage/
lien/security interest] in the new transaction.
You have a legal right under federal law to
cancel the new transaction, without cost,
within three business days from whichever of
the following events occurs last:
( 1 ) the date of the new transaction, which is
;or
(2) the date you received your new Truth in
Lending disclosures; or
(3) the date you received this notice of your
right to cancel.
If you cancel the new transaction, your can­
cellation will apply only to the increase in the
amount of credit. It will not affect the amount
that you presently owe or the [mortgage/
lien/security interest] we already have [on/
in] your home. If you cancel, the [mortgage/
lien/security interest] as it applies to the in­
creased amount is also cancelled. Within 20
calendar days after we receive your notice of
cancellation of the new transaction, we must
take the steps necessary to reflect the fact that
our [mortgage/lien/security interest] [on/
in] your home no longer applies to the in­
crease of credit. We must also return any
money you have given to us or anyone else in
connection with the new transaction.
You may keep any money we have given
you in the new transaction until we have done
the things mentioned above, but you must
then offer to return the money at the address
below. If we do not take possession of the
45

Appendix H -9
money within 2 0 calendar days of your offer,
you may keep it without further obligation.
How to Cancel
If you decide to cancel the new transaction,
you may do so by notifying us in writing, at
(creditor’s name and business address).

You may use any written statement that is
signed and dated by you and states your inten­
tion to cancel, or you may use this notice by
dating and signing below. Keep one copy of
this notice because it contains important in­

Regulation Z
formation about your rights.
If you cancel by mail or telegram, you must
send the notice no later than midnight of
(date)

(or midnight of the third business day follow­
ing the latest of the three events listed above).
If you send or deliver your written notice to
cancel some other way, it must be delivered to
the above address no later than that time.
I WISH TO CANCEL

Consumer’s Signature

Date

Appendix H-10

Regulation Z
H -10 — C redit Sale Sample

Big Whael Auto

Alice Green

Total Sale Price

ANNUAL
PERCENTAGE
RATE

FINANCE
CHARGE

Amount
Financed

Total of
Payments

T h e d o l la r a m o u n t

T h e a m o u n t o t c r e d it

T h e a m o u n t y o u w ill

cha se o n c r e d i t , i n c l u d i n g

T h e c o n o f y o u r c r e d it

th e c r e d it w i l l c o s t

p r o v id e d t o y o u o r o n

have p a id a f t e r y o u

you r dow npaym ent o f

as a y e a r ly rate .

you.

y o u r b e h a lf

hava m a d e a ll p a y m e n ts

T h e t o t a l c o st o f y o u r p u r ­

as s ch e d u le d .

I4.S4*

$l4W.K) '6I07.50 *7604.2)Q 'qia.q.30

Y o u have the rig h t to receive at th is tim e an ite m iz a tio n o f th e A m o u n t Financed,
□

I w a nt an ite m iza tio n .

N u m b e r o f P a y m e n ts

I do n o t w a n t an ite m iz a tio n .

A m o u n t n f P a ym e n ts

7,[0

W h e n P a y m e n ts A r e D ua

Mor\+hlu bicTmntaa (o- 1 1
J j
j

Insurance
C re d it life insurance and c re d it d is a b ility insurance are n o t required to o b ta in c re d it, and w ilt n o t be p ro v id e d unless y o u sign
P r e m iu m

Type

S ig n a tu re

1 w a n t c re d it life

C re d it L ife

$* i Ia . o -

SI

m

t J

. a

1

■ / f

insurance.
1 w a n t cre d it d is a b ility

C re d it D is a b ility

insurance.
C red it L ife and

1 w a n t cre d it life and

D is a b ility

d is a b ility insurance.

S ig n a tu r e

S ig n a tu r e

Skecurity:
e c u rity : Y ou are giving a se cu rity interest in :

□

the goods being purchased.

Filing fees $

ia.sp

N on-filing insurance $ _

Late Charge: If a paym en t is late, y o u w ill be charged $10.
Prepaym ent: I f you pay o f f early, you
m ay

□

w ill n o t

have to pay a pen alty.

J^qpay

□

□

w ill n o t

be e n title d to a refund o f p art o f the finance charge.

See y o u r c o n tra c t d ocum ents fo r any a d d itio n a l in fo rm a tio n a bo ut n on p a ym e n t, d e fa u lt, any re q uired re p aym e n t in f u ll before
the scheduled date, and pre pa ym e nt re fun d s and penalties
I havee ceceiyed
ceceived a co py o fo lyis
ty s statem ent.

OJUM utiUM J

5-1-81

e means an e stim ate

47

Appendix H - ll

Regulation Z

H -l 1—Installment Loan Sample

Frtendy Bank & Trust Co.

Lisa Stone
22-4859-22
300 Maple Avenue
Little Creek, USA

700 East Street
Little Creek, USA

ANNUAL
PERCENTAGE
RATE

FINANCE
CHARGE

Amount
Financed

Total of
Payments

T h e d o l la r a m o u n t

T h e a m o u n t o l c r e d it

T he a m o u n t y o u w i l l

T he c o st o f y o u r c r e d it

th e c r e d it M il l co$i

p r o v id e d t o y o u o r o n

as a y e a r ly r a l e

y ou

y o u r b e h a lf

have p a id a f te r y o u
have m a d e a ll p a y m e n is
as s c h e d u le d

IZ

$ 5000 -

% $ 675.3/

*5675.3/

Y ou have the rig h t t o receive at th is tim e an ite m iz a tio n o f th e A m o u n t Financed,
□

I w ant an ite m iz a tio n .

□

I do n ot w a n t an ite m iz a tio n .

Y o u r p a ym en t schedule w ill be
N u m b e r o f P a y m e n t?

/
Z3

A m o u n t o f P a y m e n ts

W h e n P a y m e n ts A»e D ue

* Z 6 Z . 0 3 & blllS/
^ 3 5 36
M er*t/tU f be& K A i+tut 7 /i/8 /

Lata C lw rgt: If a paym en t is late, yo u w ill be charged $5 o r 10% o f th e p aym en t, w h ich eve r is less.
P re pa ym e nt: If you pay o f f e arly, y o u

V

may

□

w ill n o t

have to pay a p en alty.

R tq u ira d D « p o *it: The annual percentage rate does n o t take in to a cco u n t y o u r re q uired deposit.
See y o u r c o n tra c t d ocum ents to r any a d d itio n a l in fo rm a tio n a bo ut n o n p a ym e n t, d e fa u lt, any re q uired re p aym e n t in f u ll before
the scheduled date, and p repaym ent re fun d s and penalties.
e means an e stim ate

48

Appendix H - l2

Regulation Z
H - l 2— Refinancing Sample

Emryoiw’s Credit Union

/,/f s y
Amount
Financed

Total of
Payments

T h e d o l la r a m o u n t

T h e a m o u n t o f c r e d it

T he a m o u n t y o u w ill

th e c r e d it w i l l co s t

p r o v id e d to y o u o r o n

ANNUAL
PERCENTAGE
RATE

FINANCE
CHARGE

T h e c o st o f y o u f c r e d it
as a y e a r ly rate .

y ou

y o u r b e h a lf

have p a id a f te r y o u
have m a d e all p a y m e n ts
as s c h e d u le d

15

%

$ 12

8 5 . 0 6 *5/77.73

*64^2.79

Y o u r paym ent schedule w ill be;
N u m b e r o f P a y m e n ts

^5
/

A m o u n t o l P a ym e nts

W hen P a y m e n ts A r e D ue

*/7?.53

M e n U ttu

StSbTUA t* 5 - / - G /

tn i.U b

Insurance
C redit life insurance and c re d it d is a b ility insurance are n ot required to obta in c re d it, and w ill n o t be p ro vid e d unless y o u sign
and agree t o pay the a d d itio n a l cost.
Type

Premium

Signature

C re d i t Life

1 w a n t c r ed it life
in s u ran c e.

C re d i t D isability

&m «

UMilLnlii WfidOii
| in s ura nc e.

*/7 7 .7 3

S e c u rity : Y ou are giving a se curity interest in ;

□

u' b

ysionatur#

_

J

the goods o r p ro p e rty being purchased.
y o u r a u to m o b ile .

Late Charge: If a paym ent is late, y o u w ill be charged 20% o f the interest due w ith a m in im u m charge o f $.05.
P repaym ent: I f you pay o ff e arly, yo u w ill n o t have to pay a penalty.
See y o u r c o n tra c t d ocum ents fo r any a d d itio n a l in fo rm a tio n a bout n o n pa ym e n t, d e fa u lt, any required re paym ent in f u ll before
the scheduled date, and p re pa ym e nt re fun d s and penalties.
e means an estim ate

Ite m iz a tio n o f th e A m o u n t Financed o f $_

$
$

io o o -

$oao'

5/77.7.3

A m o u n t g iven t o y o u d ire c tly
A m o u n t paid o n y o u r account

A m o u n t paid to o th e rs on y o u r behalf

$

_____

* ____ 500____

l° public
P~k|icofficials,.
°ti'c- - .
CatyCraart
to

.

*

ACJHZ-Kr&tce, c a .
Pan.&alactic.

$ _____/ T 7 . 7 3

to

$ _________________

fo r c re d it re p ort

$

Prepaid fin a n ce charge

49

Appendix H -l 3

Regulation Z

H -l3—Mortgage with Demand Feature Sample

Mortgage Savings and Loan Aaaoc.

Glenn Jon es
700 Oak D riv e
L i t t l e C re e k , USA

D ate: A p r il 15, 1981

ANNUAL
PERCENTAGE
RATE

FINANCE
CHARGE

Amount
Financed

Total of
Payments
T he a m o u n t you w ill

T h e d o l la r a m o u n t

T h e a m o u n t o f c r e d it

T he c o s t o f y o u r c r e d it

th e c r e d it M ill c o s i

p r o v id e d t o y o u o r o n

as a y e a rly ra te .

you.

y o u r b e h a lf.

have p a id a l t e r y o u
have m a d e all p a y m e n ts
as s ch e d u le d .

14*. 8 5

%

* 1 5 6 ,5 5 1 .5 4 -

s 4 + ,fe 0 5 .b 6

* 2 0 1 ,1 5 7 .2 0

Your paym ent schedule wilt be:
N u m b e r o f P a y m e n ts

360

A m o u n t o f P a y m e n ts

W hen P a ym e nts A r e D ue

M orfbltj beqivimnq fe/l /8t

5 5 3.7 7

T h is o b lig a tio n has a dem and feature.

Y o u m a y o b ta in p ro p e rty insurance fro m anyone yo u w a n t th a t is acceptable to M ortgage Savings and Loan Assoc.. I f y o u get
th e insurance fro m Mortgage Savings and Loan Assoc, y o u w ill pay $

j

Security: Y o u are giving a se cu rity interest in:
the goods o r p ro p e rty being purchased.

□ _____________________________
L ate Charge: I f a paym en t

is

_

late, y o u w ill be charged $ _

k V a

/—.5 _

%o f th e paym en t.

P re pa ym e nt: If yo u pay o f f e arly, yo u m a y have to pay a pen alty.
Assum ption: S om eone b u yin g y o u r house m ay, subject to c o n d itio n s , be a llo w e d to assume th e re m a in de r o f th e m ortgage o n
the o rig in al term s.
See y o u r c o n tra c t docu m e nts f o r any a d d itio n a l in fo rm a tio n a b o u t n o n p a ym e n t, d e fa u lt, any re q u ire d re p aym e n t in f u ll b efo re
the scheduled date, and pre pa ym e nt refunds and penalties.
e means an estim ate

50

Appendix H-14

Regulation Z
H - 1 4 — V a r i a b l e - R a t e M o r t g a g e S a m p le

State Savings and Loan Assoc.

Anne Jones
600 Pine Lane
Little Creek, USA
Account number: 210802-47

ANNUAL
PERCENTAGE
RATE
T h e ccmt o f y o u r cr e d it
as a ye a rly rate.

(5 .0 7

%

N u m b e r o f Pa y m e n ts

36>Q

FINANCE
CHARGE

Amount
Financed

Total of
Payments

T h e do lla r a m o u n t
t h e cr e d it wifi co st
yo u .

T h e a m o u n t o l cr ed it
p r o v id e d t o y o u o r o n
y o u r beha lf.

T h e a m o u n t y o u will
have pa id a f t e r y ou

*1 5 7 ,1 5 5 -2 0

$ 4 4 ,0 0 7 -'

S2 X > | , I 5 7 . 2 0

have m a d e all p a y m e n t s
as sc h e d u le d

W hen P a y m e n t ! A r e Due

A m o u n t o f P a y m e n ts

Month l«j tjeq'mrtirui

* 5 5 * .7 7

V ariab le Rata
The annual percentage rate m ay increase d u rin g th e te rm o f th is tra nsa ctio n if the p rim e rate o f S tate Savings and Loan Assoc,
increases. T he rate may n o t increase more o fte n tha n once a year, and m ay n o t increase b y m o re tha n 1% a n n u a lly. T h e in terest
rate w ill n o t increase above

I

creases b y ____ _____ % in _

. A n y increase w ill take the fo r m o f higher p a ym en t a m ounts. I f th e interest rate in ­

one. y a r

. y o u r regular p a ym e n t w o u ld increase t o $

5^51

Security: Y ou are g iving a s e cu rity in te re st in th e p ro p e rty being purchased.
Late Charge: If a p a ym e n t is late, yo u w ill be charged 5% o f the p aym ent.
Prepaym ent: I f yo u pay o f f e arly, yo u

^

may

□

w ill n o t

have to pay a pen alty.

Assum ption: Som eone b u yin g y o u r house m a y, subject to co n d itio n s , be a llo w ed to assume th e re m a in de r o f th e m ortgage o n
the o rig in a l term s.
See y o u r co n tra ct docu m e nts fo r any a d d itio n a l in fo rm a tio n a bo ut n o n p a ym e n t, d e fa u lt, any required re paym ent in f u ll b efo re
th e scheduled date, and p re pa ym e nt refunds and penalties.
e means an estim ate

51

Regulation Z

Appendix H - l5

H -l5—Graduated-Payment Mortgage Sample

Convenient Swings and Loan

A cco u nt [lunber: 4 8 6 2 - 8 8

Michael Jones

500 Walnut Court, Little Creek USA
ANNUAL
PERCENTAGE
RATE
T h e c o st o f y o u r cr e d it
u a ye ar ly rate.

IS . 3 7

%

FINANCE
CHARGE

Amount
Financed

Total of
Payments

T he d o lla r a m o u n t
t h e cr e d it will cost
yo u .

Th e a m o u n t o f cr ed it
p r o v id e d t o y o u o r o n
y o u r behal f.

T he a m o u n t y o u will
ha ve p a id a f t e r y o u
have m a d e all p a y m e n t s
as sc h e d u le d .

$1 7 7 ^ * 7 0 .4 4

* 4 3 ,7 7 7

sZ Z \ , S H M

Y o u r p a ym e n t schedule w ill be.
N um ber of Paym ents

A m o u n t of P a y m e n ts

W he n P a y m e n ts A r e Due

12*
>479. fe7
* 515. II
* S53. 13
* ^ 3 3 .3 1
1 4/ V-»J/c 4*.v
^ 7 -7 . 37

IZ
IX

J

t i­
ll.
300

w J

# ■ H O

MertHlUf
"
"
*'

1

»

» U M 4

“"
"
"
M
11

C

f e /l/8 1

b lllS l

fc/l/fr3
t/l/M
b ( i( K S
6>l l/S’fc

S a c u rity : Y o u are giving a se cu rity interest in the p ro p e rty being purchased.
Lata C h a rg e : H a p a ym en t is late, yo u w ill be charged 5% o f th e p aym en t.
P repaym ent: I f yo u pay o f f e arly, yo u
^

may

□

w ill n o t

have to pay a pen alty.

^

may

□

w ill n o t

be e n title d to a re fun d o f part o f the fin an ce charge.

A s s u m p tio n : Som eone b uyin g y o u r h om e ca nn ot assume th e rem ainder o f the m ortgage o n th e o rig in a l term s.
See y o u r c o n tra c t d ocum ents fo r any a d d itio n a l in fo rm a tio n a bo ut n on p a ym e n t, d e fa u lt, any re q uired re p aym e n t in f u l l b e fo re
the scheduled date, and p re pa ym e nt refunds and penalties.
e means an e stim ate

Regulation Z

APPENDIX I—Federal Enforcement
Agencies
The following list indicates which federal
agency enforces Regulation Z for particular
classes of businesses. Any questions concern­
ing compliance by a particular business
should be directed to the appropriate enforce­
ment agency.
National Banks
Office of Customer and Community Programs
Comptroller of the Currency
Washington, D.C. 20219
State Member Banks
Federal Reserve Bank serving the District in
which the state member bank is located.
Nonmember Insured Banks
Federal Deposit Insurance Corporation re­
gional director for the region in which the
nonmember insured bank is located.
Savings Institutions Insured by the FSLIC and
Members o f the FHLB System (except fo r sav­
ings banks insured by FDIC)
The Federal Home Loan Bank Board supervi­
sory agent in the district in which the institu­
tion is located.
Federal Credit Unions
Regional office of the National Credit Union
Administration serving the area in which the
federal credit union is located.
Creditors Subject to Civil Aeronautics Board
Director, Bureau of Consumer Protection
Civil Aeronautics Board
1825 Connecticut Avenue, N.W.
Washington, D.C. 20428
Creditors Subject to Packers and Stockyards
Act
Nearest Packers and Stockyards Administra­
tion area supervisor.
Federal Land Banks, Federal Land Bank As­
sociations, Federal Intermediate Credit Banks
and Production Credit Associations
Farm Credit Administration
490 L’Enfant Plaza, S.W.
Washington, D.C. 20578

Appendix J
Retail, Department Stores, Consumer Finance
Companies, A ll Other Creditors, and A ll Non­
bank Credit Card Issuers (Creditors operating
on a local or regional basis should use the ad­
dress o f the FTC Regional Office in which they
operate.)
Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580

APPENDIX J—Annual Percentage Rate
Computations for Closed-End Credit
Transactions
(a) Introduction. (1) Section 226.22(a) of
Regulation Z provides that the annual per­
centage rate for other than open-end credit
transactions shall be determined in accord­
ance with either the actuarial method or the
United States Rule method. This appendix
contains an explanation of the actuarial
method as well as equations, instructions
and examples of how this method applies to
single-advance
and
multiple-advance
transactions.
(2) Under the actuarial method, at the end
of each unit period (or fractional unit peri­
od) the unpaid balance of the amount fi­
nanced is increased by the finance charge
earned during that period and is decreased
by the total payment (if any) made at the
end of that period. The determination of
unit periods and fractional unit periods
shall be consistent with the definitions and
rules in paragraphs (b )(3 ), (4) and (5) of
this section and the general equation in par­
agraph (b )( 8 ) of this section.
(3) In contrast, under the United States
Rule method, at the end of each payment
period, the unpaid balance of the amount
financed is increased by the finance charge
earned during that payment period and is
decreased by the payment made at the end
of that payment period. If the payment is
less than the finance charge earned, the ad53

Appendix J
justment of the unpaid balance of the
amount financed is postponed until the end
of the next payment period. If at that time
the sum of the two payments is still less
than the total earned finance charge for the
two payment periods, the adjustment of the
unpaid balance of the amount financed is
postponed still another payment period,
and so forth.
(b) Instructions and equations fo r the actuari­
al method. (1) General rule. The annual
percentage rate shall be the nominal annual
percentage rate determined by multiplying
the unit-period rate by the number of unit
periods in a year.
(2) Term o f the transaction. The term of
the transaction begins on the date of its
consummation, except that if the finance
charge or any portion of it is earned begin­
ning on a later date, the term begins on the
later date. The term ends on the date the
last payment is due, except that if an ad­
vance is scheduled after that date, the term
ends on the later date. For computation
purposes, the length of the term shall be
equal to the time interval between any point
in time on the beginning date to the same
point in time on the ending date.
(3) Definitions o f time intervals, (i) A pe­
riod is the interval of time between ad­
vances or between payments and includes
the interval of time between the date the
finance charge begins to be earned and
the date of the first advance thereafter or
the date of the first payment thereafter,
as applicable.
(ii) A common period is any period that
occurs more than once in a transaction.
(iii) A standard interval of time is a day,
week, semimonth, month, or a multiple
of a week or a month up to, but not ex­
ceeding, one year.
(iv) All months shall be considered
equal. Full months shall be measured
from any point in time on a given date of
a given month to the same point in time
on the same date of another month. If a
series of payments (or advances) is
scheduled for the last day of each month,

Regulation Z
months shall be measured from the last
day of the given month to the last day of
another month. If payments (or ad­
vances) are scheduled for the 29th or
30th of each month, the last day of Feb­
ruary shall be used when applicable.
(4) Unit period, (i) In all transactions
other than a single-advance, single-pay­
ment transaction, the unit period shall be
that common period, not to exceed one
year, that occurs most frequently in the
transaction, except that—
(A ) If two or more common periods
occur with equal frequency, the small­
er of such common periods shall be the
unit period; or
(B) If there is no common period in
the transaction, the unit period shall be
that period which is the average of all
periods rounded to the nearest whole
standard interval of time. If the aver­
age is equally near two standard inter­
vals of time, the lower shall be the unit
period.
(ii) In a single-advance, single-payment
transaction, the unit period shall be the
term of the transaction, but shall not ex­
ceed one year.
(5) Number o f unit periods between two
given dates, (i) The number of days be­
tween two dates shall be the number of
24-hour intervals between any point in
time on the first date to the same point in
time on the second date.
(ii) If the unit period is a month, the
number of full unit periods between two
dates shall be the number of months mea­
sured back from the later date. The re­
maining fraction of a unit period shall be
the number of days measured forward
from the earlier date to the beginning of
the first full unit period, divided by 30. If
the unit period is a month, there are 1 2
unit periods per year.
(iii) If the unit period is a semimonth or
a multiple of a month not exceeding 1 1
months, the number of days between two
dates shall be 30 times the number of full
months measured back from the later
date, plus the number of remaining days.
The number of full unit periods and the
remaining fraction of a unit period shall

Regulation Z
be determined by dividing such number
of days by 15 in the case of a semimonth­
ly unit period or by the appropriate mul­
tiple of 30 in the case of a multimonthly
unit period. If the unit period is a semi­
month, the number of unit periods per
year shall be 24. If the number of unit
periods is a multiple of a month, the
number of unit periods per year shall be
1 2 divided by the number of months per
unit period.
(iv) If the unit period is a day, a week,
or a multiple of a week, the number of
full unit periods and the remaining frac­
tions of a unit period shall be determined
by dividing the number of days between
the two given dates by the number of
days per unit period. If the unit period is
a day, the number of unit periods per
year shall be 365. If the unit period is a
week or a multiple of a week, the number
of unit periods per year shall be 52 divid­
ed by the number of weeks per unit
period.
(v) If the unit period is a year, the num­
ber of full unit periods between two dates
shall be the number of full years (each
equal to 1 2 months) measured back from
the later date. The remaining fraction of
a unit period shall be—
(A ) The remaining number of months
divided by 1 2 if the remaining interval
is equal to a whole number of months,
or
(B) The remaining number of days
divided by 365 if the remaining inter­
val is not equal to a whole number of
months.
(vi) In a single-advance, single-payment
transaction in which the term is less than
a year and is equal to a whole number of
months, the number of unit periods in
the term shall be one, and the number of
unit periods per year shall be 1 2 divided
by the number of months in the term or
365 divided by the number of days in the
term.
(vii) In a single-advance, single-pay­
ment transaction in which the term is less
than a year and is not equal to a whole

Appendix J
number of months, the number of unit
periods in the term shall be one, and the
number of unit periods per year shall be
365 divided by the number of days in the
term.

( 6 ) Percentage rate fo r a fraction o f a unit
period. The percentage rate of finance
charge for a fraction (less than one) of a
unit period shall be equal to such fraction
multiplied by the percentage rate of finance
charge per unit period.

(7) Symbols. The symbols used to express
the terms of a transaction in the equation
set forth in paragraph ( b ) ( 8 ) of this sec­
tion are defined as follows:
Ak = The amount of the kth advance.
qk = The number of full unit periods
from the beginning of the term of
the transaction to the kth advance.
ek = The fraction of a unit period in the
time interval from the beginning of
the term of the transaction to the
kth advance.
m = The number of advances.
Pj = The amount of the jth payment.
tj = The number of full unit periods
from the beginning of the term of
the transaction to the jth payment.
fj = The fraction of a unit period in the
time interval from the beginning of
the term of the transaction to the
jth payment.
n = The number of payments.
i = The percentage rate of finance
charge per unit period, expressed
as a decimal equivalent.
Symbols used in the examples shown in this
appendix are defined as follows:
55

Appendix J

6

Regulation Z

-^= The present value of 1 per unit period
for x unit periods, first payment due
immediately.

1

+

( 1

+ i) +

( 1

+ i)

2

+

Step 2:
Let I 2 = I x .1 =
12.60%
Evaluate expression for A,
letting i = I 2 /(100w ) = .010500000
Result
(referred to as A ") =
1003.235366

1
( 1

+ i) x

w = The number of unit periods per year.
I = wi X 100 = The nominal annual
percentage rate.

( 8 ) General equation. The following equa­
tion sets forth the relationship among the
terms of a transaction:
Ai
+
( l + eii) ( l+ i) « i

( 1

A2
+
+ e 2 i) ( l + i ) ‘l 2

A„
( 1 + emi) ( l + i ) qm
Pi
“ 7777
( l + f , i ) ( l + i ) ‘l

+ ( l + f iP) ( l + i
2

2

) ‘2

Pn
( l + f ni) ( l+ i)* .

(9) Solution o f general equation by itera­
tion process, (i) The general equation in
paragraph (b ) ( 8 ) of this section, when
applied to a simple transaction in which a
loan of $1000 is repaid by 36 monthly
payments of $33.61 each, takes the spe­
cial form:
33.61 a
A =

36)

(1+i)
Step 1:
Let I] = estimated annual
percentage rate =
Evaluate expression for A,
letting i = ^/(lO O w ) =
Result (referredtoasA ') =

12.50%
.010416667
1004.674391

Step 3:
Interpolate for I (annual percentage
rate):
I = I, + .1 [ (A ~ A ) 1

‘

.1

L(A"-A')J

= 12.50 +

r (looo.oooooo - 1004.674391)
(1003.235366 - 1004.674391)

]

= 12.82483042%
Step 4:
First iteration, let Ij
= 12.82483042% and
repeat Steps 1, 2, and 3
obtaining a new I =
12.82557859%
Second iteration, let It
= 12.82557859% and
repeat Steps 1, 2, and 3
obtaining a new I =
12.82557529%
In this case, no further iterations are re­
quired to obtain the annual percentage
rate correct to two decimal places,
12.83%.

(ii) When the iteration approach is
used, it is expected that calculators or
computers will be programmed to carry
all available decimals throughout the cal­
culation and that enough iterations will
be performed to make virtually certain
that the annual percentage rate obtained,
when rounded to two decimals, is cor­
rect. Annual percentage rates in the ex­
amples below were obtained by using a
1 0 -digit
programmable calculator and
the iteration procedure described above.

Regulation Z

Appendix J

(c) Examples fo r the actuarial method. (1)
Single-advance transaction, with or without
an odd first period, and otherwise regular.
The general equation in paragraph (b )( 8 )
of this section can be put in the following
special form for this type of transaction:

From 2-23-78 through 3-1-78 =
(t = 0 ; f = 6/15)
Annual percentage rate
(I) = wi = .1034 = 10.34%

6

days.

Example (iv): Quarterly payments (long
first period)
A =

( l + f , ) ( l + i ) ‘ ( P a 5l)

Example (i): Monthly payments (regular
first period)
Amount advanced (A ) - $5000. Payment
(P) = $230.
Number of payments (n) - 24.
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
Advance, 1-10-78. First payment, 2-10-78.
From 1-10-78 through 2-10-78 = 1 unit pe­
riod. (t = 1 ; f = 0 )
Annual percentage rate
(I) = wi = .0969 = 9.69%
Example (ii): Monthly payments (long first
period)
Amount advanced (A ) = $6000. Payment
(P) = $200.
Number of payments (n) = 36.
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
Advance, 2-10-78. First payment, 4-1-78.
From 3-1-78 through 4-1-78 = 1 unit peri­
od. (t = 1 )
From 2-10-78 through 3-1-78 = 19 days.
(f = 19/30)
Annual percentage rate
(I) = wi = .1182 = 11.82%
Example (iii): Semimonthly
(short first period)

Amount advanced (A) = $10,000. Pay­
ment (P) = $385.
Number of payments (n) = 40.
Unit period = 3 months. Unit periods per
year (w) = 4.
Advance, 5-23-78. First payment, 10-1-78.
From 7-1-78 through 10-1-78 = 1 unit pe­
riod. (t = 1 )
From
6-1-78
through
7-1-78 = 1
month = 30 days. From 5-23-78 through
6-1-78 = 9 days, (f = 39/90)
Annual percentage rate
(I) = wi = .0897 = 8.97%

Example (v): Weekly payments (long first
period)
Amount advanced (A) = $500. Payment
(P) = $17.60.
Number of payments (n) = 30.
Unit period = 1 week. Unit periods per
year (w) = 52.
Advance, 3-20-78. First payment, 4-21-78.
From 3-24-78 through 4-21-78 = 4 unit pe­
riods. (t = 4)
From 3-20-78 through 3-24-78 = 4 days.
(f = 4/7)
Annual percentage rate
(I) = wi = .1496 = 14.96%

payments

Amount advanced (A ) = $5000. Payment
(P ) = $219.17.
Number of payments (n) = 24.
Unit period = J month. Unit periods per
year (w) = 24.
Advance, 2-23-78. First payment, 3-1-78.
Payments made on 1st and 16th of each
month.

(2) Single-advance transaction, with an
odd first payment, with or without an odd
first period, and otherwise regular. The gen­
eral equation in paragraph (b ) ( 8 ) of this
section can be put in the following special
form for this type of transaction:

A=

1

rP

(l+fi)(l+i)‘ [

PM

1 " (l+i)J

Appendix J

Regulation Z

Example (i): Monthly payments (regu­
lar first period and irregular first
payment)

Example (i): Monthly payments (regu­
lar first period and irregular final
payment)

Amount advanced (A ) = $5000. First
payment (P t) = $250.
Regular payment (P ) = $230. Number
of payments (n) = 24.
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
Advance, 1-10-78. First payment, 2-10­
78.
From 1-10-78 through 2-10-78 = 1 unit
period, (t = 1 ; f = 0 )
A nnual percentage rate
(I) = wi = .1008 = 10.08%

Amount advanced (A ) = $5000. Regu­
lar payment (P ) - $230.
Final payment (Pn) = $280. Number of
payments (n) = 24.
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
Advance, 1-10-78. First payment, 2-10­
78.
From 1-10-78 through 2-10-78 = 1 unit
period- (t = 1 ; f = 0 )
Annual percentage rate
(I) = wi = .1050 = 10.50%

Example (ii): Payments every four weeks
(long first period and irregular first
payment)

Example (ii): Payments every two weeks
(short first period and irregular final
payment)

Amount advanced (A ) = $400. First
payment (P j) - $39.50.
Regular payment (P) = $38.31. Num­
ber of payments (n) = 1 2 .
Unit period = 4 weeks. Unit periods per
year (w) = 52/4 = 1 3 .
Advance, 3-18-78. First payment, 4-20­
78.
From 3-23-78 through 4-20-78 = 1 unit
period, (t = 1 )
From 3-18-78 through 3-23-78 = 5 days.
(f = 5/28)
Annual percentage rate
(I) = wi = .2850 = 28.50%.

Amount advanced (A ) - $200. Regular
payment (P) = $9.50.
Final payment (Pn) = $30. Number of
payments (n) = 2 0 .
Unit period = 2 weeks. Unit periods per
year (w) = 52/2 = 26.
Advance, 4-3-78. First payment, 4-11-78.
From 4-3-78 through 4-11-78 = 8 days.
(t = 0; f = 8/14)
Annual percentage rate
(I) = wi = . 1 2 2 2 = 1 2 .2 2 %

(3) Single-advance transaction, with an
odd final payment, with or without an odd
first period, and otherwise regular. The gen­
eral equation in paragraph ( b ) ( 8 ) of this
section can be put in the following special
form for this type of transaction:

(4) Single-advance transaction, with an odd
first payment, odd final payment, with or
without an odd first period, and otherwise
regular. The general equation in paragraph
(b) ( 8 ) of this section can be put in the fol­
lowing special form for this type of
transaction:
P a ___

"
1

A =t[ p *— +
(l+ fi)(l+ i)

1

A =(l+ fi) ( l+ i)

Pi +

■t

+

Regulation Z
Example (i): Monthly payments (regu­
lar first period, irregular first payment,
and irregular final payment)
Amount advanced (A) = $5000. First
payment (P ]) = $250.
Regular payment (P) = $230. Final
payment (Pn) = $280.
Number of payments (n) = 24. Unit pe­
riod — 1 month.
Unit periods per year (w) = 12.
Advance, 1-10-78. First payment, 2-10­
78.
From 1-10-78 through 2-10-78 = 1 unit
period, (t = 1 ; f = 0 )
Annual percentage rate
(I) = wi = .1090 = 10.90%

Example (ii): Payments every two
months (short first period, irregular first
payment, and irregular final payment)
Amount advanced (A ) = $8000. First
payment (P j) = $449.36.
Regular payment (P) = $465. Final
payment (Pn) = $200.
Number of payments (n) = 20. Unit pe­
riod = 2 months.
Unit periods per year (w) = 12/2 = 6 .
Advance, 1-10-78. First payment, 3-1-78.
From 2-1-78 through 3-1-78 = 1 month.
From 1-10-78 through 2-1-78 = 22
days, (t = 0; f = 52/60)
Annual percentage rate
(I) = wi = .0730 = 7.30%

(5) Single-advance, single-payment trans­
action. The general equation in paragraph
(b) ( 8 ) of this section can be put in the spe­
cial forms below for single advance, single
payment transactions. Forms 1 through 3
are for the direct determination of the an­
nual percentage rate under special condi­
tions. Form 4 requires the use of the itera­
tion procedure of paragraph (b) (9) of this
section and can be used for all single-ad­
vance, single-payment transactions regard­
less of term.

Appendix J
Form 1— Term less than one year:
I = lOOw

Form 2— Term more than one year but less
than two years:

1 = y [ J (1 + o 2 +

4,( l ‘ - 1) ] ' /2- (1 + f))
Form 3— Term equal to exactly a year or
exact multiple o f a year:
, =

. 0 0

[ ( f ) - - ,]

Form 4— Special form fo r iteration proce­
dure (no restriction on term):

A = ____ ?____
( 1

+ fi)(l + i ) ‘

Example (i): Single-advance, single-pay­
ment (term of less than one year, mea­
sured in days)
Amount advanced (A ) = $1000. Pay­
ment (P ) = $1080.
Unit period = 255 days. Unit periods per
year (w)
365/255.
Advance, 1-3-78. Payment, 9-15-78.
From 1-3-78 through 9-15-78 = 255
days, (t = 1 ; f = 0 )
Annual percentage rate
(I) = wi = .1145 = 11.45%. (Use
form 1 or 4.)
Example (ii): Single-advance, single-pay­
ment (term of less than one year, mea­
sured in exact calendar months)
Amount advanced (A ) - $1000. Pay­
ment (P) = $1044.
59

Appendix J

Regulation Z

Unit period = 6 months. Unit periods
per year (w) = 2 .
Advance, 7-15-78. Payment, 1-15-79.
From 7-15-78 through 1-15-79 = 6 mos.
(t= l;f= 0 )
Annual percentage rate
(I) = wi = .0880 = 8.80%. (Use
form 1 or 4.)

Example (iii): Single-advance, single-pay­
ment (term of more than one year but
less than two years, fraction measured in
exact months)
Amount advanced (A ) = $1000. Pay­
ment (P) = $1135.19.
Unit period
1 year. Unit periods per
year (w) = 1 .
Advance, 7-17-78. Payment, 1-17-80.
From 1-17-79 through 1-17-80 = 1 unit
period, (t = 1 )
From 7-17-78 through 1-17-79 = 6 mos.
( f = 6/12)
Annual percentage rate
(I) = wi = .0876 = 8.76%. (Use
form 2 or 4.)

It is to be repaid by 24 payments of
$100 each. Payments are due every
four weeks beginning 2-20-78. Howev­
er, in those months in which two pay­
ments would be due, only the first of
the two payments is made and the fol­
lowing payment is delayed by two
weeks to place it in the next month.
Unit period = 4 weeks. Unit periods per
year (w) = 52/4 = 1 3 .
First series of payments begins 26 days
after 1-25-78. (t, = 0; f, = 26/28)
Second series of payments begins nine
unit periods plus two weeks after start
of first series. (t 2 = 1 0 ; f2 = 12/28)
Third series of payments begins six unit
periods plus two weeks after start of
second series. (t 3 = 16; f3 = 26/28)
Last series of payments begins six unit
periods plus two weeks after start of
third series. (t 4 = 23; f4 = 12/28)
The general equation in paragraph
(b) ( 8 ) of this section can be written in
the special form:
100 £
2135 = ------------ ^ ---- +
( l + (26/28)i)

Example (iv): Single-advance, single-pay­
ment (term of exactly two years)
Amount advanced (A ) = $1000. Pay­
ment (P) = $1240.
Unit period = 1 year. Unit periods per
year (w) = 1 .
Advance, 1-3-78. Payment, 1-3-80.
From 1-3-78 through 1-3-79 = 1 unit pe­
riod. (t = 2 ; f = 0 )
Annual percentage rate
(I) = wi = .1136 = 11.36%. (Use
form 3 or 4.)

( 1

100 5
ft
+ (12/28)i) ( 1 + i )

( 1

+ ( 2 6 /2 8 ) 0 ( 1 + 0 16 +

10

.
'r

100 5

____________ 51

( l + ( 12/28)i) ( 1 + i )

23

Annual percentage rate
(I) = wi = . 1 2 0 0 = 1 2 .0 0 %

( 6 ) Complex single-advance transaction.

loan

Example (ii): Skipped-payment loan plus
single payments

A loan of $2135 is advanced on 1-25-78.

A loan of $7350 on 3-3-78 is to be repaid
by three monthly payments of $ 1 0 0 0

Example (i): Skipped-payment
(payments every four weeks)

Regulation Z

Appendix J

each beginning 9-15-78, plus a single
payment of $2000 on 3-15-79, plus
three more monthly payments of $750
each beginning 9-15-79, plus a final
payment of $ 1 0 0 0 on 2-1-80.
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
First series of payments begins six unit
periods plus 12 days after 3-3-78.
(t, = 6 ; fj = 12/30)
Second series of payments (single pay­
ment) occurs 1 2 unit periods plus 1 2
days after 3-3-78. (t 2 = 12; f2 = 12/
30)
Third series of payments begins 18 unit
periods plus 12 days after 3-3-78.
(t 3 = 18; f3 = 12/30)
Final payment occurs 22 unit periods
plus 29 days after 3-3-78. (t 4 = 22;
f4 = 29/30)
The general equation in paragraph
(b) ( 8 ) of this section can be written in
the special form:

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Monthly
payment

Year

Monthly
payment

$291.81

16

$383.67

300.18
308.78
317.61
326.65

17
18
19
20

383.13
382.54

335.92
345.42
355.15
365.12
375.33
385.76

21
22

385.42
385.03
384.62
384.17

27
28
29

381.20
380.43
379.60
378.68
377.69
376.60
375.42
374.13
372.72
371.18

30

369.50

381.90

23
24
25
26

+

Unit period = 1 month. Unit periods
per year (w) = 1 2 .
From 5-1-78 through 6-1-78 = 1 unit pe­
riod. (t = 1 )
From 4-10-78 through 5-1-78 = 21 days.
( f = 21/30)

2000
+
( l + ( 1 2 /3 0 ) i) ( l+ i) 12

The general equation in paragraph
( b ) ( 8 ) of this section can be written in
the special form:

1000 a
7350 =

Year

31

( l + (1 2 /3 0 )i)(l+ i)6

750 a..

31

(1 + (12/30) i) ( 1 + i)

+

39,688.56 =

12l
( l + (2 1 /3 0 )i)(l+ i)

1000

(1 + (2 9 /3 0 )i)(l+ i) 22
Annual percentage rate
(I) = wi = . 1 0 2 2 = 1 0 .2 2 %

[291.81 + 3 0 0 1 8 1 2 + 3 0 8 ' 7 8 2 4 +
L
(i + o
(i + o

... +

369'.50 I

(1+0
iH

Annual percentage rate
(I) = wi = .0980 = 9.80%
Example (iii): Mortgage with varying
payments
A loan of $39,688.56 (net) on 4-10-78 is
to be repaid by 360 monthly payments
beginning 6-1-78. Payments are the same
for 1 2 months at a time as follows:

(7) Multiple-advance transactions.
Example (i): Construction loan
Three advances of $20,000 each are made
on 4-10-79, 6-12-79, and 9-18-79. Re61

Appendix J

Regulation Z

payment is by 240 monthly payments
of $612.36 each beginning 12-10-79.
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
From 4-10-79through 6-12-79 =
(2 + 2 /3 0 ) unit periods.
From 4-10-79through 9-18-79 =
(5 + 8/30) unit periods.
From 4-10-79 through 12-10-79 = ( 8 )
unit periods.
The general equation in paragraph
(b) ( 8 ) of this section is changed to the
single-advance mode by treating the sec­
ond and third advances as negative
payments:
612.36a__

20,000

=

+ O8

20,000
( l + ( 2 /3 0 ) i) ( l+ i) 2
20,000
(1 + ( 8 /3 0 )i) ( l + i )

7-1-78 to 9-5-78 = (2
periods.
7-1-78 to 9-5-79 = (14
periods.
7-1-78 to 9-5-80 == (26
periods.
7-1-78 to 9-5-81 == (38
periods.
7-1-78 to 1-5-79 = ( 6
periods.
7-1-78 to 1-5-80 == (18
periods.
7-1-78 to 1-5-81 == (30
periods.
7-1-78 to 1-5-82 = (42
periods.

240 a

5

Annual percentage rate
(I) = wi = .1025 = 10.25%

+ 4/30)
+ 4/30)
+ 4/30)
+ 4/30)
+ 4/30)
+ 4/30)
+ 4/30)

1800
( l + (4/30)i)

491
(1 + i)

- 240 =

1

Example (ii): Student loan
A student loan consists of eight advances:
$1800 on 9-5-78, 9-5-79, 9-5-80, and 9­
5-81; plus $1000 on 1-5-79, 1-5-80, 1-5­
81, and 1-5-82. The borrower is to
make 50 monthly payments of $240
each beginning 7-1-78 (prior to first
advance).
Unit period = 1 month. Unit periods per
year (w) = 1 2 .
Zero point is date of first payment since it
precedes first advance.

62

+ 4/30)

Since the zero point is date of first pay­
ment, the general equation in paragraph
(b ) ( 8 ) of this section is written in the
single-advance form below by treating
the first payment as a negative advance
and the eight advances as negative
payments:

________ 2401
( 1

From
unit
From
unit
From
unit
From
unit
From
unit
From
unit
From
unit
From
unit

h r +l i )
+
( 1

2

+

+ i)

( 1

] '

38

.( 1 + i)

6

+ ■

+ i)

14

( 1

1

+ i)

26

1000
(1 + (4/30)i)

(1 + 0
1

(l+ i)

3 0

18

+ ■
■ (1

Annual percentage rate
(I) = wi = .3204 = 32.04%

fO42]
+

0

Truth in Lending Act
15 USC 1601; 82 Stat. 146; Pub. L. 90-321 (May 29, 1968); as amended October 26, 1970, October 28,
1974, February 27, 1976, March 23, 1976, and March 31,1980

Public Law 90-321 (as amended), Title I
(Chapters 1 through 4)

CHAPTER 1—GENERAL
PROVISIONS
Section
1 0 1
1 0 2

103
104
105
106
107
108
109
1 1 0
1 1 1
1 1 2

113
114
115

Short title
Findings and declaration of purpose
Definitions and rules of construction
Exempted transactions
Regulations
Determination of finance charge
Determination of annual percentage
rate
Administrative enforcement
Views of other agencies
[Repealed]
Effect on other laws
Criminal liability for willful and know­
ing violation
Effect on governmental agencies
Reports by Board and Attorney
General
[Repealed]

compare more readily the various credit terms
available to him and avoid the uninformed use
of credit, and to protect the consumer against
inaccurate and unfair credit billing and credit
card practices.
(b) The Congress also finds that there has
been a recent trend toward leasing automo­
biles 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 household
purposes so as to enable the lessee to compare
more readily the various lease terms available
to him, limit balloon payments in consumer
leasing, enable comparison of lease terms with
credit terms where appropriate, and to assure
meaningful and accurate disclosures of lease
terms in advertisements.

SECTION 103—Definitions and Rules of
Construction

SECTION 101—Short Title

(a) The definitions and rules of construction
set forth in this section are applicable for the
purposes of this title.

This title may be cited as the Truth in Lend­
ing Act.

(b) The term “Board” refers to the Board of
Governors of the Federal Reserve System.

SECTION 102—Findings and
Declaration of Purpose

(c) The term “organization” means a corpo­
ration, government or governmental subdivi­
sion or agency, trust, estate, partnership, co­
operative, or association.

(a) The Congress finds that economic stabili­
zation would be enhanced and the competi­
tion 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 cred­
it terms so that the consumer will be able to

(d) The term “person ” means a natural per­
son or an organization.
(e) The term “credit” means the right grant­
ed by a creditor to a debtor to defer payment
of debt or to incur debt and defer its payment.
(f) The term “creditor” refers only to a per­
son who both ( 1 ) regularly extends, whether
63

§1 0 3

in connection with loans, sales of property or
services, or otherwise, consumer credit which
is payable by agreement in more than four in­
stallments or for which the payment of a fi­
nance charge is or may be required; and ( 2 ) is
the person to whom the debt arising from the
consumer credit transaction is initially pay­
able on the face of the evidence of indebted­
ness or, if there is no such evidence of indebt­
edness, by agreement. Notwithstanding the
previous sentence, a person who regularly ar­
ranges for the extension of consumer credit,
which is payable in more than four install­
ments or for which the payment of a finance
charge is or may be required, from persons
who are not creditors is a creditor, and in the
case of an open end credit plan involving a
credit card, the card issuer and any person
who honors the credit card and offers a dis­
count which is a finance charge are creditors.
For the purposes of the requirements imposed
under chapter 4 and sections 127(a)(5),
127(a)(6), 127(a)(7), 127(b)(1), 127(b)
(2), 127(b)(3), 127(b)(8), and 127(b)(10)
of chapter 2 of this title, the term “creditor”
shall also include card issuers whether or not
the amount due is payable by agreement in
more than four installments or the payment of
a finance charge is or may be required, and
the Board shall, by regulation, apply these re­
quirements to such card issuers, to the extent
appropriate, even though the requirements are
by their terms applicable only to creditors of­
fering open end credit plans.
(g) The term “credit sale ” refers to any sale
in which the seller is a creditor. The term in­
cludes any contract in the form of a bailment
or lease if the bailee or lessee contracts to pay
as compensation for use a sum substantially
equivalent to or in excess of the aggregate val­
ue of the property and services involved and it
is agreed that the bailee or lessee will become,
or for no other or a nominal consideration has
the option to become, the owner of the prop­
erty 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 or extended is a natural

Regulation Z (Statutory Provisions)
person, and the money, property, or services
which are the subject of the transaction are
primarily for personal, family, or household
purposes.
(i) The term “open end credit plan” means a
plan under which the creditor reasonably con­
templates repeated transactions, which pre­
scribes the terms of such transactions, and
which provides for a finance charge which
may be computed from time to time on the
outstanding unpaid balance. A credit plan
which is an open end credit plan within the
meaning of the preceding sentence is an open
end credit plan even if credit information is
verified from time to time.
(j) The term “adequate notice”, as used in
section 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 cred­
it card, or on each periodic statement of ac­
count, issued to the cardholder, or by any oth­
er means reasonably assuring the receipt
thereof by the cardholder.
(k) The term “credit card” means any card,
plate, coupon book or other credit device ex­
isting for the purpose of obtaining money,
property, labor, or services on credit.
(/) 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
person who has agreed with the card issuer to
pay obligations arising from the issuance of a
credit card to another person.
(n) The term “card issuer” means any person
who issues a credit card, or the agent of such
person with respect to such card.

Regulation Z (Statutory Provisions)
(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 authori­
ty 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 in­
creasing the regular price to a cardholder
which is not imposed upon customers paying
by cash, check, or similar means.
(r) The term “State” refers to any State, the
Commonwealth of Puerto Rico, the District
of Columbia, and any territory or possession
of the United States.
(s) The term “agricultural purposes” in­
cludes the production, harvest, exhibition,
marketing, transportation, processing, or
manufacture of agricultural products by a nat­
ural person who cultivates, plants, propagates,
or nurtures those agricultural products, in­
cluding but not limited to the acquisition of
farmland, real property with a farm residence,
and personal property and services used pri­
marily in fanning.
(t) The term “agriculturalproducts” 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 prod­
ucts raised or produced on farms and any
processed or manufactured products thereof.
(u) The term “material disclosures” means
the disclosure, as required by this title, of the
annual percentage rate, the method of deter­
mining the finance charge and the balance
upon which a finance charge will be imposed,
the amount of the finance charge, the amount
to be financed, the total of payments, the
number and amount of payments, and the due
dates or periods of payments scheduled to re­
pay the indebtedness.

§1 0 4

(v) The term “dwelling” means a residential
structure or mobile home which contains one
to four family housing units, or individual
units of condominiums or cooperatives.
(w) The term “residential mortgage transac­
tion” means a transaction in which a mortage,
deed of trust, purchase money security inter­
est arising under an installment sales contract,
or equivalent consensual security interest is
created or retained against the consumer’s
dwelling to finance the acquisition or initial
construction of such dwelling.
(x) 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 or the provision thereof
in question.
(y) The disclosure of an amount or percent­
age which is greater than the amount or per­
centage required to be disclosed under this ti­
tle does not in itself constitute a violation of
this title.

SECTION 104—Exempted Transactions
This title does not apply to the following:
(1) Credit transactions involving exten­
sions of credit primarily for business, com­
mercial, or agricultural purposes, or to gov­
ernment or governmental agencies or
instrumentalities, or to organizations.
(2) Transactions in securities or commodi­
ties accounts by a broker-dealer registered
with the Securities and Exchange
Commission.
(3) Credit transactions, other than those
in which a security interest is or will be ac­
quired in real property, or in personal prop­
erty used or expected to be used as the prin­
cipal dwelling of the consumer, in which
the total amount financed exceeds $25,000.
(4) Transactions under public utility tar­
iffs, if the Board determines that a State
regulatory body regulates the charges for
the public utility services involved, the
charges for delayed payment, and any dis­
count allowed for early payment.
65

§105

SECTION 105—Regulations
(a) The Board shall prescribe regulations to
carry out the purposes of this title. These reg­
ulations may contain such classifications, dif­
ferentiations, or other provisions, and may
provide for such adjustments and exceptions
for any class of transactions, as in the judg­
ment of the Board are necessary or proper to
effectuate the purposes of this title, to prevent
circumvention or evasion thereof, or to facili­
tate compliance therewith.
(b) The Board shall publish model disclosure
forms and clauses for common transactions to
facilitate compliance with the disclosure re­
quirements of this title and to aid the borrow­
er or lessee in understanding the transaction
by utilizing readily understandable language
to simplify the technical nature of the disclo­
sures. In devising such forms, the Board shall
consider the use by creditors or lessors of data
processing or similar automated equipment.
Nothing in this title may be construed to re­
quire a creditor or lessor to use any such mod­
el form or clause prescribed by the Board un­
der this section. A creditor or lessor shall be
deemed to be in compliance with the disclo­
sure provisions of this title with respect to
other than numerical disclosures if the credi­
tor or lessor ( 1 ) uses any appropriate model
form or clause as published by the Board, or
( 2 ) uses any such model form or clause and
changes it by (A ) deleting any information
which is not required by this title, or (B) rear­
ranging the format, if in making such deletion
or rearranging the format, the creditor or les­
sor does not affect the substance, clarity, or
meaningful sequence of the disclosure.
(c) Model disclosure forms and clauses shall
be adopted by the Board after notice duly giv­
en in the Federal Register and an opportunity
for public comment in accordance with sec­
tion 553 of title 5, United States Code.
(d) Any regulation of the Board, or any
amendment or interpretation thereof, requir­
ing any disclosure which differs from the dis­
closures previously required by this chapter,
66

Regulation Z (Statutory Provisions)
chapter 4, or chapter 5, or by any regulation
of the Board promulgated thereunder shall
have an effective date of that October 1 which
follows by at least six months the date of
promulgation, except that the Board may at
its discretion take interim action by regula­
tion, amendment, or interpretation to length­
en the period of time permitted for creditors
or lessors to adjust their forms to accommo­
date new requirements or shorten the length
of time for creditors or lessors to make such
adjustments when it makes a specific finding
that such action is necessary to comply with
the findings of a court or to prevent unfair or
deceptive disclosure practices. Notwithstand­
ing the previous sentence, any creditor or les­
sor may comply with any such newly promul­
gated disclosure requirements prior to the
effective date of the requirements.

SECTION 106—Determination of
Finance Charge
(a) Except as otherwise provided in this sec­
tion, the amount of the finance charge in con­
nection 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 di­
rectly or indirectly by the creditor as an inci­
dent to the extension of credit. The finance
charge does not include charges of a type pay­
able in a comparable cash transaction. Exam­
ples of charges which are included in the fi­
nance charge include any of the following
types of charges which are applicable.
(1) Interest, time price differential, and
any amount payable under a point, dis­
count, or other system of additional
charges.
(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 guar­
antee or insurance protecting the creditor
against the obligor’s default or other credit
loss.

§107

Regulation Z (Statutory Provisions)
(b) Charges or premiums for credit life, acci­
dent, or health insurance written in connec­
tion with any consumer credit transaction
shall be included in the finance charge unless
( 1 ) the coverage of the debtor by the insur­
ance is not a factor in the approval by the
creditor of the extension of credit, and this
fact is clearly disclosed in writing to the
person applying for or obtaining the exten­
sion of credit; and
( 2 ) in order to obtain the insurance in con­
nection 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 disclo­
sure to him of the cost thereof.
(c) Charges or premiums for insurance, writ­
ten in connection with any consumer credit
transaction, against loss of or damage to prop­
erty or against liability arising out of the own­
ership or use of property, shall be included in
the finance charge unless a clear and specific
statement in writing is furnished by the credi­
tor to the person to whom the credit is extend­
ed, 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 regula­
tions of the Board in connection with any
transaction, then the creditor need not include
that item in the computation of the finance
charge with respect to that transaction:
(1) Fees and charges prescribed by law
which actually are or will be paid to public
officials for determining the existence of or
for perfecting or releasing or satisfying any
security related to the credit transaction.
(2) The premium payable for any insur­
ance in lieu of perfecting any security inter­
est otherwise required by the creditor in
connection with the transaction, if the pre­
mium does not exceed the fees and charges
described in paragraph ( 1 ) which would
otherwise be payable.
(e) The following items, when charged in
connection with any extension of credit se­

cured 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 examina­
tion, title insurance, or similar purposes.
(2) Fees for preparation of a deed, settle­
ment statement, or other documents.
(3) Escrows for future payments of taxes
and insurance.
(4) Fees for notarizing deeds and other
documents.
(5) Appraisal fees.
( 6 ) Credit reports.

SECTION 107—Determination of
Annual Percentage Rate
(a) The annual percentage rate applicable to
any extension of consumer credit shall be de­
termined, in accordance with the regulations
of the Board,
( 1 ) in the case of any extension of credit
other than under an open end credit plan,
as
(A ) that nominal annual percentage
rate which will yield a sum equal to the
amount of the finance charge when it is
applied to the unpaid balances of the
amount financed, calculated according to
the actuarial method of allocating pay­
ments made on a debt between the
amount financed and the amount of the
finance charge, pursuant to which a pay­
ment is applied first to the accumulated
finance charge and the balance is applied
to the unpaid amount financed; or
(B) the rate determined by any method
prescribed by the Board as a method
which materially simplifies computation
while retaining reasonable accuracy as
compared with the rate determined un­
der subparagraph (A ).
( 2 ) in the case of any extension of credit
under an open end credit plan, as the quo­
tient (expressed as a percentage) of the to­
tal 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.
67

§ 107
(b) Where a creditor imposes the same fi­
nance 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 mean­
ingful, or would be materially misleading, the
annual percentage rate shall be computed on
such other basis as the Board may by regula­
tion require.
(c) The disclosure of an annual percentage
rate is accurate for the purpose of this title if
the rate disclosed is within a tolerance not
greater than one-eighth of 1 per centum more
or less than the actual rate or rounded to the
nearest one-fourth of 1 per centum. The
Board may allow a greater tolerance to simpli­
fy compliance where irregular payments are
involved.
(d) The Board may authorize the use of rate
tables or charts which may provide for the
disclosure of annual percentage rates which
vary from the rate determined in accordance
with subsection (a )(1 )(A ) by not more than
such tolerances as the Board may allow. The
Board may not allow a tolerance greater than
8 per centum of that rate except to simplify
compliance where irregular payments are
involved.
(e) In the case of creditors determining the
annual percentage rate in a manner other than
as described in subsection (d), the Board may
authorize other reasonable tolerances.

SECTION 108—Administrative
Enforcement
(a) Compliance with the requirements im­
posed under this title shall be enforced under
(1) section 8 of the Federal Deposit Insur­
ance Act, in the case of
(A ) national banks, by the Comptroller
of the Currency.
(B) member banks of the Federal Re­
serve System (other than national
banks), by the Board.
(C) banks insured by the Federal De­
posit Insurance Corporation (other than
68

Regulation Z (Statutory Provisions)
members of the Federal Reserve Sys­
tem), by the Board of Directors of the
Federal Deposit Insurance Corporation.
(2) section 5(d) of the Home Owners’
Loan Act of 1933, section 407 of the Na­
tional Housing Act, and sections 6 (i) and
17 of the Federal Home Loan Bank Act, by
the Federal Home Loan Bank Board (act­
ing directly or through the Federal Savings
and Loan Insurance Corporation), in the
case of any institution subject to any of
those provisions.
(3) the Federal Credit Union Act, by the
Administrator of the National Credit Un­
ion Administration 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
A ct), by the Secretary of Agriculture with
respect to any activities subject to that Act.
( 6 ) the Farm Credit Act of 1971, by the
Farm Credit Administration with respect to
any Federal land bank, Federal land bank
association, Federal intermediate credit
bank, or production credit association.
(b) For the purpose of the exercise by any
agency referred to in subsection (a) of its
powers under any Act referred to in that sub­
section, a violation of any requirement im­
posed under this title shall be deemed to be a
violation of a requirement imposed under that
Act. In addition to its powers under any pro­
vision of law specifically referred to in subsec­
tion (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
specifically committed to some other Govern­
ment agency under subsection (a), the Feder­
al Trade Commission shall enforce such re­
quirements. For the purpose of the exercise by
the Federal Trade Commission of its func­
tions and powers under the Federal Trade

Regulation Z (Statutory Provisions)
Commission Act, a violation of any require­
ment 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 Trade Commission under the
Federal Trade Commission Act are available
to the Commission to enforce compliance by
any person with the requirements imposed un­
der this title, irrespective of whether that per­
son is engaged in commerce or meets any oth­
er jurisdictional tests in the Federal Trade
Commission Act.
(d) The authority of the Board to issue regu­
lations under this title does not impair the au­
thority of any other agency designated in this
section to make rules respecting its own pro­
cedures in enforcing compliance with require­
ments imposed under this title.
(e) (1) In carrying out its enforcement activi­
ties under this section, each agency referred
to in subsection (a) or (c), in cases where
an annual percentage rate or finance charge
was inaccurately disclosed, shall notify the
creditor of such disclosure error and is au­
thorized in accordance with the provisions
of this subsection to require the creditor to
make an adjustment to the account of the
person to whom credit was extended, to as­
sure that such person will not be required
to pay a finance charge in excess of the fi­
nance charge actually disclosed or the dol­
lar equivalent of the annual percentage rate
actually disclosed, whichever is lower. For
the purposes of this subsection, except
where such disclosure error resulted from a
willful violation which was intended to
mislead the person to whom credit was ex­
tended, in determining whether a disclosure
error has occurred and in calculating any
adjustment, (A ) each agency shall apply
(i) with respect to the annual percentage
rate, a tolerance of one-quarter of 1 percent
more or less than the actual rate, deter­
mined without regard to section 107(c) of
this title, and (ii) with respect to the fi­
nance charge, a corresponding numerical
tolerance as generated by the tolerance pro­
vided under this subsection for the annual
percentage rate; except that (B) with re­
spect to transactions consummated after

§ 108
two years following the effective date of sec­
tion 608 of the Truth in Lending Simplifica­
tion and Reform Act, each agency shall
apply (i) for transactions that have a sched­
uled amortization of ten years or less, with
respect to the annual percentage rate, a tol­
erance not to exceed one-quarter of 1 per­
cent more or less than the actual rate, deter­
mined without regard to section 107(c) of
this title, but in no event a tolerance of less
than the tolerances allowed under section
107(c), (ii) for transactions that have a
scheduled amortization of more than ten
years, with respect to the annual percentage
rate, only such tolerances as are allowed un­
der section 107(c) of this title, and (iii) for
all transactions, with respect to the finance
charge, a corresponding numerical toler­
ance as generated by the tolerances provid­
ed under this subsection for the annual per­
centage rate.
(2) Each agency shall require such an ad­
justment when it determines that such dis­
closure error resulted from (A ) a clear and
consistent pattern or practice of violations,
(B) gross negligence, or (C) a willful viola­
tion which was intended to mislead the per­
son to whom the credit was extended. Not­
withstanding the preceding sentence, except
where such disclosure error resulted from a
willful violation which was intended to mis­
lead the person to whom credit was extend­
ed, an agency need not require such an
adjustment if it determines that such
disclosure error—
(A ) resulted from an error involving the
disclosure of a fee or charge that would
otherwise be excludable in computing the
finance charge, including but not limited
to violations involving the disclosures de­
scribed in sections 106(b), (c) and (d)
of this title, in which event the agency
may require such remedial action as it
determines to be equitable, except that
for transactions consummated after two
years after the effective date of section
608 of the Truth in Lending Simplifica­
tion and Reform Act, such an adjustment
shall be ordered for violations of section
106(b);
(B) involved a disclosed amount which
was 1 0 per centum or less of the amount
69

§108
that should have been disclosed and (i)
in cases where the error involved a dis­
closed finance charge, the annual per­
centage rate was disclosed correctly, and
(ii) in cases where the error involved a
disclosed annual percentage rate, the fi­
nance charge was disclosed correctly; in
which event the agency may require such
adjustment as it determines to be
equitable;
(C) involved a total failure to disclose
either the annual percentage rate or the
finance charge, in which event the agency
may require such adjustment as it deter­
mines to be equitable; or
(D ) resulted from any other unique cir­
cumstance involving clearly technical
and nonsubstantive disclosure violations
that do not adversely affect information
provided to the consumer and that have
not misled or otherwise deceived the
consumer.
In the case of other such disclosure errors,
each agency may require such an
adjustment.
(3) Notwithstanding paragraph (2), no
adjustment shall be ordered (A ) if it would
have a significantly adverse impact upon
the safety or soundness of the creditor, but
in any such case, the agency may require a
partial adjustment in an amount which does
not have such an impact except that with
respect to any transaction consummated af­
ter the effective date of section 608 of the
Truth in Lending Simplification and Re­
form Act, the agency shall require the full
adjustment, but permit the creditor to make
the required adjustment in partial payments
over an extended period of time which the
agency considers to be reasonable, (B) if
the amount of the adjustment would be less
than $ 1 , except that if more than one year
has elapsed since the date of the violation,
the agency may require that such amount
be paid into the Treasury of the United
States, or (C ) except where such disclosure
error resulted from a willful violation which
was intended to mislead the person to
whom credit was extended, in the case of an
open-end credit plan, more than two years
after the violation, or in the case of any oth­
er extension of credit, as follows:

Regulation Z (Statutory Provisions)
(i) with respect to creditors that are
subject to examination by the agencies
referred to in paragraphs ( 1 ) through
(3) of section 108(a) of this title,
except in connection with violations
arising from practices identified in the
current examination and only in con­
nection with transactions that are con­
summated after the date of the imme­
diately preceding examination, except
that where practices giving rise to vio­
lations identified in earlier examina­
tions have not been corrected, adjust­
ments for those violations shall be
required in connection with transac­
tions consummated after the date of
the examination in which such prac­
tices were first identified;
(ii) with respect to creditors that are
not subject to examination by such
agencies, except in connection with
transactions that are consummated af­
ter May 10, 1978; and
(iii) in no event after the later of (I)
the expiration of the life of the credit
extension, or (II) two years after the
agreement to extend credit was
consummated.
(4) (A ) Notwithstanding any other provi­
sion of this section, an adjustment under
this subsection may be required by an
agency referred to in subsection (a) or
(c) only by an order issued in accord­
ance with cease and desist procedures
provided by the provision of law referred
to in such subsections.
(B) In the case of an agency which is
not authorized to conduct cease and de­
sist proceedings, such an order may be
issued after an agency hearing on the rec­
ord conducted at least thirty but not
more than sixty days after notice of the
alleged violation is served on the creditor.
Such a hearing shall be deemed to be a
hearing which is subject to the provisions
of section 8 (h) of the Federal Deposit
Insurance Act and shall be subject to ju ­
dicial review as provided therein.
(5) Except as otherwise specifically pro­
vided in this subsection and notwithstand­
ing any provision of law referred to in sub­
section (a) or (c), no agency referred to in

Regulation Z (Statutory Provisions)
subsection (a) or (c) may require a credi­
tor to make dollar adjustments for errors in
any requirements under this title, except
with regard to the requirements of section
165.
( 6 ) A creditor shall not be subject to an
order to make an adjustment, if within sixty
days after discovering a disclosure error,
whether pursuant to a final written exami­
nation report or through the creditor’s own
procedures, the creditor notifies the person
concerned of the error and adjusts the ac­
count so as to assure that such person will
not be required to pay a finance charge in
excess of the finance charge actually dis­
closed or the dollar equivalent of the annual
percentage rate actually disclosed, whichev­
er is lower.
(7) Notwithstanding the second sentence
of subsection (e)(1 ), subsection (e)(3 )
(C )(i), and subsection (e )(3 )(C )(ii),
each agency referred to in subsection (a) or
(c) shall require an adjustment for an an­
nual percentage rate disclosure error that
exceeds a tolerance of one quarter of one
percent less than the actual rate, deter­
mined without regard to section 107(c) of
this title, except in the case of an irregular
mortgage lending transaction, with respect
to any transaction consummated between
January 1, 1977, and the effective date of
section 608 of the Truth in Lending Simpli­
fication and Reform Act.

SECTION 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.

SECTION 110—[Repealed]
SECTION 111—Effect on Other Laws
(a)(1 ) Chapters 1, 2, and 3 do not annul,

§1 1 1

alter, or affect the laws of any State relating
to the disclosure of information in connec­
tion with credit transactions, except to the
extent that those laws are inconsistent with
the provisions of this title, and then only to
the extent of the inconsistency. Upon its
own motion or upon the request of any
creditor, State, or other interested party
which is submitted in accordance with pro­
cedures prescribed in regulations of the
Board, the Board shall determine whether
any such inconsistency exists. If the Board
determines that a State-required disclosure
is inconsistent, creditors located in that
State may not make disclosures using the
inconsistent term or form, and shall incur
no liability under the law of that State for
failure to use such term or form, notwith­
standing that such determination is subse­
quently amended, rescinded, or determined
by judicial or other authority to be invalid
for any reason.
(2) Upon its own motion or upon the re­
quest of any creditor, State, or other
interested party which is submitted in
accordance with procedures prescribed in
regulations of the Board, the Board shall
determine whether any disclosure required
under the law of any State is substantially
the same in meaning as a disclosure re­
quired under this title. If the Board deter­
mines that a State-required disclosure is
substantially the same in meaning as a dis­
closure required by this title, then creditors
located in that State may make such disclo­
sure in compliance with such State law in
lieu of the disclosure required by this title,
except that the annual percentage rate and
finance charge shall be disclosed as required
by section 1 2 2 .
(b) This title does not otherwise annul, alter
or affect in any manner the meaning, scope or
applicability of the laws of any State, includ­
ing, but not limited to, laws relating to the
types, amounts or rates of charges, or any ele­
ment or elements of charges, permissible un­
der such laws in connection with the exten­
sion 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.
71

§1 1 1

(c) In any action or proceeding in any court
involving a consumer credit sale, the disclo­
sure of the annual percentage rate as required
under this title in connection with that sale
may not be received as evidence that the sale
was a loan or any type of transaction other
than a credit sale.
(d) Except as specified in sections 125, 130,
and 166, this title and the regulations issued
thereunder do not affect the validity or en­
forceability of any contract or obligation un­
der State or Federal law.

SECTION 112—Criminal Liability for
Willful and Knowing Violation
Whoever willfully and knowingly
( 1 ) gives false or inaccurate information or
fails to provide information which he is re­
quired to disclose under the provisions of
this title or any regulation issued there­
under,
( 2 ) uses any chart or table authorized by
the Board under section 107 in such a man­
ner as to consistently understate the annual
percentage rate determined under section
107(a)(1)(A ), or
(3) otherwise fails to comply with any re­
quirement imposed under this title, shall be
fined not more than $5,000 or imprisoned
not more than one year, or both.

SECTION 113—Effect on Governmental
Agencies
(a) Any department or agency of the United
States which administers a credit program in
which it extends, insures, or guarantees con­
sumer credit and in which it provides instru­
ments to a creditor which contain any disclo­
sures required by this title shall, prior to the
issuance or continued use of such instruments,
consult with the Board to assure that such in­
struments comply with this title.
(b) No civil or criminal penalty provided un72

Regulation Z (Statutory Provisions)
der this title for any violation thereof may be
imposed upon the United States or any de­
partment or agency thereof, or upon any State
or political subdivision thereof, or any agency
of any State or political subdivision.

(c) A creditor participating in a credit pro­
gram administered, insured, or guaranteed by
any department or agency of the United States
shall not be held liable for a civil or criminal
penalty under this title in any case in which
the violation results from the use of an instru­
ment required by any such department or
agency.

(d) A creditor participating in a credit pro­
gram administered, insured, or guaranteed by
any department or agency of the United States
shall not be held liable for a civil or criminal
penalty under the laws of any State (other
than laws determined under section 1 1 1 to be
inconsistent with this title) for any technical
or procedural failure, such as a failure to use a
specific form, to make information available
at a specific place on an instrument, or to use
a specific typeface, as required by State law,
which is caused by the use of an instrument
required to be used by such department or
agency.

SECTION 114—Reports by Board and
Attorney General
Each year the Board and the Attorney Gener­
al shall, respectively, make reports to the Con­
gress concerning the administration of their
functions under this title, including such rec­
ommendations as the Board and the Attorney
General, respectively, deem necessary or ap­
propriate. In addition, each report of the
Board shall include its assessment of the ex­
tent to which compliance with the require­
ments imposed under this title is being
achieved.

SECTION 115— [Repealed]

Regulation Z (Statutory Provisions)

CHAPTER 2—CREDIT
TRANSACTIONS .
Section
1 2 1
1 2 2

123
124
125
126
127
128
129
130
131
132
133
134
135
136

General requirement of disclosure
Form of disclosure; additional
information
Exemption for State-regulated
transactions
Effect of subsequent occurrence
Right of rescission as to certain
transactions
[Repealed]
Open end consumer credit plans
Consumer credit not under open end
credit plans
[Repealed]
Civil liability
Liability of assignees
Issuance of credit cards
Liability of holder of credit card
Fraudulent use of credit card
Business credit cards
Dissemination of annual percentage
rates

SECTION 121—General Requirement of
Disclosure
(a) Subject to subsection (b), a creditor or
lessor shall disclose to the person who is obli­
gated on a consumer lease or a consumer
credit transaction the information required
under this title. In a transaction involving
more than one obligor, a creditor or lessor,
except in a transaction under section 125,
need not disclose to more than one of such
obligors if the obligor given disclosure is a pri­
mary obligor.

§123
that any portion of the information required
to be disclosed by this title may be given in the
form of estimates where the provider of such
information is not in a position to know exact
information.
(d) The Board shall determine whether toler­
ances for numerical disclosures other than the
annual percentage rate are necessary to facili­
tate compliance with this title, and if it deter­
mines that such tolerances are necessary to
facilitate compliance, it shall by regulation
permit disclosures within such tolerances. The
Board shall exercise its authority to permit
tolerances for numerical disclosures other
than the annual percentage rate so that such
tolerances are narrow enough to prevent such
tolerances from resulting in misleading disclo­
sures or disclosures that circumvent the pur­
poses of this title.

SECTION 122—Form of Disclosure;
Additional Information
(a) Information required by this title shall be
disclosed clearly and conspicuously, in ac­
cordance with regulations of the Board. The
terms ‘annual percentage rate’ and ‘finance
charge’ shall be disclosed more conspicuously
than other terms, data, or information provid­
ed in connection with a transaction, except in­
formation relating to the identity of the credi­
tor. Regulations o f the Board need not require
that disclosures pursuant to this title be made
in the order set forth in this title and, except
as otherwise provided, may permit the use of
terminology different from that employed in
this title if it conveys substantially the same
meaning.

(b) If a transaction involves one creditor as
defined in section 103(f), or one lessor as de­
fined in section 181 (3), such creditor or lessor
shall make the disclosures. If a transaction in­
volves more than one creditor or lessor, only
one creditor or lessor shall be required to
make the disclosures. The Board shall by reg­
ulation specify which creditor or lessor shall
make the disclosures.

(b) Any creditor or lessor may supply addi­
tional information or explanation with any
disclosures required under chapters 4 and 5
and, except as provided in section 128(b)(1),
under this chapter.

(c) The Board may provide by regulation

The Board shall by regulation exempt from

SECTION 123—Exemption for StateRegulated Transactions
73

§123
the requirements of this chapter any class of
credit transactions within any State if it deter­
mines that under the law of that State that
class of transactions is subject to requirements
substantially similar to those imposed under
this chapter, and that there is adequate provi­
sion for enforcement.

SECTION 124—Effect of Subsequent
Occurrence
If information disclosed in accordance with
this chapter is subsequently rendered inaccu­
rate as the result of any act, occurrence, or
agreement subsequent to the delivery of the
required disclosures, the inaccuracy resulting
therefrom does not constitute a violation of
this chapter.

SECTION 125—Right of Rescission as
to Certain Transactions
(a) Except as otherwise provided in this sec­
tion, in the case of any consumer credit trans­
action (including opening or increasing the
credit limit for an open end credit plan) in
which a security interest, including any such
interest arising by operation of law, is or will
be retained or acquired in any property which
is used as the principal dwelling of the person
to whom credit is extended, the obligor shall
have the right to rescind the transaction until
midnight of the third business day following
the consummation of the transaction or the
delivery of the information and rescission
forms required under this section together
with a statement containing the material dis­
closures required under this title, whichever is
later, by notifying the creditor, in accordance
with regulations of the Board, of his intention
to do so. The creditor shall clearly and con­
spicuously disclose, in accordance with regu­
lations of the Board, to any obligor in a trans­
action subject to this section the rights of the
obligor under this section. The creditor shall
also provide, in accordance with regulations
of the Board, appropriate forms for the obli­
gor to exercise his right to rescind any trans­
action subject to this section.
74

Regulation Z (Statutory Provisions)
(b) When an obligor exercises his right to re­
scind under subsection (a), he is not liable for
any finance or other charge, and any security
interest given by the obligor, including any
such interest arising by operation of law, be­
comes void upon such a rescission. Within 20
days after receipt of a notice of rescission, the
creditor shall return to the obligor any money
or property given as earnest money, downpay­
ment, or otherwise, and shall take any action
necessary or appropriate to reflect the termi­
nation of any security interest created under
the transaction. If the creditor has delivered
any property to the obligor, the obligor may
retain possession of it. Upon the performance
of the creditor’s obligations under this section,
the obligor shall tender the property to the
creditor, except that if return of the property
in kind would be impracticable or inequitable,
the obligor shall tender its reasonable value.
Tender shall be made at the location of the
property or at the residence of the obligor, at
the option of the obligor. If the creditor does
not take possession of the property within 2 0
days after tender by the obligor, ownership of
the property vests in the obligor without obli­
gation on his part to pay for it. The proce­
dures prescribed by this subsection shall apply
except when otherwise ordered by a court.
(c) Notwithstanding any rule of evidence,
written acknowledgment of receipt of any dis­
closures required under this title by a person
to whom information, forms, and a statement
is required to be given pursuant to this section
does no more than create a rebuttable pre­
sumption of delivery thereof.
(d) The Board may, if it finds that such ac­
tion is necessary in order to permit homeown­
ers to meet bona fide personal financial emer­
gencies, prescribe regulations authorizing the
modification or waiver of any rights created
under this section to the extent and under the
circumstances set forth in those regulations.
(e)(1 ) This section does not apply to—
(A ) a residential mortgage transaction
as defined in section 103 (w);
(B) a transaction which constitutes a re­
financing or consolidation (with no new
advances) of the principal balance then

Regulation Z (Statutory Provisions)
due and any accrued and unpaid finance
charges of an existing extension of credit
by the same creditor secured by an inter­
est in the same property;
(C) a transaction in which an agency of
a State is the creditor; or
(D ) advances under a preexisting open
end credit plan if a security interest has
already been retained or acquired and
such advances are in accordance with a
previously established credit limit for
such plan.
(2) The provisions of paragraph (1)(D )
shall cease to be effective 3 years after the
effective date of the Truth in Lending Sim­
plification and Reform Act.

(f) An obligor’s right of rescission shall ex­
pire three years after the date of consumma­
tion of the transaction or upon the sale of the
property, whichever occurs first, notwith­
standing the fact that the information and
forms required under this section or any other
disclosures required under this chapter have
not been delivered to the obligor, except that
if ( 1 ) any agency empowered to enforce the
provisions of this title institutes a proceeding
to enforce the provisions of this section within
three years after the date of consummation of
the transaction, ( 2 ) such agency finds a viola­
tion of section 125, and (3) the obligor’s right
to rescind is based in whole or in part on any
matter involved in such proceeding, then the
obligor’s right of rescission shall expire three
years after the date of consummation of the
transaction or upon the earlier sale of the
property, or upon the expiration of one year
following the conclusion of the proceeding, or
any judicial review or period for judicial re­
view thereof, whichever is later.

(g) In any action in which it is determined
that a creditor has violated this section, in ad­
dition to rescission the court may award relief
under section 130 for violations of this title
not relating to the right to rescind.

SECTION 126—[Repealed]

§127

SECTION 127—Open End Consumer
Credit Plans
(a) Before opening any account under an
open end consumer credit plan, the creditor
shall disclose to the person to whom credit is
to be extended each of the following items, to
the extent applicable:
(1) The conditions under which a finance
charge may be imposed, including the time
period (if any) within which any credit ex­
tended may be repaid without incurring a
finance charge, except that the creditor
may, at his election and without disclosure,
impose no such finance charge if payment is
received after the termination of such time
period. If no such time period is provided,
the creditor shall disclose such fact.
(2) The method of determining the bal­
ance upon which a finance charge will be
imposed.
(3) The method of determining the
amount of the finance charge, including any
minimum or fixed amount imposed as a fi­
nance charge.
(4) Where one or more periodic rates may
be used to compute the finance charge, each
such rate, the range of balances to which it
is applicable, and the corresponding nomi­
nal annual percentage rate determined by
multiplying the periodic rate by the number
of periods in a year.
(5) Identification of other charges which
may be imposed as part of the plan, and
their method of computation, in accordance
with regulations of the Board.
( 6 ) In cases where the credit is or will be
secured, a statement that a security interest
has been or will be taken in (A ) the proper­
ty purchased as part of the credit transac­
tion, or (B) property not purchased as part
of the credit transaction identified by item
or type.
(7) A statement, in a form prescribed by
regulations of the Board of the protection
provided by sections 161 and 170 to an obli­
gor and the creditor’s responsibilities under
sections 162 and 170. With respect to one
billing cycle per calendar year, at intervals
75

§127
of not less than six months or more than
eighteen months, the creditor shall transmit
such statement to each obligor to whom the
creditor is required to transmit a statement
pursuant to section 127(b) for such billing
cycle.
(b) The creditor of any account under an
open end consumer credit plan shall transmit
to the obligor, for each billing cycle at the end
of which there is an outstanding balance in
that account or with respect to which a fi­
nance charge is imposed, a statement setting
forth each of the following items to the extent
applicable:
(1) The outstanding balance in the ac­
count at the beginning of the statement
period.
(2) The amount and date of each extension
of credit during the period, and a brief iden­
tification, on or accompanying the state­
ment of each extension of credit in a form
prescribed by the Board sufficient to enable
the obligor either to identify the transaction
or to relate it to copies of sales vouchers or
similar instruments previously furnished,
except that a creditor’s failure to disclose
such information in accordance with this
paragraph shall not be deemed a failure to
comply with this chapter or this title if (A )
the creditor maintains procedures reason­
ably adapted to procure and provide such
information, and (B) the creditor responds
to and treats any inquiry for clarification or
documentation as a billing error and an er­
roneously billed amount under section 161.
In lieu of complying with the requirements
of the previous sentence, in the case of any
transaction in which the creditor and seller
are the same person, as defined by the
Board, and such person’s open end credit
plan has fewer than 15,000 accounts, the
creditor may elect to provide only the
amount and date of each extension of credit
during the period and the seller’s name and
location where the transaction took place if
(A ) a brief identification of the transaction
has been previously furnished, and (B) the
creditor responds to and treats any inquiry
for clarification or documentation as a bill­
ing error and an erroneously billed amount
under section 161.
76

Regulation Z (Statutory Provisions)
(3) The total amount credited to the ac­
count during the period.
(4) The amount of any finance charge add­
ed to the account during the period, item­
ized to show the amounts, if any, due to the
application of percentage rates and the
amount, if any, imposed as a minimum or
fixed charge.
(5) Where one or more periodic rates may
be used to compute the finance charge, each
such rate, the range of balances to which it
is applicable, and, unless the annual per­
centage rate (determined under section
107(a)(2)) is required to be disclosed pur­
suant to paragraph ( 6 ), the corresponding
nominal annual percentage rate determined
by multiplying the periodic rate by the
number of periods in a year.
( 6 ) Where the total finance charge exceeds
50 cents for a monthly or longer billing cy­
cle, or the pro rata part of 50 cents for a
billing cycle shorter than monthly, the total
finance charge expressed as an annual per­
centage rate (determined under 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 of the balance to which it is
applicable.
(7) The balance on which the finance
charge was computed and a statement of
how the balance was determined. If the bal­
ance is determined without first deducting
all credits during the period, that fact and
the amount of such payments shall also be
disclosed.
( 8 ) The outstanding balance in the ac­
count at the end of the period.
(9) The date by which or the period (if
any) within which payment must be made
to avoid additional finance charges, except
that the creditor may, at his election and
without disclosure, impose no such addi­
tional finance charge if payment is received
after such date or the termination of such
period.
(10) The address to be used by the creditor
for the purpose of receiving billing inquiries
from the obligor.

Regulation Z (Statutory Provisions)
SE C T IO N 128— C onsum er C redit N ot
U n der Open E nd C redit Plans
(a) For each consumer credit transaction
other than under an open end credit plan, the
creditor shall disclose each of the following
items, to the extent applicable:
(1) The identity of the creditor required to
make disclosure.
(2) (A ) The ‘amount financed’, using that
term, which shall be the amount of credit
of which the consumer has actual use.
This amount shall be computed as fol­
lows, but the computations need not be
disclosed and shall not be disclosed with
the disclosures conspicuously segregated
in accordance with subsection (b) ( 1 ):
(i) take the principal amount of the
loan or the cash price less downpay­
ment and trade-in;
(ii) add any charges which are not
part of the finance charge or of the
principal amount of the loan and
which are financed by the consumer,
including the cost of any items exclud­
ed from the finance charge pursuant to
section 106; and
(iii) subtract any charges which are
part of the finance charge but which
will be paid by the consumer before or
at the time of the consummation of the
transaction, or have been withheld
from the proceeds of the credit.
(B) In conjunction with the disclosure
of the amount financed, a creditor shall
provide a statement of the consumer’s
right to obtain, upon a written request, a
written itemization of the amount fi­
nanced. The statement shall include
spaces for a ‘yes’ and ‘no’ indication to be
initialed by the consumer to indicate
whether the consumer wants a written
itemization of the amount financed.
Upon receiving an affirmative indication,
the creditor shall provide, at the time
other disclosures are required to be fur­
nished, a written itemization of the
amount financed. For the purposes of
this subparagraph, ‘itemization of the
amount financed’ means a disclosure of
the following items, to the extent
applicable:

§ 128
(i) the amount that is or will be paid
directly to the consumer;
(ii) the amount that is or will be cred­
ited to the consumer’s account to dis­
charge obligations owed to the
creditor;
(iii) each amount that is or will be
paid to third persons by the creditor on
the consumer’s behalf, together with
an identification of or reference to the
third person; and
(iv) the total amount of any charges
described in the preceding subpara­
graph (A) (iii).
(3) The ‘finance charge’, not itemized, us­
ing that term.
(4) The finance charge expressed as an ‘an­
nual percentage rate’, using that term. This
shall not be required if the amount financed
does not exceed $75 and the finance charge
does not exceed $5, or if the amount fi­
nanced exceeds $75 and the finance charge
does not exceed $7.50.
(5) The sum of the amount financed and
the finance charge, which shall be termed
the ‘total of payments’.
( 6 ) The number, amount, and due dates or
period of payments scheduled to repay the
total of payments.
(7) In a sale of property or services in
which the seller is the creditor required to
disclose pursuant to section 1 2 1 (b), the ‘to­
tal sale price’, using that term, which shall
be the total of the cash price of the property
or services, additional charges, and the fi­
nance charge.
( 8 ) Descriptive explanations of the terms
‘amount financed’, ‘finance charge’, ‘annual
percentage rate’, ‘total of payments’, and
‘total sale price’ as specified by the Board.
The descriptive explanation of ‘total sale
price’ shall include reference to the amount
of the downpayment.
(9) Where the credit is secured, a state­
ment that a security interest has been taken
in (A ) the property which is purchased as
part of the credit transaction, or (B) prop­
erty not purchased as part of the credit
transaction identified by item or type.
(10) Any dollar charge or percentage
amount which may be imposed by a credi­
tor solely on account of a late payment,
77

§128
other than a deferral or extension charge.
(11) A statement indicating whether or
not the consumer is entitled to a rebate of
any finance charge upon refinancing or pre­
payment in full pursuant to acceleration or
otherwise, if the obligation involves a pre­
computed finance charge. A statement indi­
cating whether or not a penalty will be im­
posed in those same circumstances if the
obligation involves a finance charge com­
puted from time to time by application of a
rate to the unpaid principal balance.
(12) A statement that the consumer
should refer to the appropriate contract
document for any information such docu­
ment provides about nonpayment, default,
the right to accelerate the maturity of the
debt, and prepayment rebates and penalties.
(13) In any residential mortgage transac­
tion, a statement indicating whether a sub­
sequent purchaser or assignee of the con­
sumer may assume the debt obligation on
its original terms and conditions.
(b )(1 ) Except as otherwise provided in this
chapter, the disclosures required under sub­
section (a) shall be made before the credit
is extended. Except for the disclosures re­
quired by subsection (a) ( 1 ) of this section,
all disclosures required under subsection
(a) and any disclosure provided, for in sub­
section (b), (c), or (d) of section 106 shall
be conspicuously segregated from all other
terms, data, or information provided in
connection with a transaction, including
any computations or itemization.
(2) In the case of a residential mortgage
transaction, as defined in section 103(w),
which is also subject to the Real Estate Set­
tlement Procedures Act, good faith esti­
mates of the disclosures required under sub­
section (a) shall be made in accordance
with regulations of the Board under section
1 2 1 (c)
before the credit is extended, or
shall be delivered or placed in the mail not
later than three business days after the
creditor receives the consumer’s written ap­
plication, whichever is earlier. If the disclo­
sure statement furnished within three days
of the written application contains an annu­
al percentage rate which is subsequently
rendered inaccurate within the meaning of

Regulation Z (Statutory Provisions)
section 107(c), the creditor shall furnish
another statement at the time of settlement
or consummation.

(c)(1 ) If a creditor receives a purchase order
by mail or telephone without personal solic­
itation, and the cash price and the total sale
price and the terms of financing, including
the annual percentage rate, are set forth in
the creditor’s catalog or other printed mate­
rial distributed to the public, then the dis­
closures required under subsection (a) may
be made at any time not later than the date
the first payment is due.
(2) If a creditor receives a request for a
loan by mail or telephone without personal
solicitation and the terms of financing, in­
cluding the annual percentage rate for rep­
resentative amounts of credit, are set forth
in the creditor’s printed material distribut­
ed to the public, or in the contract of loan
or other printed material delivered to the
obligor, 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
pursuant 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 percent­
age 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 received payments aggregat­
ing the amount of the sales price including
any finance charges attributable 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. For 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.

Regulation Z (Statutory Provisions)

SECTION 129—[Repealed]
SECTION 130—Civil Liability
(a) Except as otherwise provided in this sec­
tion, any creditor who fails to comply with
any requirement imposed under this chapter,
including any requirement under section 125,
or chapter 4 or 5 of this title with respect to
any person is liable to such person in an
amount equal to the sum of—
( 1 ) any actual damage sustained by such
person as a result of the failure;
( 2 ) (A ) (i) in the case of an individual ac­
tion twice the amount of any finance
charge in connection with the transac­
tion, or (ii) in the case of an individual
action relating to a consumer lease under
chapter 5 of this title, 25 per centum of
the total amount of monthly payments
under the lease, except that the liability
under this subparagraph shall not be less
than $ 1 0 0 nor greater than $ 1 ,0 0 0 ; or
(B) in the case of a class action, such
amount as the court may allow, except
that as to each member of the class no
minimum recovery shall be applicable,
and the total recovery under this sub­
paragraph in any class action or series of
class actions arising out of the same fail­
ure to comply by the same creditor shall
not be more than the lesser of $500,000
or 1 per centum of the net worth of the
creditor; and
(3) in the case of any successful action to
enforce the foregoing liability or in any ac­
tion in which a person is determined to
have a right of rescission under section 125,
the costs of the action, together with a rea­
sonable attorney’s fee as determined by the
court. In determining the amount of award
in any class action, the court shall consider,
among other relevant factors, the amount
of any actual damages awarded, the fre­
quency and persistence of failures of com­
pliance by the creditor, the resources of the
creditor, the number of persons adversely
affected, and the extent to which the credi­
tor’s failure of compliance was intentional.
In connection with the disclosures referred
to in section 127, a creditor shall have a

§ 130
liability determined under paragraph ( 2 )
only for failing to comply with the require­
ments of section 125, section 127(a), or of
paragraph (4), (5), ( 6 ), (7), ( 8 ), (9), or
( 1 0 ) of section 127(b) or for failing to
comply with disclosure requirements under
State law for any term or item which the
Board has determined to be substantially
the same in meaning under section
1 1 1 ( a ) ( 2 ) as any of the terms or items re­
ferred to in section 127(a) or any of those
paragraphs of section 127(b). In connec­
tion with the disclosures referred to in sec­
tion 128, a creditor shall have a liability
determined under paragraph ( 2 ) only for
failing to comply with the requirements of
section 125 or of paragraph (2) (insofar as
it requires a disclosure of the ‘amount fi­
nanced’), (3), (4), (5), ( 6 ), or (9) of sec­
tion 128(a), or for failing to comply with
disclosure requirements under State law for
any term which the Board has determined
to be substantially the same in meaning un­
der section 1 1 1 ( a )( 2 ) as any of the terms
referred to in any of those paragraphs of
section 128(a). With respect to any failure
to make disclosures required under this
chapter or chapter 4 or 5 of this title, liabili­
ty shall be imposed only upon the creditor
required to make disclosure, except as pro­
vided in section 131.

(b) A creditor or assignee has no liability un­
der this section or section 108 or section 1 1 2
for any failure to comply with any require­
ment imposed under this chapter or chapter 5,
if within sixty days after discovering an error,
whether pursuant to a final written examina­
tion report or notice issued under section
108(e)(1) or through the creditor’s or assign­
ee’s own procedures, and prior to the institu­
tion of an action under this section or the re­
ceipt of written notice of the error from the
obligor, the creditor or assignee notifies the
person concerned of the error and makes
whatever adjustments in the appropriate ac­
count are necessary to assure that the person
will not be required to pay an amount in ex­
cess of the charge actually disclosed, or the
dollar equivalent of the annual percentage
rate actually disclosed, whichever is lower.
79

§130
(c) A creditor or assignee may not be held
liable in any action brought under this section
or section 125 for a violation of this title if the
creditor or assignee shows by a preponderance
of evidence that the violation was not inten­
tional and resulted from a bona fide error not­
withstanding the maintenance of procedures
reasonably adapted to avoid any such error.
Examples of a bona fide error include, but are
not limited to, clerical, calculation, computer
malfunction and programing, and printing er­
rors, except that an error of legal judgment
with respect to a person’s obligations under
this title is not a bona fide error.
(d) When there are multiple obligors in a
consumer credit transaction or consumer
lease, there shall be no more than one recov­
ery of damages under subsection (a) ( 2 ) for a
violation of this title.
(e) Any action under this section may be
brought in any United States district court, or
in any other court of competent jurisdiction,
within one year from the date of the occur­
rence of the violation. This subsection does
not bar a person from asserting a violation of
this title in an action to collect the debt which
was brought more than one year from the date
of the occurrence of the violation as a matter
of defense by recoupment or set-off in such
action, except as otherwise provided by State
law.

Regulation Z (Statutory Provisions)
person any information required under this
chapter or chapter 4 or 5 of this title to be
disclosed in connection with a single account
under an open end consumer credit plan, oth­
er single consumer credit sale, consumer loan,
consumer lease, or other extension of consum­
er credit, shall entitle the person to a single
recovery under this section but continued
failure to disclose after a recovery has been
granted shall give rise to rights to additional
recoveries. This subsection does not bar any
remedy permitted by section 125.
(h) A person may not take any action to off­
set any amount for which a creditor or assign­
ee is potentially liable to such person under
subsection ( a ) ( 2 ) against any amount owed
by such person, unless the amount of the cred­
itor’s or assignee’s liability under this title has
been determined by judgment of a court of
competent jurisdiction in an action of which
such person was a party. This subsection does
not bar a consumer then in default on the ob­
ligation from asserting a violation of this title
as an original action, or as a defense or coun­
terclaim to an action to collect amounts owed
by the consumer brought by a person liable
under this title.

SECTION 131—Liability of Assignees

( 0 No provision of this section, section
108(b), section 108(c), section 108(e), or
section 1 1 2 imposing any liability shall apply
to any act done or omitted in good faith in
conformity with any rule, regulation, or inter­
pretation thereof by the Board or in conformi­
ty with any interpretation or approval by an
official or employee of the Federal Reserve
System duly authorized by the Board to issue
such interpretations or approvals under such
procedures as the Board may prescribe there­
for, notwithstanding that after such act or
omission has occurred, such rule, regulation,
interpretation, or approval is amended, re­
scinded, or determined by judicial or other au­
thority to be invalid for any reason.

(a) Except as otherwise specifically provided
in this title, any civil action for a violation of
this title or proceeding under section 108
which may be brought against a creditor may
be maintained against any assignee of such
creditor only if the violation for which such
action or proceeding is brought is apparent on
the face of the disclosure statement, except
where the assignment was involuntary. For
the purpose of this section, a violation appar­
ent on the face of the disclosure statement in­
cludes, but is not limited to ( 1 ) a disclosure
which can be determined to be incomplete or
inaccurate from the face of the disclosure
statement or other documents assigned, or
( 2 ) a disclosure which does not use the terms
required to be used by this title.

(g) The multiple failure to disclose to any

(b) Except as provided in section 125(c), in

80

Regulation Z (Statutory Provisions)
any action or proceeding by or against any
subsequent assignee of the original creditor
without knowledge to the contrary by the as­
signee when he acquires the obligation, writ­
ten acknowledgement of receipt by a person to
whom a statement is required to be given pur­
suant to this title shall be conclusive proof of
the delivery thereof and, except as provided in
subsection (a), of compliance with this chap­
ter. This section does not affect the rights of
the obligor in any action against the original
creditor.

(F) the card issuer has provided a meth­
od whereby the user of such card can be
identified as the person authorized to use
it.
(2) For purposes of this section, a card is­
suer has been notified when such steps as
may be reasonably required in the ordinary
course of business to provide the card issuer
with the pertinent information have been
taken, whether or not any particular officer,
employee, or agent of the card issuer does
in fact receive such information.

(c) Any consumer who has the right to re­
scind a transaction under section 125 may re­
scind the transaction as against any assignee
of the obligation.

(b) In any action by a card issuer to enforce
liability for the use of a credit card, the bur­
den 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 condi­
tions of liability for the unauthorized use of a
credit card, as set forth in subsection (a),
have been met.

SECTION 132—Issuance of Credit
Cards
No credit card shall be issued except in re­
sponse to a request or application therefor.
This prohibition does not apply to the issu­
ance of a credit card in renewal of, or in sub­
stitution for, an accepted credit card.

SECTION 133—Liability of Holder of
Credit Card
(a)(1 ) A cardholder shall be liable for the
unauthorized use of a credit card only if—
(A ) the card is an accepted credit card;
(B) the liability is not in excess of $50;
(C) the card issuer gives adequate notice
to the cardholder of the potential
liability;
(D ) the card issuer has provided the
cardholder with a description of a means
by which the card issuer may be notified
of loss or theft of the card, which descrip­
tion may be provided on the face or re­
verse side of the statement required by
section 127(b) or on a separate notice ac­
companying such statement;
(E) the unauthorized use occurs before
the card issuer has been notified that an
unauthorized use of the credit card has
occurred or may occur as the result of
loss, theft, or otherwise; and

(c) Nothing in this section imposes liability
upon a cardholder for the unauthorized use of
a credit card in excess of his liability for such
use under other applicable law or under any
agreement with the card issuer.
(d) Except as provided in this section, a
cardholder incurs no liability from the unau­
thorized use of a credit card.

SECTION 134—Fraudulent Use of
Credit Card
(a) Whoever knowingly in a transaction af­
fecting interstate or foreign commerce, uses or
attempts or conspires to use any counterfeit,
fictitious, altered, forged, lost, stolen, or
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 , 0 0 0 or more; or
(b) Whoever, with unlawful or fraudulent in­
tent, transports or attempts or conspires to
transport in interstate or foreign commerce a
counterfeit, fictitious, altered, forged, lost, sto­
len, or fraudulently obtained credit card
knowing the same to be counterfeit, fictitious,
81

Regulation Z (Statutory Provisions)

§134
altered, forged, lost, stolen, or fraudulently
obtained; or
(c) Whoever, with unlawful or fraudulent in­
tent, uses any instrumentality of interstate or
foreign commerce to sell or transport a coun­
terfeit, fictitious, altered, forged, lost, stolen,
or fraudulently obtained credit card knowing
the same to be counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained;
or
(d) Whoever knowingly receives, conceals,
uses, or transports money, goods, services, or
anything else of value (except tickets for in­
terstate or foreign transportation) which ( 1 )
within any one-year period has a value aggre­
gating SI,000 or more, (2) has moved in or is
part of, or which constitutes interstate or for­
eign commerce, and (3) has been obtained
with a counterfeit, fictitious, altered, forged,
lost, stolen, or fraudulently obtained credit
card; or
(e) Whoever knowingly receives, conceals,
uses, sells, or transports in interstate or for­
eign commerce one or more tickets for inter­
state or foreign transportation, which ( 1 )
within any one-year period have a value ag­
gregating $500 or more, and (2) have been
purchased or obtained with one or more coun­
terfeit, fictitious, altered, forged, lost, stolen,
or fraudulently obtained credit cards; or
(f) Whoever in a transaction affecting inter­
state or foreign commerce furnishes money,
property, services, or anything else of value,
which within any one-year period has a value
aggregating $ 1 , 0 0 0 or more, through the use
of any counterfeit, fictitious, altered, forged,
lost, stolen, or fraudulently obtained credit
card knowing the same to be counterfeit, ficti­
tious, altered, forged, lost, stolen, or fraudu­
lently obtained—
shall be fined not more than $ 1 0 , 0 0 0 or im­
prisoned not more than ten years, or both.

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 unautho­
rized use of such credit cards without regard
to the provisions of section 133, but in no case
may such business or other organization or
card issuer impose liability upon any employ­
ee with respect to unauthorized use of such a
credit card except in accordance with and
subject to the limitations of section 133.

SECTION 136—Dissemination of
Annual Percentage Rates
(a) The Board shall collect, publish, and dis­
seminate to the public, on a demonstration ba­
sis in a number of standard metropolitan sta­
tistical areas to be determined by the Board,
the annual percentage rates charged for repre­
sentative types of nonsale credit by creditors
in such areas. For the purpose of this section,
the Board is authorized to require creditors in
such areas to furnish information necessary
for the Board to collect, publish, and dissemi­
nate such information.
(b) The Board is authorized to enter into
contracts or other arrangements with appro­
priate persons, organizations, or State agen­
cies to carry out its functions under subsection
(a) and to furnish financial assistance in sup­
port thereof.

CHAPTER 3—CREDIT
ADVERTISING
Section
141
142

SECTION 135—Business Credit Cards
The exemption provided by section 104(1)
does not apply to the provisions of sections
82

143
144
145

Catalogs and multiple-page
advertisements
Advertising of downpayments and
installments
Advertising of open end credit plans
Advertising of credit other than open
end plans
Nonliability of media

§146

Regulation Z (Statutory Provisions)
146

Use of annual percentage rate in oral SECTION 144— Advertising of Credit
disclosures
Other Than Open End Plans

SECTION 141—Catalogs and MultiplePage Advertisements
For the purposes of this chapter, a catalog or
other multiple-page advertisement shall be
considered a single advertisement if it clearly
and conspicuously displays a credit terms ta­
ble on which the information required to be
stated under this chapter is clearly set forth.

SECTION 142—Advertising of
Downpayments and Installments
No advertisement to aid, promote, or assist
directly or indirectly any extension of con­
sumer credit may state
( 1 ) that a specific periodic consumer credit
amount or installment amount can be ar­
ranged, unless the creditor usually and cus­
tomarily arranges credit payments or in­
stallments for that period and in that
amount.
( 2 ) that a specified downpayment is re­
quired in connection with any extension of
consumer credit, unless the creditor usually
and customarily arranges downpayments in
that amount.

(a) Except as provided in subsection (b),
this section applies to any advertisement to
aid, promote, or assist directly or indirectly
any consumer credit sale, loan, or other exten­
sion of credit subject to the provisions of this
title, other than an open end credit plan.
(b) The provisions of this section do not ap­
ply to advertisements of residential real estate
except to the extent that the Board may by
regulation require.
(c) If any advertisement to which this sec­
tion 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 down­
payment, if any, the amount of any install­
ment payment, the dollar amount of any fi­
nance charge, or the number of installments
or the period of repayment, then the adver­
tisement shall state all of the following items:
(1) The downpayment, if any.
(2) The terms of repayment.
(3) The rate of the finance charge ex­
pressed as an annual percentage rate.

SECTION 145—Nonliability of Media
SECTION 143—Advertising of Open
End Credit Plans
No advertisement to aid, promote, or assist
directly or indirectly the extension of consum­
er credit under an open end credit plan may
set forth any of the specific terms of that plan
unless it also clearly and conspicuously sets
forth all of the following items:
(1) Any minimum or fixed amount which
could be imposed.
(2) In any case in which periodic rates
may be used to compute the finance charge,
the periodic rates expressed as annual per­
centage rates.
(3) Any other term that the Board may by
regulation require to be disclosed.

There is no liability under this chapter on the
part of any owner or personnel, as such, of
any medium in which an advertisement ap­
pears or through which it is disseminated.

SECTION 146—Use of Annual
Percentage Rate in Oral Disclosures
In responding orally to any inquiry about the
cost of credit, a creditor, regardless of the
method used to compute finance charges,
shall state rates only in terms of the annual
percentage rate, except that in the case of an
open end credit plan, the periodic rate also
may be stated and, in the case of an other than
83

Regulation Z (Statutory Provisions)

§ 146
open end credit plan where a major compo­
nent of the finance charge consists of interest
computed at a simple annual rate, the simple
annual rate also may be stated. The Board
may, by regulation, modify the requirements
of this section or provide an exception from
this section for a transaction or class of trans­
actions for which the creditor cannot deter­
mine in advance the applicable annual per­
centage rate.

CHAPTER 4—CREDIT BILLING
Section
161
162
163
164
165
166
167
168
169
170
171

Correction of billing errors
Regulation of credit reports
Length of billing period
Prompt crediting of payments
Treatment of credit balances
Prompt notification of returns
Use of cash discounts
Prohibition of tie-in services
Prohibition of offsets
Rights of credit card customers
Relation to State laws

SECTION 161—Correction of Billing
Errors
(a) If a creditor, within sixty days after hav­
ing transmitted to an obligor a statement of
the obligor’s account in connection with an
extension of consumer credit, receives at the
address disclosed under section 127(b) ( 1 0 ) a
written notice (other than notice on a pay­
ment stub or other payment medium supplied
by the creditor if the creditor so stipulates
with the disclosure required under section
127(a)(7) from the obligor in which the
obligor—
( 1 ) sets forth or otherwise enables the
creditor to identify the name and account
number (if any) of the obligor,
( 2 ) indicates the obligor’s belief that the
statement contains a billing error and the
amount of such billing error, and
(3) sets forth the reasons for the obligor’s
belief (to the extent applicable) that the
statement contains a billing error,
84

the creditor shall, unless the obligor has, after
giving such written notice and before the expi­
ration of the time limits herein specified,
agreed that the statement was correct—
(A ) not later than thirty days after the
receipt of the notice, send a written ac­
knowledgment thereof to the obligor, un­
less the action required in subparagraph
(B) is taken within such thirty-day peri­
od, and
(B) not later than two complete billing
cycles of the creditor (in no event later
than ninety days) after the receipt of the
notice and prior to taking any action to
collect the amount, or any part thereof,
indicated by the obligor under paragraph
( 2 ) either—
(1) make appropriate corrections in
the account of the obligor, including
the crediting of any finance charges on
amounts erroneously billed, and trans­
mit to the obligor a notification of such
corrections and the creditor’s explana­
tion of any change in the amount indi­
cated by the obligor under paragraph
( 2 ) and, if any such change is made
and the obligor so requests, copies of
documentary evidence of the obligor’s
indebtedness; or
(ii) send a written explanation or
clarification to the obligor, after having
conducted an investigation, setting
forth to the extent applicable the rea­
sons why the creditor believes the ac­
count of the obligor was correctly
shown in the statement and, upon re­
quest of the obligor, provide copies of
documentary evidence of the obligor’s
indebtedness. In the case of a billing
error where the obligor alleges that the
creditor’s billing statement reflects
goods not delivered to the obligor or
his designee in accordance with the
agreement made at the time of the
transaction, a creditor may not con­
strue such amount to be correctly
shown unless he determines that such
goods were actually delivered, mailed,
or otherwise sent to the obligor and
provides the obligor with a statement
of such determination.

Regulation Z (Statutory Provisions)
After complying with the provisions of this
subsection with respect to an alleged billing
error, a creditor has no further responsibility
under this section if the obligor continues to
make substantially the same allegation with
respect to such error.
(b) For the purpose of this section, a “billing
error” consists of any of the following:
(1) A reflection on a statement of an ex­
tension of credit which was not made to the
obligor or, if made, was not in the amount
reflected on such statement.
(2) A reflection on a statement of an ex­
tension of credit for which the obligor re­
quests additional clarification including
documentary evidence thereof.
(3) A reflection on a statement of goods or
services not accepted by the obligor or his
designee or not delivered to the obligor or
his designee in accordance with the agree­
ment made at the time of a transaction.
(4) The creditor’s failure to reflect proper­
ly on a statement a payment made by the
obligor or a credit issued to the obligor.
(5) A computation error or similar error
of an accounting nature of the creditor on a
statement.
( 6 ) Failure to transmit the statement re­
quired under section 127(b) of this Act to
the last address of the obligor which has
been disclosed to the creditor, unless that
address was furnished less than twenty days
before the end of the billing cycle for which
the statement is required.
(7) Any other error described in regula­
tions of the Board.
(c) For the purposes of this section, “action
to collect the amount, or any part thereof, in­
dicated by an obligor under paragraph ( 2 ) ”
does not include the sending of statements of
account, which may include finance charges
on amounts in dispute, to the obligor follow­
ing written notice from the obligor as specified
under subsection (a), if—
( 1 ) the obligor’s account is not restricted
or closed because of the failure of the obli­
gor to pay the amount indicated under
paragraph ( 2 ) of subsection (a), and
( 2 ) the creditor indicates the payment of

§162
such amount is not required pending the
creditor’s compliance with this section.
Nothing in this section shall be construed
to prohibit any action by a creditor to col­
lect any amount which has not been indi­
cated by the obligor to contain a billing
error.
(d) Pursuant to regulations of the Board, a
creditor operating an open end consumer
credit plan may not, prior to the sending of
the written explanation or clarification re­
quired under paragraph (B )(ii), restrict or
close an account with respect to which the
obligor has indicated pursuant to subsection
(a) that he believes such account to contain a
billing error solely because of the obligor’s
failure to pay the amount indicated to be in
error. Nothing in this subsection shall be
deemed to prohibit a creditor from applying
against the credit limit on the obligor’s ac­
count the amount indicated to be in error.
(e) Any creditor who fails to comply with
the requirements of this section or section 162
forfeits any right to collect from the obligor
the amount indicated by the obligor under
paragraph ( 2 ) of subsection (a) of this sec­
tion, and any finance charges thereon, except
that the amount required to be forfeited under
this subsection may not exceed $50.

SE C T IO N 162— R egulation of C redit
R eports
(a) After receiving a notice from an obligor
as provided in section 161(a), a creditor or
his agent may not directly or indirectly threat­
en to report to any person adversely on the
obligor’s credit rating or credit standing be­
cause of the obligor’s failure to pay the
amount indicated by the obligor under section
161(a)(2), and such amount may not be re­
ported as delinquent to any third party until
the creditor has met the requirements of sec­
tion 161 and has allowed the obligor the same
number of days (not less than ten) thereafter
to make payment as is provided under the
credit agreement with the obligor for the pay­
ment of undisputed amounts.
85

§162
(b) If a creditor receives a further written no­
tice from an obligor that an amount is still in
dispute within the time allowed for payment
under subsection (a) of this section, a creditor
may not report to any third party that the
amount of the obligor is delinquent because
the obligor has failed to pay an amount which
he has indicated under section 161(a)(2), un­
less the creditor also reports that the amount
is in dispute and, at the same time, notifies the
obligor of the name and address of each party
to whom the creditor is reporting information
concerning the delinquency.
(c) A creditor shall report any subsequent
resolution of any delinquencies reported pur­
suant to subsection (b) to the parties to
whom such delinquencies were initially
reported.

SECTION 163—Length of Billing Period
(a) If an open end consumer credit plan pro­
vides a time period within which an obligor
may repay any portion of the credit extended
without incurring an additional finance
charge, such additional finance charge may
not be imposed with respect to such portion of
the credit extended for the billing cycle of
which such period is a part unless a statement
which includes the amount 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 payment
must be made in order to avoid imposition 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 deliv­
ery of such periodic statement within the time
period specified in such subsection because of
an act of God, war, natural disaster, strike, or
other excusable or justifiable cause, as deter­
mined under regulations of the Board.

SECTION 164—Prompt Crediting of
Payments
Payments received from an obligor under an
86

Regulation Z (Statutory Provisions)
open end consumer credit plan by the creditor
shall be posted promptly to the obligor’s ac­
count as specified in regulations of the Board.
Such regulation shall prevent a finance charge
from being imposed on any obligor if the cred­
itor has received the obligor’s payment in
readily identifiable form in the amount, man­
ner, location, and time indicated by the credi­
tor to avoid the imposition thereof.

SECTION 165—Treatment of Credit
Balances
Whenever a credit balance in excess of $1 is
created in connection with a consumer credit
transaction through ( 1 ) transmittal of funds
to a creditor in excess of the total balance due
on an account, ( 2 ) rebates of unearned fi­
nance charges or insurance premiums, or (3)
amounts otherwise owed to or held for the
benefit of an obligor, the creditor shall—
(A) credit the amount of the credit bal­
ance to the consumer’s account;
(B) refund any part of the amount of the
remaining credit balance, upon request of
the consumer; and
(C) make a good faith effort to refund to
the consumer by cash, check, or money or­
der any part of the amount of the credit
balance remaining in the account for more
than six months, except that no further ac­
tion is required in any case in which the
consumer’s current location is not known
by the creditor and cannot be traced
through the consumer’s last known address
or telephone number.

SECTION 166—Prompt Notification of
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, a credit statement with
respect thereto and the credit card issuer shall

Regulation Z (Statutory Provisions)

§ 170

connection with a consumer credit transaction
under the relevant credit card plan against
funds of the cardholder held on deposit with
the card issuer unless—
SECTION 167—Use of Cash Discounts
( 1 ) such action was previously authorized
in writing by the cardholder in accordance
(a)(1 ) With respect to credit card which
with a credit plan whereby the cardholder
may be used for extensions of credit in sales
agrees periodically to pay debts incurred in
transactions in which the seller is a person
his open end credit account by permitting
other than the card issuer, the card issuer
the card issuer periodically to deduct all or
a portion of such debt from the cardhold­
may not, by contract or otherwise, prohibit
er’s deposit account, and
any such seller from offering a discount to a
cardholder to induce the cardholder to pay
( 2 ) such action with respect to any out­
by cash, check, or similar means rather
standing disputed amount not be taken by
than use a credit card.
the card issuer upon request of the
(2) No seller in any sales transaction may
cardholder.
impose a surcharge on a cardholder who In the case of any credit card account in exis­
elects to use a credit card in lieu of payment tence on the effective date of this section, the
by cash, check, or similar means.*
previous written authorization referred to in
clause ( 1 ) shall not be required until the date
(b) With respect to any sales transaction, any (after such effective date) when such account
discount not in excess of 5 per centum offered is renewed, but in no case later than one year
by the seller for the purpose of inducing pay­ after such effective date. Such written authori­
ment by cash, check, or other means not in­ zation shall be deemed to exist if the card is­
volving the use of a credit card shall not con­ suer has previously notified the cardholder
stitute a finance charge as determined under that the use of his credit card account will
section 106, if such discount is offered to all subject any funds which the card issuer holds
prospective buyers and its availability is dis­ in deposit accounts of such cardholder to off­
closed to all prospective buyers clearly and set against any amounts due and payable on
conspicuously in accordance with regulations his credit card account which have not been
of the Board.
paid in accordance with the terms of the
agreement between the card issuer and the
cardholder.
credit the account of the obligor for the
amount of the transaction.

SECTION 168—Prohibition of Tie-In
Services
Notwithstanding any agreement to the con­
trary, a card issuer may not require a seller, as
a condition to participating in a credit card
plan, to open an account with or procure any
other service from the card issuer or its sub­
sidiary or agent.

(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 credi­
tors generally.

SECTION 170—Rights of Credit Card
Customers
SECTION 169—Prohibition of Offsets
(a) A card issuer may not take any action to
offset a cardholder’s indebtedness arising in
* Section 167(a)(2) expired on February 27, 1981. Leg­
islation to extend this provision for three additional years
was pending as of April 1, 1981.

(a) Subject to the limitation contained in
subsection (b), a card issuer who has issued a
credit card to a cardholder pursuant to an
open end consumer credit plan shall be sub­
ject to all claims (other than tort claims) and
defenses arising out of any transaction in
which the credit card is used as a method of
87

§ 170
payment or extension of credit if ( 1 ) the obli­
gor has made a good faith attempt to obtain
satisfactory resolution of a disagreement or
problem relative to the transaction from the
person honoring the credit card; ( 2 ) the
amount of the initial transaction exceeds $50;
and (3) the place where the initial transaction
occurred was in the same State as the mailing
address previously provided by the cardholder
or was within 1 0 0 miles from such address,
except that the limitations set forth in clauses
(2) and (3) with respect to an obligor’s right
to assert claims and defenses against a card
issuer shall not be applicable to any transac­
tion in which the person honoring the credit
card (A ) is the same person as the card is­
suer, (B) is controlled by the card issuer, (C)
is under direct or indirect common control
with the card issuer, (D ) is a franchised deal­
er in the card issuer’s products or services, or
(E ) has obtained the order for such transac­
tion 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.
(b) the amount of claims or defenses asserted
by the cardholder may not exceed the amount
of credit outstanding with respect to such
transaction at the time the cardholder first no­
tifies the card issuer or the person honoring
the credit card of such claim or defense. For
the purpose of determining the amount of
credit outstanding in the preceding sentence,
payments and credits to the cardholder’s ac­
count 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 ac­
count; ( 2 ) finance charges in order of their
entry to the account; and (3) debits to the
account other than those set forth above, in

Regulation Z (Statutory Provisions)
the order in which each debit entry to the ac­
count was made.

SECTION 171—Relation to State Laws
(a) This chapter does not annul, alter, or af­
fect, or exempt any person subject to the pro­
visions of this chapter from complying with
the laws of any State with respect to credit
billing practices, except to the extent that
those laws are inconsistent with any provision
of this 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 determines 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 determines that under the law of the State
that class of transactions is subject to require­
ments substantially 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 un­
der the usury laws of any State or under the
laws of any State relating to disclosure of in­
formation in connection with credit transac­
tions, or relating to the types, amounts or
rates of charges, or to any element or elements
of charges permissible under such laws in con­
nection with the extension or use of credit.

Board of Governors of the Federal Reserve System

Regulation M
Consumer Leasing
12 CFR 213; effective April 1, 1981
Formerly part of Regulation Z (12 CFR 226)

Contents

Page
Section 213.1—General provisions.................1
(a) A uthority.............................................. 1
(b) P u rpo se................................................ 1
(c) Enforcement and liability.....................1
(d) Issuance of staff interpretations.......... 1
Section 213.2—Definitions and rules of
construction................................................ 1
(a) Definitions............................................ 1
(b) Rules of construction..........................2
Section 213.3—Exempted transactions.......... 3
Section 213.4— D isclosures............................3
(a) General requirements.......................... 3
(b) Additional information ......................3
(c) Multiple lessors; multiple lessees . . . .4
(d) Unknown-information estimate..........4
(e) Effect of subsequent occurrence..........4
(0 Leap year............................................. 4
(g) Specific disclosure requirements . . . . 4
(h) Renegotiations or extensions..............5
Section 213.5—A dvertising............................5
(a) General rule ........................................5
(b) Catalogs and multipage
advertisements ....................................5
(c) Terms that require additional
inform ation......................................... 6

Page
(d) Multiple-item leases; merchandise
tags....................................................... 6
Section 213.6—Preservation and inspection
of evidence of compliance............................6
Section 213.7—Inconsistent state
requirem ents................................................6
(a) Preem ption......................................... 6
(b) Procedures........................................... 6
Section 213.8—Exemption of certain stateregulated transactions................................. 7
(a) Exemption for state-regulated
transactions......................................... 7
(b) Procedures and criteria .....................7
(c) Civil liability.......................................7
Appendix A—Procedures and criteria for
state exemptions from the Consumer
Leasing A c t................................................. 7
Appendix B—Procedures and criteria for
Board determination regarding
preemption..................................................1 0
Appendix C—Model fo rm s..........................13
Appendix D—Federal enforcement
agencies..................................................... 26
Truth in Lending A c t................................... 29

Regulation M
Consumer Leasing
12 CFR 213; effective April 1, 1981

Section
213.1 General provisions
213.2 Definitions and rules of construction
213.3 Exempted transactions
213.4 Disclosures
213.5 Advertising
213.6 Preservation and inspection of evi­
dence of compliance
213.7 Inconsistent state requirements
213.8 Exemption of certain state-regulated
transactions
Appendix A—Procedures and criteria for
state exemptions from the Consumer Leas­
ing Act
Appendix B—Procedures and criteria for
Board determination regarding preemption
Appendix C—Model forms
Appendix D—Federal enforcement agencies

and Community Affairs are authorized to
issue official staff interpretations of this reg­
ulation. Official staff interpretations provide
the formal protection afforded under sec­
tion 130(f) of the act.
(2) A request for an official staff interpre­
tation shall be in writing and addressed to
the Director, Division of Consumer and
Community Affairs, Board of Governors of
the Federal Reserve System, Washington,
D.C. 20551. The request shall contain a
complete statement of all relevant facts con­
cerning the issue, including copies of all
pertinent documents.
(3) No staff interpretations will be issued
approving lessor’s forms, statements, calcu­
lation tools, or methods. This restriction
does not apply to forms, statements, tools,
or methods whose use is required or sanc­
tioned by a government agency.

SECTION 213.1—General Provisions
(a) Authority. This regulation, known as
Regulation M, is issued by the Board of Gov­
ernors of the Federal Reserve System to im­
plement the consumer leasing portions of the
Truth in Lending Act, which is title I of the
Consumer Credit Protection Act, as amended
(15 USC 1601 et seq.).
(b) Purpose. The purpose of this regulation is
to assure that lessees of personal property are
given meaningful disclosures of lease terms, to
delimit the ultimate liability of lessees in leas­
ing personal property and to require meaning­
ful and accurate disclosures of lease terms in
advertising.
(c) Enforcement and liability. Section 108 of
the act contains the administrative enforce­
ment provisions. Sections 112, 130, 131, and
185 of the act contain the liability provisions
for failing to comply with the requirements of
the act and this regulation.
(d) Issuance to sta ff interpretations. (1) Offi­
cials in the Board’s Division of Consumer

SECTION 213.2—Definitions and Rules
of Construction
(a) Definitions. For the purposes of this regu­
lation, unless the context indicates otherwise,
the following definitions apply:
(1) “A ct” means the Truth in Lending Act
(15 USC 1601 et seq.).
( 2 ) “Advertisement” means any commer­
cial message in any newspaper, magazine,
leaflet, flyer or catalog, on radio, television
or public address system, in direct mail lit­
erature or other printed material on any in­
terior or exterior sign or display, in any
window display, in any point-of-transaction
literature or price tag which is delivered or
made available to a lessee or prospective
lessee in any manner whatsoever.
(3) “Agricultural purpose” means a pur­
pose related to the production, harvest, ex­
hibition, marketing, transportation, proc­
essing, or manufacture of agricultural prod­
ucts by a natural person who cultivates,
plants, propagates, or nurtures those agri­
cultural products, including but not limited
to the acquisition of personal property and
1

§213.2
services used primarily in farming. “Agri­
cultural products” includes agricultural,
horticultural, viticultural, and dairy prod­
ucts, livestock, wildlife, poultry, bees, forest
products, fish and shellfish, and any prod­
ucts thereof, including processed and man­
ufactured products, and any and all prod­
ucts raised or produced on farms and any
processed or manufactured products
thereof.
(4) “Arrange fo r lease o f personal proper­
ty” means to provide or offer to provide a
lease which is or will be extended by anoth­
er person under a business or other rela­
tionship pursuant to which the person ar­
ranging such lease:
(i) Receives or will receive a fee, com­
pensation, or other consideration for
such service; or
(ii) Has knowledge of the lease terms
and participates in the preparation of the
contract documents required in connec­
tion with the lease.
(5) “Board” refers to the Board of Gover­
nors of the Federal Reserve System.
(6) “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 obliga­
tion not exceeding $25,000, whether or not
the lessee has the option to purchase or oth­
erwise become the owner of the property at
the expiration of the lease. It does not in­
clude a lease which meets the definition of a
credit sale in Regulation Z, 12 CFR part
226.2(a), nor does it include a lease for ag­
ricultural, business or commercial purposes
or one made to an organization.
(7) “Lessee” means a natural person who
leases under, or who is offered a consumer
lease.
(8) “Lessor” means a person who, in the
ordinary course of business regularly leases,
offers to lease, or arranges for the leasing of
personal property under a consumer lease.
(9) “Organization” means a corporation,
trust, estate, partnership, cooperative, asso­
ciation, government, or governmental sub­
division, agency, or instrumentality.

Regulation M
(10) “Period” means a day, week, month,
or other subdivision of a year.
(11) “Person ” means a natural person or an
organization.
(12) “Personal property” means any prop­
erty 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.
(13) “Real property” means property which
is real property under the law of the state in
which it is located.
(14) “Realized value” means (i) the price
received by the lessor for the leased proper­
ty at disposition, (ii) the highest offer for
disposition, or (iii) the fair market value at
the end of the lease term.
(15) “Security interest” and “security”
mean any interest in property which secures
payment or performance of an obligation.
The terms include, but are not limited to,
security interests under the Uniform Com­
mercial Code, real property mortgages,
deeds of trust, and other consensual or con­
fessed liens whether or not recorded, me­
chanic’s, materialman’s, artisan’s, and other
similar liens, vendor’s liens in both real and
personal property, any lien on property
arising by operation of law, and any interest
in a lease when used to secure payment or
performance of an obligation.
(16) “State” means any state, the District
of Columbia, the Commonwealth of Puerto
Rico, and any territory or possession of the
United States.
(17) “Total lease obligation ” equals the to­
tal of (i) the scheduled periodic payments
under the lease, (ii) any nonrefundable
cash payment required of the lessee or
agreed upon by the lessor and lessee or any
trade-in allowance made at consummation,
and (iii) the estimated value of the leased
property at the end of the lease term.
(18) “Value at consummation” equals the
cost to the lessor of the leased property in­
cluding, if applicable, any increase or mark­
up by the lessor prior to consummation.

(b) Rules o f construction. For purposes of
this regulation, the following rules of con­
struction apply:
(1) Unless the context indicates otherwise,

Regulation M
“lease” shall be construed to mean “con­
sumer lease.”
(2) A transaction shall be considered con­
summated at the time a contractual rela­
tionship is created between the lessor and
lessee, irrespective of the time of the per­
formance of either party.
(3) Captions and catchlines are intended
solely as aids to convenient reference, and
no inference as to the intent of any provi­
sion may be drawn from them.

SECTION 213.3—Exempted
Transactions
This regulation does not apply to lease trans­
actions of personal property which are inci­
dent to the lease of real property and which
provide that (a) the lessee has no liability for
the value of the property at the end of the
lease term except for abnormal wear and tear,
and (b) the lessee has no option to purchase
the leased property.

SECTION 213.4—Disclosures
(a) General requirements. (1) Any lessor
shall, in accordance with this regulation
and to the extent applicable, make the dis­
closures required by paragraph (g) of this
section with respect to any consumer lease.
Such disclosures shall be made clearly, con­
spicuously, in meaningful sequence, and in
accordance with the further requirements
of this section. All numerical amounts and
percentages shall be stated in figures and
shall be printed in not less than the equiva­
lent of 10-point type, .075 inch computer
type, or elite size typewritten numerals, or
shall be legibly handwritten.
(2) Disclosures shall be made prior to the
consummation of the lease on a dated writ­
ten statement which identifies the lessor
and the lessee, and a copy of the statement
shall be given to the lessee at that time. All
of the disclosures shall be made together on
either (i) the contract or other instrument
evidencing the lease on the same page and
above the place for the lessee’s signature; or

§213.4
(ii) a separate statement which identifies
the lease transaction.
(3) In any lease of multiple items, the de­
scription required by paragraph (g)(1) of
this section may be provided on a separate
statement or statements which are incorpo­
rated by reference in the disclosure state­
ment required by paragraph (a) of this
section.
(4) All disclosures required to be given by
this regulation shall be made in the English
language except in the Commonwealth of
Puerto Rico, where disclosures may be
made in the Spanish language with English
language disclosures provided upon the cus­
tomer’s request, either in substitution for
the Spanish disclosures or as additional in­
formation in accordance with paragraph
(b) of this section.
(b) Additional information. At the lessor’s
option, additional information or explanations
may be supplied with any disclosure required
by this regulation, but none shall be stated,
utilized, or placed so as to mislead or confuse
the lessee or contradict, obscure, or detract
attention from the information required to be
disclosed. Any lessor who elects to make dis­
closures specified in any provision of state law
which, under section 213.7 of this regulation,
is inconsistent with the requirements of the
act and this regulation may—
(1) Make such inconsistent disclosures on
a separate paper apart from the disclosures
made pursuant to this regulation; or
(2) Make such inconsistent disclosures on
the same statement on which disclosures
required by this regulation are made,
provided:
(i) All disclosures required by this regu­
lation appear separately and above any
other disclosures,
(ii) Disclosures required by this regula­
tion are identified by a clear and conspicious heading indicating that they are
made in compliance with federal law, and
(iii) All inconsistent disclosures appear
separately and below a conspicuous de­
marcation line, and are identified by a
clear and conspicuous heading indicating
that the statements made thereafter are
inconsistent with the disclosure require3

§213.4
ments of the federal Consumer Leasing
Act.
(c) Multiple lessors; multiple lessees. When a
transaction involves more than one lessor,
only one lessor need make the disclosures re­
quired by this regulation, and the one that dis­
closes shall be the one chosen by the lessors.
When a lease involves more than one lessee,
the disclosures may be made to any lessee who
is primarily liable on the lease.
(d) Unknown-information estimate. If, at the
time disclosures must be made, an amount or
other item of information required to be dis­
closed, or needed to determine a required dis­
closure, is unknown or not available to the
lessor and the lessor has made a reasonable
effort to ascertain it, the lessor may use an
estimated amount or an approximation of the
information, provided the estimate or approx­
imation is clearly identified as such, is reason­
able, is based on the best information available
to the lessor, and is not used for the purpose
of circumventing or evading the disclosure re­
quirements of this regulation. Notwithstand­
ing the requirement of this paragraph that the
estimate be based on the best information
available, a lessor is not precluded in a pur­
chase option lease from understating the esti­
mated value of the leased property at the end
of the term in computing the total lease obli­
gation as required in paragraph (g) (15) (i) of
this section.
(e) Effect o f subsequent occurrence. If infor­
mation required to be disclosed in accordance
with this regulation is subsequently rendered
inaccurate as a result of any act, occurrence,
or agreement subsequent to the delivery of the
required disclosures, the inaccuracy resulting
therefrom does not constitute a violation of
this regulation.1
1 Such acts, occurrences, or agreements include the fail­
ure of the lessee to perform his obligations under the con­
tract and such actions by the lessor as may be proper to
protect his interests in such circumstances. Such failure
may result in the liability of the lessee to pay delinquency
charges, collection costs,, or expenses of the lessor for per­
fection or acquisition of any security interest or amounts
advanced by the lessor on behalf of the lessee in connection
with insurance, repairs to, or preservation of leased
property.

Regulation M
(f) Leap year. Any variance in any term re­
quired under this regulation to be disclosed,
or stated in any advertisement, which occurs
by reason of the addition of February 29 in |
each leap year, may be disregarded, and such
term may be disclosed or stated without re­
gard to such variance.
(g) Specific disclosure requirements. In any
lease subject to this section, the following
items, as applicable, shall be disclosed:
(1) A brief description of the leased prop­
erty, sufficient to identify the property to
the lessee and lessor.
(2) The total amount of any payment,
such as a refundable security deposit paid
by cash, check or similar means, advance
payment, capitalized cost reduction or any
trade-in allowance, appropriately identified,
to be paid by the lessee at consummation of
the lease.
(3) The number, amount, and due dates or
periods of payments scheduled under the
lease and the total amount of such periodic
payments.
(4) The total amount paid or payable by
the lessee during the lease term for official
fees, registration, certificate of title, license
fees, or taxes.
(5) The total amount of all other charges,
individually itemized, payable by the lessee
to the lessor, which are not included in the
periodic payments. This total includes the
amount of any liabilities the lease imposes
upon the lessee at the end of the term, but
excludes the potential difference between
the estimated and realized values, required
to be disclosed under paragraph (g) (13) of
this section.
(6) A brief identification of insurance in
connection 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 cover­
ages required of the lessee.
(7) A statement identifying any express
warranties or guarantees available to the
lessee made by the lessor or manufacturer
with respect to the leased property.
(8) An identification of the party responsi­
ble for maintaining or servicing the leased

§213.5

Regulation M
property together with a brief description of
the responsibility, and a statement of rea­
sonable standards for wear and use, if the
lessor sets such standards.
(9) A description of any security interest,
other than a security deposit disclosed un­
der paragraph (g)(2) of this section, 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.
(10) The amount or method of determin­
ing the amount of any penalty or other
charge for delinquency, default, or late
payments.
(11) A statement of whether or not the les­
see 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.
(13) A statement that the lessee shall be
liable for the difference between the esti­
mated value of the property and its realized
value at early termination or the end of the
lease term, if such liability exists.
(14) Where the lessee’s liability at early
termination 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 prop­
erty by an independent third party agreed
to by the lessee and the lessor, which ap­
praisal shall be final and binding on the
parties.
(15) Where the lessee’s liability at the end
of the lease term is based upon the estimat­
ed value of the leased property:
(i) The value of the property at consum­
mation of the lease, the itemized total
lease obligation at the end of the lease
term, and the difference between them.
(ii) That there is a rebuttable presump­

tion 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 average
payment allocable to a monthly period,
and that the lessor cannot collect the
amount of such excess liability unless the
lessor brings a successful action in court
in which the lessor pays the lessee’s attor­
ney’s fees, and that this provision regard­
ing 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 paragraph (g) (15) (ii) of this section
do not preclude the right of a willing
lessee to make any mutually agreeable
final adjustment regarding such excess
liability.
(h) Renegotiations or extensions. If any exist­
ing lease is renegotiated or extended, such re­
negotiation or extension shall be considered a
new lease subject to the disclosure require­
ments of this regulation, except that the re­
quirements 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 payment
allocable to a monthly period is not changed
by more than 25 percent, or (2) a lease which
is extended for not more than six months on a
month-to-month basis or otherwise.

SECTION 213.5—Advertising
(a) General rule. No advertisement to aid,
promote, or assist directly or indirectly any
consumer lease may state that a specific lease
of any property at specific amounts or terms is
available unless the lessor usually and custom­
arily leases or will lease such property at those
amounts or terms.
(b) Catalogs and multipage advertisements. If
a catalog or other multiple-page advertise­
ment sets forth or gives information in suffi­
cient detail to permit determination of the dis5

§213.5
closures required by this section in a table or
schedule of lease terms, such catalog or multiple-page advertisement shall be considered a
single advertisement provided—
(1) The table or schedule and the disclo­
sures made therein are set forth clearly and
conspicuously, and
(2) Any statement of lease terms appear­
ing in any place other than in that table or
schedule of lease terms clearly and conspic­
uously refers to the page or pages on which
that table or schedule appears, unless that
statement discloses all of the lease terms re­
quired to be stated under this section.

Regulation M
eluded in a multiple-item lease sets forth in­
formation which would require additional dis­
closures under paragraph (c) of this section,
such merchandise tag need not contain such
additional disclosures, provided it clearly and
conspicuously refers to a sign or display
which is prominently posted in the lessor’s
showroom. Such sign or display shall contain
a table or schedule of those items of informa­
tion to be disclosed under paragraph (c) of
this section.

SECTION 213.6—Preservation and
Inspection of Evidence of Compliance

(c) Terms that require additional informa­
tion. No advertisement to aid, promote, or as­
sist directly or indirectly any consumer lease
shall state the amount of any payment, the
number of required payments, or that any or
no downpayment or other payment is re­
quired at consummation of the lease unless
the advertisement also states clearly and con­
spicuously each of the following items of in­
formation as applicable:
(1) That the transaction advertised is a
lease.
(2) The total amount of any payment such
as a security deposit or capitalized cost re­
duction required at the consummation of
the lease, or that no such payments are
required.
(3) The number, amounts, due dates or pe­
riods of scheduled payments, and the total
of such payments under the lease.
(4) A statement of whether or not the les­
see has the option to purchase the leased
property and at what price and time. The
method of determining the price may be
substituted for disclosure of the price.
(5) A statement of the amount or method
of determining the amount 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, be­
tween the estimated value of the leased
property and its realized value at the end of
the lease term, if the lessee has such
liability.

(a) Preemption. A state law which is similar
in nature, purpose, scope, intent, effect, or
requisites to a section of chapter 5 of the act is
not inconsistent with the act or this regulation
within the meaning of section 186(a) of the
act if the lessor can comply with the state law
without violating this regulation. If a lessor
cannot comply with a state law without vio­
lating a provision of this regulation which im­
plements a section of chapter 5 of the act,
such state law is inconsistent with the require­
ments of the act and this regulation within the
meaning of section 186(a) of the act and is
preempted.

(d) Multiple-item leases; merchandise tags. If
a merchandise tag for an item normally in-

(b) Procedures. A state, through its gover­
nor, attorney general, or other appropriate of­

6

(a) Evidence of compliance with the require­
ments imposed under this regulation, other
than advertising requirements under section
213.5, shall be preserved by the lessor for a
period of not less than two years after the date
such disclosure is required to be made.
(b) Each lessor shall, when directed by the
appropriate administrative enforcement au­
thority designated in section 108 of the act,
permit that authority or its duly authorized
representative to inspect its relevant records
and evidence of compliance with this
regulation.

SECTION 213.7—Inconsistent State
Requirements

Regulation M
ficial having primary enforcement or interpre­
tative responsibilities for its consumer leasing
law, may apply to the Board for a determina­
tion that the state law offers greater protection
and benefit to lessees than a comparable pro­
vision (s) of chapter 5 of the act and its imple­
menting provision (s) in this regulation, or is
otherwise not inconsistent with chapter 5 of
the act and this regulation, or for a determina­
tion with respect to any issues not clearly cov­
ered by paragraph (a) of this section as to the
consistency or inconsistency of a state law
with chapter 5 of the act or its implementing
provisions in this regulation.

SECTION 213.8—Exemption of Certain
State-Regulated Transactions
(a) Exemption fo r state-regulated transac­
tions. In accordance with the provisions of ap­
pendix A to Regulation M, any state may
make application to the Board for exemption
of any class of transactions within the state
from the requirements of chapter 5 of the act
and the corresponding provisions of this regu­
lation, provided that—
(1) The Board determines that under the
law of that state, that class of transactions
is subject to requirements substantially sim­
ilar to those imposed under chapter 5 of the
act and the corresponding provisions of this
regulation; or the lessee is afforded greater
protection and benefit than is afforded un­
der chapter 5 of the act, and
(2) There is adequate provision for
enforcement.
(b) Procedures and criteria. The procedures
and criteria under which a state may apply for
the determination provided for in paragraph
(a) of this section are set forth in appendix A
to Regulation M.
(c) Civil liability. In order to assure that the
concurrent jurisdiction of federal and state
courts created in sections 130(e) and 185(c)
of the act shall continue to have substantive
provisions to which such jurisdiction shall ap­
ply, and generally to aid in implementing the
act with respect to any class of transactions
exempted pursuant to paragraph (a) of this
section and appendix A, the Board pursuant

Appendix A
to sections 105 and 186(b) of the act hereby
prescribes that—
(1) No such exemptions shall be deemed
to extend to the civil liability provisions of
sections 130, 131, and 185 of the act; and
(2) After an exemption has been granted,
the disclosure requirements of the applica­
ble state law shall constitute the disclosure
requirements of the act, except to the extent
that such state law imposes disclosure re­
quirements not imposed by the act. Infor­
mation required under such state law with
the exception of those provisions which im­
pose disclosure requirements not imposed
by the act shall, accordingly, constitute a
“requirement imposed” under chapter 5 of
the act for the purpose of section 130(a).

APPENDIX A—Procedures and
Criteria for State Exemptions from the
Consumer Leasing Act
(a) Application. Any state may make applica­
tion to the Board, pursuant to the terms of
this appendix and the Board’s Rules of Proce­
dure (12 CFR part 262), for a determination
that under the laws of the state,1 “consumer
lease” transactions as provided in section
181(1) of the act and section 213.2 of this
regulation, within that state are subject to re­
quirements which are substantially similar to
those imposed under chapter 5 of the act 2 or
which provide greater protection and benefit
to lessees than those provided under chapter
5, and that there is adequate provision for en­
forcement of such requirement. Such applica­
tion shall be made by letter addressed to the
Board signed by the governor, the attorney
general, or any official of the state having re­
sponsibilities under the state laws which are
applicable to the relevant class of transactions.
(b) Supporting documents. The application
shall be accompanied by—
1 Any reference to state law in this appendix includes a
reference to any regulations which implement state law and
formal interpretations thereof by a court of competent ju­
risdiction or a duly authorized agency of that state.
2 Any reference in this appendix to chapter 5 of the act
or any section thereof includes a reference to the imple­
menting provisions of this regulation and the Board’s for­
mal interpretations thereof.

Appendix A
(1) A copy of the full text of the laws of
the state which are claimed by the applicant
to impose requirements substantially simi­
lar to those imposed under chapter 5 or to
provide greater protection and benefit to
lessees than does chapter 5 with respect to
“consumer lease” transactions as defined in
section 213.2 of this regulation.
(2) A comparison of each requirement of
state law with the corresponding require­
ment of chapter 5, together with reasons to
support the claim that the requirements of
state law are substantially similar to or pro­
vide greater protection and benefit to lessees
than requirements of chapter 5 with respect
to the class of consumer lease transactions.
It shall also demonstrate that any differenc­
es are not inconsistent with and do not re­
sult in a diminution in the protection and
benefit afforded lessees under chapter 5 and
state that there are no other state laws
which, due to their relations to the state law
under consideration, should be considered
by the Board in making its determination.
(3) A copy of the full text of the laws of
the state which provide for enforcement of
the state laws referred to in paragraph
(b)(1) of this appendix.
(4) A comparison of the provisions of state
law with the provisions of sections 108, 112,
130, 131, 183(a), 183(b), and 185 of the
act, together with reasons to support the
claim that such state laws provide for—
(i) Administrative enforcement of the
state laws referred to in paragraph
(b)(1) of this appendix which is equiva­
lent to the enforcement provided under
section 108 of the act;
(ii) Criminal liability for willful and
knowing violation of the state law with
penalties substantially similar to those
prescribed under section 112 of the act,
except that more severe penalties may be
provided;
(iii) Civil liability for failure to comply
with the requirements of the state law,
including class action liability, which is
substantially similar to that provided un­
der sections 130, 131, 185(b) of the act,
except that more severe penalties may be
provided;
(iv) In leases where the lessee’s liability

Regulation M
at the end of the lease term is based on
the estimated value of the leased proper­
ty, a limitation on the lessee’s liability at
the end of the lease term substantially
similar to that provided by section
183(a) of the act, except that a stricter
limitation may be provided;
(v) A provision prescribing that all pen­
alties and other charges for delinquency,
default or early termination specified in
the lease must be reasonable substantially
similar to that provided in section 183(b)
of the act, except that a stricter provision
may be provided; and
(vi) A statute of limitations that pre­
scribes a period in which to institute civil
actions of substantially similar duration
as that provided under section 185(c) of
the act, except that a longer period may
be provided.
(5) A statement identifying the office des­
ignated or to be designated to administer
the state laws referred to in paragraph
(b )(1) of this appendix, together with
complete information regarding the fiscal
arrangements for administrative enforce­
ment (including the amount of funds avail­
able or to be provided), the number and
qualifications of personnel engaged therein,
and a description of the procedures under
which such state laws are to be administra­
tively enforced, including administrative
enforcement with respect to federally char­
tered lessors.3 The foregoing statement
should include reasons to support the claim
that there is adequate provision for enforce­
ment of such state laws.
(c) Criteria fo r determination. The Board
will consider the following criteria along with
any other relevant information in making a
determination whether the laws of a state im­
pose requirements substantially similar to or
3 Transactions within a state in which a federally char­
tered institution is a lessor shall not be subject to the ex­
emption, and such federally chartered lessors shall remain
subject to the requirements of the act and administrative
enforcement by the appropriate federal authority under
section 108 of the act, unless it is established to the satisfac­
tion of the Board that appropriate arrangements have been
made with such federal authorities to assure effective en­
forcement of the requirements of state laws with respect to
such lessors.

Regulation M
provide greater protection and benefit to les­
sees than under chapter 5, and whether there
is adequate provision for enforcement of such
laws:
(1) In order for provisions of state law to
be substantially similar to or provide great­
er protection and benefit to lessees than the
provision of chapter 5, the provisions of
state law 4 shall require that
(i) Definitions and rules of construction
import the same meaning and have the
same application as those prescribed un­
der section 213.2 of this regulation;
(ii) Lessors make all of the applicable
disclosures required by this regulation
and within the same (or more stringent)
time periods as are prescribed by this
regulation;
(iii) Lessors abide by obligations sub­
stantially similar to those prescribed by
chapter 5, under conditions substantially
similar to (or more stringent than) those
prescribed in chapter 5;
(iv) Lessors abide by the same (or more
stringent) prohibitions as are provided in
chapter 5;
(v) Lessees need comply with no obliga­
tions or responsibilities which are more
costly or burdensome as a condition of
exercising any of the rights or gaining the
benefits and protections in the state law
which correspond to those afforded by
chapter 5, than those obligations or re­
sponsibilities imposed upon lessees in
chapter 5; and
(vi) Substantially similar or more favor­
able rights and protections are provided
to lessees under conditions substantially
similar to or more favorable (to lessees)
than those afforded by chapter 5.
(2) In determining whether the provisions
for enforcement of the state law referred to
in paragraph (b)(1) of this appendix are
adequate, consideration will be given to the
extent to which, under the laws of the state,
provision is made for
(i) Administrative enforcement, includ4 This paragraph is not to be construed as indicating that
the Board will consider adversely any additional require­
ments of state law which are not inconsistent with the
purpose of the act or the requirements imposed under
chapter 5.

Appendix A
ing necessary facilities, personnel and
funding;
.
(ii) Criminal liability for willful and
knowing violation with penalties substan­
tially similar to those prescribed under
section 112 of the act, except that more
severe criminal penalties may be
prescribed;
(iii) Civil liability for failure to comply
with the provisions of the state law sub­
stantially similar to that provided under
sections 130, 131 and 185(b) of the act,
except that more severe civil liability pen­
alties may be prescribed;
(iv) In leases where the lessee’s liability
at the end of the lease term is based on
the estimated value of the leased proper­
ty, a limitation on the lessee’s liability at
the end of the lease term substantially
similar to that provided in section 183(a)
of the act, and a provision requiring that
penalties be reasonable substantially sim­
ilar to that provided in section 183(b) of
the act, except that stricter standards on
end-term liability and penalty provisions
may be prescribed; and
(v) A statute of limitations with respect
to civil liability of substantially similar
duration to that provided under section
185(c) of the act, except that a longer
duration may be provided.
(d) Public notice o f filing and proposed rule­
making. Following initial review of an appli­
cation filed in accordance with the require­
ments of paragraphs (a) and (b) of this
appendix, notice of such filing and proposed
rulemaking will be published by the Board in
the Federal Register, and a copy of such appli­
cation will be made available for examination
by interested persons during business hours at
the Board and at the Federal Reserve Bank of
each Federal Reserve District in which any
part of the state of the applicant is situated. A
reasonable period of time will be allowed from
the date of such publication for the Board to
receive written comments from interested per­
sons with respect to that application.
(e) Exemption from requirements o f chapter
5. If the Board determines that under the law
of a state consumer lease transactions are sub­
9

Appendix A
ject to requirements which are substantially
similar to or which provide greater protection
and benefit to lessees than those imposed un­
der chapter 5 and that there is adequate provi­
sion for enforcement, the Board will exempt
such class of transactions in that state from
the requirements of chapter 5 in the following
manner and subject to the following
conditions:
(1) Notice of the exemption will be pub­
lished in the Federal Register, and the
Board will furnish a copy of such notice to
the official who made application for such
exemption and to each federal authority re­
sponsible for administrative enforcement of
the requirements of chapter 5.
(2) The appropriate official of any state
which receives an exemption shall inform
the Board within 30 days of the occurrence
of any change in its related law (including
regulations). The report of any such change
shall contain the full text of that change to­
gether with statements setting forth the in­
formation and opinions with respect to that
change as specified in paragraphs (b)(2)
and (4) of this appendix. The official who
has received an exemption shall file with the
Board from time to time such reports as the
Board may require.
(3) The Board will inform the official of
any subsequent amendments to chapter 5
(including the implementing provisions of
this regulation and the Board’s formal in­
terpretations) which might call for amend­
ment of state law, regulations or formal in­
terpretations thereof.
( 0 Adverse determination. (1) If the Board
denies the application for exemption, it will
notify the appropriate state official of the
facts upon which its decision is based and
shall afford that state a reasonable opportu­
nity to demonstrate or achieve compliance.
(2) If, after giving the state an opportunity
to demonstrate or achieve compliance, the
Board finds that it still cannot grant the ex­
emption, the Board will publish in the Fed­
eral Register a notice of its decision and will
furnish a copy of such notice to the official
who made application for such exemption.
(g) Revocation o f exemption. (1) The Board
10

Regulation M
reserves the right to revoke any exemption
if at any time it determines that the state
law does not, in fact, impose requirements
which are substantially similar to or pro­
vide greater protection and benefit to lessees
than those imposed under chapter 5, or that
there is not, in fact, adequate provision for
enforcement.
(2) Before revoking any state exemption,
the Board will notify the appropriate state
official of the facts or conduct which in the
opinion of the Board warrants such revoca­
tion and shall afford that state such oppor­
tunity as the Board deems appropriate to
demonstrate or achieve compliance.
(3) If, after having been afforded the op­
portunity to demonstrate or achieve com­
pliance, the Board determines that the state
has not done so, notice of the Board’s inten­
tion to revoke such exemption shall be pub­
lished as a notice of proposed rulemaking in
the Federal Register. A period of time will
be allowed from the date of such publica­
tion for the Board to receive written com­
ments from interested persons.
(4) In the event of revocation of such ex­
emption, notice of such revocation shall be
published by the Board in the Federal Reg­
ister, and a copy of such notice shall also be
furnished to the appropriate state official
and to the federal authorities responsible
for enforcement of requirements of chapter
5, and the class of transactions affected
within that state shall then be subject to the
requirements of chapter 5, to administrative
enforcement as provided under section 108,
to criminal liability as provided under section
112, and to civil liability as provided under
sections 130, 131, and 185(b) of the act.

APPENDIX B—Procedures and Criteria
for Board Determination Regarding
Preemption
Procedures and criteria under which any state
may apply for a determination that a state
law 1 is not inconsistent with and not pre­
1 Any reference to state law in this appendix includes a
reference to any regulations which implement state law and
formal interpretations thereof by a court of competent ju­
risdiction or a duly authorized agency of that state.

Regulation M
empted by a provision of chapter 5 of the a c t2
pursuant to section 213.7 of this regulation.
I (a) Application. Any state may make applica-.
tion to the Board pursuant to the terms of this
appendix and the Board’s Rules of Procedure
(12 CFR part 262), for a determination that a
law of such state is consistent 3 with a provi­
sion of chapter 5 of the act, because such state
law provides greater protection and benefit to
lessees than does the provision of chapter 5,
that such law is consistent with a provision of
chapter 5 for any other reason, or for a deter­
mination of any issues not clearly covered by
section 213.7 of this regulation with regard to
the relationship of the federal law to the state
law. Such application shall be made by letter
addressed to the Board signed by the gover­
nor, attorney general or any official of the
state having responsibilities under the state
law.
(b) Supporting documents. The application
shall be accompanied by:
(1) A copy of the full text of the laws of
the state which are claimed by the applicant
to be consistent with a provision of chapter
5 or whose relationship (with regard to
consistency or inconsistency) to a provision
of chapter 5 is claimed by the applicant to
be not clearly covered by the standards and
criteria for comparison set forth in section
213.7 of this regulation.
(2) A comparison of each requirement of
the state law with the corresponding re­
quirement of chapter 5, with reasons to sup­
port the claim that the state law is consis­
tent with a provision of chapter 5 or that
the relationship (with regard to consistency
or inconsistency) between the state law and
chapter 5 is not clearly covered by the stan­
dards and criteria set forth in section 213.7
of this regulation.
(3) A copy of the full text of any provi­
sions of state law corresponding to sections

2 Any reference in this appendix to chapter 5 of the act
or any section thereof includes a reference to the imple­
menting provisions of this regulation and the Board’s for­
mal interpretations thereof.
3 For purposes of this appendix, the terms “consistent”
and “not inconsistent” shall convey the same meaning and
shall involve the same evidentiary showing.

Appendix B
112, 130, 131, 183(a), 183(b), 185(b), and
185(c) of the act (if applicable), together
with reasons for the applicant’s claim that
such state provisions are not inconsistent
(because they provide greater protection
and benefit to lessees or for other reasons)
with the act.
(4) A statement that there are no state
laws (including administrative or judicial
interpretations) other than those submitted
to the Board which have any bearing on
whether or not the state law is consistent
with a provision of chapter 5.
(5) A statement identifying the office des­
ignated or to be designated to administer
the state laws referred to in paragraph
(b) (1) of this appendix. If no such admin­
istrative office exists, then a statement iden­
tifying the office to which the Board can
address any correspondence regarding the
request for such determination shall accom­
pany the application.
(c) Criteria fo r determination. The Board
will consider the following criteria along with
any other relevant information, in addition to
the criteria set forth in section 213.7 of this
regulation, in making a determination of
whether or not state law is inconsistent with a
provision of chapter 5. In order for provisions
of state law to be determined to be consistent
with a provision of chapter 5, the provisions
of state law 4 shall, to the extent relevant to
the determination, require that—
(1) Definitions and rules of construction
import the same meaning and have the
same application as those prescribed by this
regulation;
(2) Lessors make all of the applicable dis­
closures required by the corresponding pro­
vision of chapter 5 and this regulation, and
within the same (or more stringent) time
periods as those prescribed by this
regulation;
(3) Lessors abide by obligations substan­
tially similar to those prescribed by a provi­
sion of chapter 5 under conditions substan4
This paragraph is not to be construed as indicating that
the Board would consider adversely any additional require­
ments of state law which are not inconsistent with the
purposes of the act or the requirements imposed under
chapter 5.

11

Appendix B
tially similar (or more stringent) to those
in chapter 5;
(4) Lessors abide by the same (or more
stringent) prohibitions as are provided by
chapter 5;
(5) Lessees need comply with no obliga­
tions or responsibilities which are more
costly or burdensome as a condition of ex­
ercising any of the rights or gaining the
benefits and protections provided in the
state law, which correspond to those afford­
ed by chapter 5, than those obligations or
responsibilities imposed on lessees in chap­
ter 5; and
(6) Lessees are to have rights and protec­
tions substantially similar to or more favor­
able than those provided by the correspond­
ing provisions of chapter 5 under conditions
and within time periods which are substan­
tially similar to or more favorable (to les­
sees) than those prescribed by chapter 5.®
(d) Public notice o f filing and proposed rule­
making. In connection with any application
which has been filed in accordance with the
requirements of paragraphs (a) and (b) of
this appendix, notice of such filing and pro­
posed rulemaking will be published by the
Board in the Federal Register, and a copy of
such application will be made available for ex­
amination by interested persons during busi­
ness hours at the Board and at the Federal
Reserve Bank of each Federal Reserve Dis­
trict in which any part of the state of the ap­
plicant is situated. A period of time will be
allowed from the date of such publication for
the Board to receive written comments from
interested persons with respect to that
application.

Regulation M
be published in the following manner and
shall be subject to the following conditions:
(1) Notice of the determination will be
published in the Federal Register, and the
Board will furnish a copy of such notice to
the official who made application for such
exemption and to each federal authority
responsible for administrative enforcement
of the requirements of chapter 5.
(2) The appropriate official of any state
which receives such a determination shall
inform the Board within 30 days of the oc­
currence of any change in its related law
(or regulations). The report of any such
change shall contain copies of the full text
of the law, as changed, together with state­
ments setting forth the information and
opinions with respect to that change as
specified in paragraphs (b)(2) and (4) of
this appendix. The appropriate official of
any state which has received such a deter­
mination shall file with the Board from time
to time such reports as the Board may
require.
(3) The Board will inform the appropriate
official of any state which receives such a
determination of any subsequent amend­
ments to chapter 5 (including the imple­
menting provisions of this regulation and
the Board’s formal interpretations) which
might call for amendment of state law, reg­
ulations, or formal interpretations.

(f) Adverse determination. (1) If, after publi­
cation of notice in the Federal Register as
provided under paragraph (d) of this ap­
pendix, the Board finds that such state law
is inconsistent with a provision of chapter 5,
it will notify the appropriate state official of
the facts upon which such finding is based
(e) Determination that a state law is consis­
and shall afford that state official a reason­
tent with chapter 5. If the Board determines on
able opportunity to demonstrate further
the basis of the information before it that the
that such state law is not inconsistent with
law of a state is consistent with a provision of
the corresponding provisions of chapter 5,
chapter 5, notice of such determination shall
if such state official desires to do so.
(2) If, after having afforded the state offi­
5
A state may make a showing that in certain limited cial such further opportunity to demon­
readily identifiable circumstances a law which may other­
strate that the state law is consistent with a
wise be inconsistent with a provision of chapter 5 is not
provision of chapter 5, the Board finds that
inconsistent under the criteria set forth in paragraph (c) of
this appendix. The Board may determine such state law to
the state law is inconsistent, it will publish
be consistent only under those circumstances but will make
in the Federal Register a notice of its deci­
no such determination if doing so would mislead or confuse
lessees.
sion with respect to such application and
12

Regulation M
will furnish a copy of such notice to the
official who made application for the
determination.
(g) Reversal o f determination. (1) The Board
reserves the right to reverse any determina­
tion made under this appendix to the effect
that a state law is consistent with a provi­
sion of chapter 5 because of subsequently
discovered facts, a change in the state or
federal law (by amendment or administra­
tive or judicial interpretation or otherwise)
or for any other reason bearing on the cov­
erage or impact of the state or federal law.
(2) Before reversing any such determina­
tion, the Board will notify the appropriate
state official of the facts or conduct which,
in the opinion of the Board, warrants such
reversal and shall afford that state such op­
portunity as the Board deems appropriate
under the circumstances to demonstrate
that the determination should not be
reversed.
(3) If, after having been afforded the op­
portunity to demonstrate that its law is con­
sistent with a provision of chapter 5, the
Board determines that the state has not

Appendix C
done so, notice of the Board’s intention to
reverse such determination shall be pub­
lished as a notice of proposed rulemaking in
the Federal Register. A reasonable period of
time will be allowed from the date of such
publication for the Board to receive written
comments from interested persons.
(4) In the event of reversal of such deter­
mination, notice shall be published by the
Board in the Federal Register, and a copy of
such notice shall also be furnished to the
appropriate state official and to the federal
authorities responsible for enforcement of
the requirements of chapter 5, and the state
law affected shall then be considered incon­
sistent with and preempted by chapter 5
within the meaning of section 186(a) of the
act.

APPENDIX C—Model Forms
C -l—Model Open-End or Finance Vehicle
Lease Disclosures
C-2—Model Closed-End or Net Vehicle
Lease Disclosures
C-3—Model Furniture Lease Disclosures

13

Appendix C -l

Regulation M

C -l—Model Open-End or Finance Vehicle Lease Disclosures

t . LESSOR(S)

Date _
These disclosures are provided pursuant to the Federal Consumer Leasing Act.
LESSEE(S)

2 Description of leased properly
Year
[
Make
]
Model
3. |a) Initial Charges, consisting of
□ Capitalized Cost Reduction
H Trade-in Allowance n
(b) Other Charges Payable at Inception, consisting of
PI Advance Mnnrhly Paym ent nf
□ Refundable Security Deposit
□ Delivery Charge
□ Registration Fees
O
_
.
Total Payment Due a t Inception;
4. lal 8asic Monthly Paym ent
lb) Other Charges Payable Monthly;

[

Bod

Style

I

Vehicle ID #

S

s

%

...

..

£
f l Insurance
Total Monthly Paym ent
S. Term of this lease:

FI
$

Oavments nf £
n n rh«»
rtf eaoh m onth rh*»r«>affer
6. Total o f Basic Monthly Payments:
7 Total of Other Charges Payable to Lessor;
f l Disonsitinn S
.....
I~l Maintenance *

a

t

8. Fees and Taxes
Total am ount you will pay during the term for official fees, registration, certificate o f title, license fees
and taxes.
9. Insurance

□
□
10.
11.
12.
13.
14.

14

$

$

$ ....

We (lessor) will provide the insurance coverage ouoied above for a total premium cost o f $
You (lessee} agree to provide insurance coverage in the am ounts an d types indicated above.
$
valuo o f rh#> u j > h i r l a a f r h o » m1 n f r h o Ib.icji r o / v n (Your liability for this sum may be limited. See Item 14.)
£
Total Lease Obligation;
$
.
(Items 3(a), 6 and 10.)
Initial Value of Vehicle:
S
.
Difference:
(Item 11 less Item 12.)
$
End of Term Liability
(a) The estimated value ol the vehicle stated in Item 10 is based on a reasonable, good faith estim ate of the value of th e vehicle at
the end of the lease term. If the actual value of the vehicle at that time is greater than the estimated value, you will have no f u r ­
th er liability under this lease, except for other charges already incurred (and are entitled t o a
credit o r re fund of any surplus].
If the actual value of the vehicle is less than the estimated value, you will be liable for any difference up to $ ______________
13 times Item 4 |a]l. For any difference in excess of th at am ount, you will be liable only if
1. Excessive use or damage (as described in Item 1S] [representing m ore than normal wear and tear] resulted inan unusually
low value at th e end of the term.
2. You voluntarily agree with us after the end o f the lease term t o make a higher paym ent.
3. The matter is not otherwise resolved and we win a lawsuit against you seeking a higher paym ent.
Should we bring a lawsuit against you, we must prove that ou r original estim ate of the value of th e leased p roperty 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 original estimated value, although the original estim ate was reasonable, because o f an unanticipated decline in value for
that type of vehicle.
Unless we prove that the excess amount owed was the result of excessive use or unreasonable wear and tear, we will pay
your reasonable attorney’s lees.
(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 t h e ______________ value of the leased vehicle which could be realized at
sale. The appraised value shall then be used as the actual value.
E ilim otpri

Appendix C -l

Regulation M

15. Standards for Wear and Use
The following standards are applicable for determining unreasonable or excessive wear and us« o f th e leased vehicle: .

16. Maintenance
[You are responsible for the following m aintenance and servicing of th e leased vehicle:

[We are responsible for the following maintenance and servicing o f the leased vehicle:

17. Warranties
The leased vehicle is subject t o the following express w a rra ntie s:-

18. Early Termination and Default
(a) You may term inate this lease before

The

end of the lease term under th e following c o n d itio n s :.

The charge for such early termination ts
(b) We may terminate this lease before the end of the lease term under th e following c o n d itio n s :,

Upon such termination we shall be entitled t o th e following charge(s) for

(c) To the extent these charges take into ac count the value of the vehicle at th e end of the lease term , you have the same right to
a professional appraisal as t h a t stated in Item 14(b).
19. Security Interest
We reserve a security interest of th e following type in the property listed below to secure perform ance of your obligations under
this le a s e :_______________ - ---------------------------------------------------- -- —
---------------------------------------—
------------------------------

20. Late Payments
The charge for late paym ents is _
21. O ption to Purchase
[You have an op tio n to purchase th e leased vehicle a t th e following times:
If at th e end of the tBrm, th e price will be $
__________ _
If prior t o th e end of th e te rm , th e price will be $ _________ ________ _____
[You have n o op tio n t o purchase th e leased vehicle,]

15

Appendix C -l

Instructions for Completion of Model
Open-End or Finance Vehicle Lease
Disclosures
General Instructions
Completion of this form may be facilitated by
reference to the following instructions. Any
question as to the permissibility or accuracy
of a specific disclosure may be answered by
reference to Regulation M, 12 CFR Part 213.
Information which is required to be dis­
closed may be estimated if the information is
unknown or unavailable, provided that the in­
formation is clearly identified as an estimate
and the estimate is based on the best informa­
tion available and is reasonable.
Any inapplicable disclosures should be de­
leted. This form is based on a monthly period­
ic payment. Any lessor whose lease contem­
plates a different payment period should
change the form where it refers to “monthly”
amounts to read “weekly” or other time peri­
od, as appropriate.
All numerical amounts must be stated in
figures and shall be printed in not less than
the equivalent of ten point type or elite type­
written numerals or legibly handwritten. Par­
agraph numbers need not be printed in ten
point type or its equivalent.
Specific Instructions
Item 1. The disclosures must be made on a
written dated statement. All lessors and les­
sees must be identified by name. If, for exam­
ple, one person arranges the lease and another
person enters into the lease, both must be
identified as lessors. An address may augment
the identification but need not be supplied as
part of the disclosure form.
Item 2. This disclosure provides a brief de­
scription of the leased property. Lessors may
include a more detailed description including,
for example, special accessories. There is no
requirement that a vehicle identification num­
ber for the vehicle be disclosed.
Item 3. This disclosure shows the total
amount of any initial payment the customer
must make when the lease is entered into. The
16

Regulation M
components of the initial payment must be
identified and may, at the lessor’s option, be
itemized with respect to dollar amount.
This item is divided into two distinct parts.
The items identified in 3(a) are those which
are included in the calculation of the “Total
Lease Obligation.” Those which appear in
3(b) are not included in the “Total Lease Ob­
ligation.” For convenient reference and to
provide the customer with the total amount
due at the inception of the lease, subtotals for
3(a) and 3(b) are provided as well as a com­
bined total of 3(a) and 3(b) (shown as “To­
tal Payment Due at Inception” ).
The term “Capitalized Cost Reduction” is
used to indicate payment in the nature of a
downpayment which reduces the value of the
leased vehicle to be amortized over the term
of the lease.
The “Advance Monthly Payment” is the
total of all amounts collected at the inception
of the lease which are to be attributed to a
monthly payment(s). For example, if the first
month’s rental payment is collected at the in­
ception, the form might read “Advance
Monthly Payment of the first month’s rent”
or a similar phrase. If the last month’s pay­
ment, or any other payment in the nature of
rental for a portion of the term, is collected at
the inception, appropriate language should be
provided to describe the components of the
“Advance Monthly Payment.”
Checklists are provided for both 3(a) and
3(b) to aid in identifying their components.
Blank spaces and check boxes are provided to
identify any other elements which are to be
included in these items.
Item 4. This item discloses the payment the
lessee must make each payment period. This
item is divided into two parts. The terms in
4(a) are those portions of each payment
which are included in the computation of the
“Total Lease Obligation.” This item includes
sales/use taxes paid on the periodic (month­
ly) payment. The terms in 4(b) are not in­
cluded in the “Total Lease Obligation.” For
convenient reference and to provide the cus­
tomer with the total amount of each payment,
subtotals are provided for 4(a) and 4(b) as
well as the combined total of 4(a) and 4(b)
(shown as the “Total Monthly Payment”).

Appendix C -l

Regulation M
The components of 4(a) and 4(b) may be
itemized as to dollar amount.
Item 5. This item discloses the term of the
lease, the date of the first periodic payment
and the dates or periods of all subsequent pe­
riodic payments. The blank spaces should be
filled in with the appropriate terms. For exam­
ple, after the phrase “Term of this lease:” the
lessor may place the words “24 months” or
“April 2, 1977, through April 2, 1979,” as ap­
propriate. In the blank spaces provided after
the phrase “The first monthly payment of:”
should be the appropriate amount and date.
The first monthly payment may be part or all
of the “Advance Monthly Payment” disclosed
under 3(b). The phrase “subsequent pay­
ments o f ’ should be preceded by the appropri­
ate number of payments and followed with
the appropriate terms, such as “$100.00 on
the 2d of each month thereafter.”
Item 6. This item discloses the total of the
basic monthly payments payable over the
term of the lease. This figure is computed by
multiplying the basic monthly payment from
Item 4(a) by the number of subsequent pay­
ments in Item 5 and adding to the product the
basic portion of the first monthly payment.
This figure will be used in computing the “To­
tal Lease Obligation.”
Item 7. This item discloses the total of other
charges payable to the lessor. This excludes
charges for official fees, taxes, insurance and
charges disclosed as totals under other items.
The individual components must be identified
and itemized as to amount. A blank check box
is provided in order to add to the list, as
necessary.
Item 8. This item discloses the total amount
to be paid by the lessee during the lease term
for taxes and other official fees.

disclosure is to be completed by identifying
the types and amounts of insurance coverage
following the colon at the end of the first sen­
tence. If the lessor is to provide the coverage
the top check box should be filled in and the
total premium cost indicated in the blank
space provided. Otherwise the bottom check
box should be filled in.
Item 10. This item provides for disclosure of
the estimated value of the leased vehicle at the
end of the term, an element of the “Total
Lease Obligation.” A blank space is provided
in which to indicate whether the value shown
is, for example, “retail” or “wholesale” value.
Items 11, 12 and 13. These items provide for
disclosure of the difference between the “Total
Lease Obligation” and the vehicle’s value at
the inception of the lease. The definition of
“Total Lease Obligation” is the sum of any
initial charges (Item 3 (a)), the total of basic
monthly payments (Item 6) and the estimat­
ed value of the property at the end of the term
(Item 10). The “Total Lease Obligation” does
not include items such as refundable security
deposits and insurance premiums.
Item 14. This item provides disclosures with
respect to the lessee’s liability at the end of the
lease term. The bracketed phrase in the sec­
ond sentence is appropriate only where the
lessee will be given any surplus resulting from
the disposition. The lessor may, in Item 14(a)
1, reference the standards set forth in Item 15,
if the lessor set such standards. If the lessor
does not set standards for wear and use, the
second bracketed phrase should be used. Item
14(b) discloses the lessee’s right to an inde­
pendent appraisal. The blank space in Item
14(b) is provided to indicate whether the val­
ue of the appraisal should be, for example,
“wholesale” or “retail.” This item should be
consistent with the type of value used in Item
10.

Item 9. This item requires disclosure of the
types and amounts of insurance coverage,
with their total premium cost, if the insurance
is provided by the lessor. In the alternative,
only the types and amounts of coverage re­
quired of the lessee must be disclosed if the
lessee provides the insurance coverage. The

Item 15. This item discloses reasonable stan­
dards for wear and use established by the les­
sor. The lessor is permitted but not required
to set such standards. Therefore, the disclo­
sure may be omitted by lessors who do not set
standards for wear and use.
17

Appendix C -l
Item 16. This item provides for disclosure of
the maintenance and servicing responsibilities
of the parties. These responsibilities may be
allocated either to the lessor or to the lessee,
or may be divided between them.
Item 17. This item discloses all express war­
ranties on the leased property made by the
manufacturer or lessor and available to the
lessee. A brief identification of the warranty
must be supplied. A reference to the standard
manufacturer’s warranty, for example, would
suffice.
Item 18. This item discloses the conditions
under which the lessee may terminate the
lease prior to the end of the lease term. It also
discloses the amount or method of determin­
ing the amount of the charge which the lessee
must pay for early termination. This item
should disclose the conditions under which
the lessor may terminate the lease prior to the
end of the term, such as default. This item
should also be used to disclose the amount or
method of determining the amount of any de­
fault charges. The charges or method of deter­
mining the charges for early termination by

Regulation M
the lessor other than for lessee’s default
should be separately specified in this item.
Item 19. This disclosure of the security taken
must include, in the space provided, a brief
identification of the types of security interests
and an identification of the property covered
by each.
Item 20. This disclosure indicates the amount
or method of determining the amount of any
charges for late payment.
Item 21. This item provides alternative disclo­
sures covering the several options a lessor may
offer to a lessee to purchase the leased proper­
ty. A lessor should use the disclosures applica­
ble to the lease plan used. For example, if no
option to purchase is offered, only the last sen­
tence of the item should be used. If the lessor
offers an option to purchase, the times at
which it may be exercised must be supplied.
The price must be disclosed for an option ex­
ercised at the end of the term and the price or
method of computing the price for an option
exercised during the lease term must be
supplied.

Appendix C-2

Regulation M

C-2—Model Closed-End or Net Vehicle Lease Disclosures

These disclosures are provided pursuant t o the Federal Consumer Leasing Act.
LESSEE(S)

1. LESSOR(S)

2. Description o f leased p i open y
B ody Style

Year
3.

T o ta l P a y m e n t D ue a t In c e p tio n :

□ Capitalized Cost Reduction
□ Trade-in Allowance
□ Advance Monthly Payment o f O Refundable Security Deposit
Term o f this lease:
The first m onthly payment of $ --------paym ents o f $_____________ _o n t h e _
5

T o ta l M o n th ly P a ym e n t:

6

Total of Monthly Payments:

7

T o t a l o f O t h e r C harg es P a y a b le t o L e ssor:

8

Fees a n d T ax e s

□ Delivery Charge
O Registration Fees
S
_____ s u b s e q u e n t

_ o f each m onth thereafter

G M a in te n a n c e $ _
_$

______

Total am ount you will pay during the term for official fees, registration, certificate o f title, license fees
and taxes.
___________________ _ _ _ _ _
9

In s u r a n c e

The following types and am ounts o f insurance will be acquired in connection w ith th is lease:
□
□

We (lessor) will provide th e insurance coverage quoted above for a total pre m iu m cost o f $ _
You (lessee) agree t o provide insurance coverage in the am ounts and types indicated above.

1 0 S ta n d a rd s f o r W e a r a n d Use

The following standards are applicable for determ ining unreasonable or excessive wear and use of the leased vehicle;.

11. Maintenance
[You are responsible for th e following maintenance and servicing of t h e leased vehicle:

[We are responsible fo r the following maintenance and servicing o f th e leased vehicle: _

19

Appendix C-2

12

Regulation M

W a r r a n ti e s

The leased vehicle ii subject to the following express warranties:

13- Early Termination and Oefault
(a) You may terminate this lease before the end o f the lease term under th e following conditions:

The charge for such early termination is

<b)

We may terminate this lease before the end ol the lease term under the following conditions:

Upon such termination we shall be entitled to the following charge(s) for

(c) To the extent th at these charges take into account the value of the vehicle at the end o f the lease term , if you disagree with
the value we assign to the vehicle, you may obtain at your own expense, from an independent third party agreeable t o b o th o f us,
a professional appraisal of t h e ___________________value of the leased vehicle which could be realised at sate. The appraised value
shall then be used as th e actual valup
14, Security Interest
We reserve a security interest o f the fallowing type in the property listed below t o secure perfo rm ance o f your obligations under
this l e a s e : _____ _
_ _ .
. __ .. .
- _
.
....................
______ .
.....

1 5 . L ate P a y m e n t s

The charge for late paym ents is
16. Lessee’s O ption to Purchase
[You have an option to purchase the leased vehicle at the following times:
if at the end of th e term , th e price will be $ ______________.

If prior t o the end of the term, the price will be $
[You have no option t o purchase the leased vehicle.}

20

... . . .

___ . _

Regulation M

Instructions for Completion of Model
Closed-End or Net Vehicle Lease
Disclosures
General Instructions
Completion of this form may be facilitated by
reference to the following instructions. Any
question as to the permissibility or accuracy
of a specific disclosure may be answered by
reference to Regulation M, 12 CFR Part 213.
Information which is required to be dis­
closed may be estimated if the information is
unknown or unavailable, provided that the in­
formation is clearly identified as an estimate
and the estimate is based on the best informa­
tion available and is reasonable.
Any inapplicable disclosures should be de­
leted. This form is based on a monthly period­
ic payment. Any lessor whose lease contem­
plates a different payment period should
change the form where it refers to “monthly”
amounts to read “weekly” or other time peri­
od, as appropriate. All numerical amounts
must be stated in figures and shall be printed
in not less than the equivalent of ten point
type or elite typewritten numerals or legibly
handwritten. Paragraph numbers need not be
printed in ten point type or its equivalent.
Specific Instructions
Item 1. The disclosures must be made on a
written dated statement. All lessors and les­
sees must be identified by name. If, for exam­
ple, one person arranges the lease and another
person enters into the lease, both must be
identified as lessors. An address may augment
the identification but need not be supplied as
part of the disclosure form.
Item 2. This disclosure provides a brief de­
scription of the leased property. Lessors may
include a more detailed description including,
for example, special accessories. There is no
requirement that a vehicle identification num­
ber for the vehicle be disclosed.
Item 3. This disclosure shows the total
amount of any initial payment the customer
must make when the lease is entered into. The
components of the initial payment must be

Appendix C-2
identified and may, at the lessor’s option, be
itemized with respect to dollar amount.
The term “Capitalized Cost Reduction” is
used to indicate a payment in the nature of a
downpayment which reduces the value of the
leased vehicle to be amortized over the term
of the lease.
The “Advance Monthly Payment” is the
total of all amounts collected at the inception
of the lease which are to be attributed to a
monthly payment(s). For example, if the first
month’s rental payment is collected at the in­
ception, the form might read “Advance
Monthly Payment of the first month’s rent”
or a similar phrase. If the last month’s pay­
ment, or any other payment in the nature of
rental for a portion of the term, is collected at
the inception, appropriate language should be
provided to describe the components of the
“Advance Monthly Payment.”
Checklists are provided to aid in identifying
the components. Blank spaces and check box­
es are provided to identify any other elements
which are to be included in this item.
Item 4. This item discloses the term of the
lease, the date of the first periodic payment
and the dates or periods of all subsequent pe­
riodic payments. The blank spaces should be
filled in with the appropriate terms. For exam­
ple, after the phrase “Term of this lease:” the
lessor may place the words “24 months” or
“April 2, 1977, through April 2, 1979,” as ap­
propriate. In the blank spaces provided after
the phrase “The first monthly payment of:”
should be the appropriate amount and date.
The first monthly payment may be part or all
of the “Advance Monthly Payment” disclosed
under Item 3. The phrase “subsequent pay­
ments o f ’ should be preceded by the appropri­
ate number of payments and followed with
the appropriate terms, such as “$100.00 on
the 2d of each month thereafter.”
Item 5. This item discloses the payment the
lessee must make each payment period. The
component parts of the “Total Monthly Pay­
ment” may but need not be identified and
itemized as to amount.
Item 6. This item discloses the total of the
monthly payments payable over the term of
21

Appendix C-2

Regulation M

the lease. This figure is computed by multiply­
ing the monthly payment from Item 5 by the
number of subsequent payments in Item 4 and
adding the first monthly payment to the
product.

manufacturer or lessor and available to the
lessee. A brief identification of the warranty
must be supplied. A reference to the standard
manufacturer’s warranty, for example, would
suffice.

Item 7. This item discloses the total of other
charges payable to the lessor. This excludes
charges for official fees, taxes, insurance and
charges disclosed as totals under other items.
The individual components must be identified
and itemized as to amount. A blank check box
is provided in order to add to the list, as
necessary.

Item 13. This item discloses the conditions
under which the lessee may terminate the
lease prior to the end of the lease term. It also
discloses the amount or method of determin­
ing the amount of the charge which the lessee
must pay for early termination. This item
should disclose the conditions under which
the lessor may terminate the lease prior to the
end of the term, such as default. This item
should also be used to disclose the amount or
method of determining the amount of any de­
fault charges. The charges or method of deter­
mining the charges for early termination by
the lessor other than for lessee’s default
should be separately specified in this item.
The blank space in 13(c) is provided to indi­
cate whether the appraisal should be, for ex­
ample, “retail” or “wholesale.”

Item 8. This item discloses the total amount
to be paid by the lessee during the lease term
for taxes and other official fees.
Item 9. This item requires disclosure of the
types and amounts of insurance coverage,
with their total premium cost, if the insurance
is provided by the lessor. In the alternative,
only the types and amounts of coverage re­
quired of the lessee must be disclosed if the
lessee provides the insurance coverage. The
disclosure is to be completed by identifying
the types and amounts of insurance coverage
following the colon at the end of the first sen­
tence. If the lessor is to provide the coverage
the top check box should be filled in and the
total premium cost indicated in the blank
space provided. Otherwise the bottom check
box should be filled in.
Item 10. This item discloses reasonable stan­
dards for wear and use established by the les­
sor. The lessor is permitted but not required
to set such standards. Therefore, the disclo­
sure may be omitted by lessors who do not set
standards for wear and use.
Item 11. This item provides for disclosure of
the maintenance and servicing responsibilities
of the parties. These responsibilities may be
allocated either to the lessor or to the lessee,
or may be divided between them.
Item 12. This item discloses all express war­
ranties on the leased property made by the

Item 14. This disclosure of the security taken
must include, in the space provided, a brief
identification of the types of security interests
and an identification of the property covered
by each.
Item 15. This disclosure indicates the amount
or method of determining the amount of any
charges for late payment.
Item 16. This item provides alternative disclo­
sures covering the several options a lessor may
offer to a lessee to purchase the leased proper­
ty. A lessor should use the disclosures applica­
ble to the lease plan used. For example, if no
option to purchase is offered, only the last sen­
tence of the item should be used. If the lessor
offers an option to purchase, the times at
which it may be exercised must be supplied.
The price must be disclosed for an option ex­
ercised at the end of the term and the price or
method of computing the price for an option
exercised during the lease term must be
supplied.

Appendix C-3

Regulation M

C-3—Model Furniture Lease Disclosures

D a te _
These disclosures are provided pursuant to the Federal Consumer Leasing Act,
1,

2

LESSORfS)

Description of leased property {is attached]
Color
I Stock #
Item

□ Refundable Security Deposit
□ Advance Monthly Paym ent o f _
Term of ihit lease

LESSEE(S]

Qty.

Mfg.

□

Delivery Charge

□

-

subsequent
_
nf pach m onth thereafter.
p a y m f ln is o f*
on the
Total Monthly Payment:
Total ol Monthly Payments;
Total of Other Charges Payable to Lessor
n Pick-up Charge $
□
.
-S
Fees and Taxes
Total am ount you will pay during th e term fo r official fees and taxes.
Insurance
□ You (lessee) agree to provide insurance coverage of the following types in th e following am ounts:
-----□

We (lessor) will provide the following types and am ounts of insurance coverage:

------

Total premium cost:
_per m onth in lieu of insurance.
0 You agree t o pay a waiver fee of $ _
Total Waiver Fee:
10. Maintenance
[You are responsible for the following maintenance of the leased p ro p e rty :
(We are responsible for the following maintenance of th e leased p ro p e rty :
11. Warranties
The leased pro perty is subject t o the following express warranties:

23

Appendix C-3

Regulation M

12. Standards for Wear and Use
The following standards are applicable for determ ining unreasonable or excessive wear and use o f th e leased property;

13. Early Termination and Default
(a) You may terminate this lease before the end o f the lease term under the following conditions:

The charge for such early term ination is

{b) We may terminate this lease before the end o f the lease term undei the following c onditions:.

Upon such termination we shall be entitled to the following charge(s):

14. Security Interest
We reserve a security interest of th e following type in the property listed below t o secure performance of your obligations under
this l e a s e : _____ ______ _____________________ _____________ _______________________________________ ______________________

15. Late Payments
The charge for late paym ents rs .
16. Option to Purchase
(You have an option to purchase any or all items o f the leased pro perty at th e following times:
If at th e end o f th e term , the price will be $ _
If prior to the end of the term , the price will be $
(You have no option ta purchase the leased property ]

24

Regulation M

Appendix C-3

Instructions for Completion of Model
Furniture Lease Disclosures

added (as indicated by the blank columns) if
the lessor desires.

General Instructions

Item 3. This disclosure shows the total
amount of any initial payment the customer
must make when the lease is consummated.
The components of the initial payment must
be identified and may, at the lessor’s option,
be itemized with respect to dollar amount.
Additional components may be added to the
list, as necessary, by use of the blank check
box.
The “Advance Monthly Payment” is the
total of all amounts collected at the inception
of the lease which are to be attributed to a
monthly payment (s). For example, if the first
month’s rental payment is collected at the in­
ception, the form might read “Advance
Monthly Payment of the first month’s rent”
or a similar phrase. If the last month’s pay­
ment, or any other payment in the nature of
rental for a portion of the term, is collected at
the inception, appropriate language should be
provided to describe the components of the
“Advance Monthly Payment.”

Completion of this form may be facilitated by
reference to the following instructions. Any
question as to the permissibility or accuracy
of a specific disclosure may be answered by
reference to Regulation M, 12 CFR Part 213.
Information which is required to be dis­
closed may be estimated if the information is
unknown or unavailable, provided that the in­
formation is clearly identified as an estimate
and the estimate is based on the best informa­
tion available and is reasonable.
Any inapplicable disclosures should be de­
leted. This form is based on a monthly period­
ic payment. Any lessor whose lease contem­
plates a different payment period should
change the form where it refers to “monthly”
amounts to read “weekly” or other time peri­
od, as appropriate.
All numerical amounts must be stated in
figures and shall be printed in not less than
the equivalent of ten point type or elite type­
written numerals or legibly handwritten. Par­
agraph numbers need not be printed in ten
point type or its equivalent.
Specific Instructions
Item I. The disclosures must be made on a
written dated statement. All lessors and les­
sees must be identified by name. If, for exam­
ple, one person arranges the lease and another
person enters into the lease, both must be
identified as lessors. An address may augment
the identification but need not be supplied as
part of the disclosure form.
Item 2. This disclosure provides a brief de­
scription of the leased items. In the left col­
umn the name of the item should appear. The
relevant entry should be made in the appro­
priate box in the columns to the right of the
names of the items as indicated by the column
headings. All of the descriptive elements in
the column headings, except the one labeled
“Item,” are examples only. Those which are
inapplicable to a lease plan may be deleted.
Other descriptive column headings may be

Item 4. This item discloses the term of the
lease, the date of the first periodic payment
and the dates or periods of all subsequent pe­
riodic payments. The blank spaces should be
filled in with the appropriate terms. For exam­
ple, after the phrase “Term of this lease:” the
lessor may place the words “24 months” or
“April 2, 1977, through April 2, 1979,” as ap­
propriate. In the blank spaces provided after
the phrase “The first monthly payment of:”
should be the appropriate amount and date.
The first monthly payment may be part or all
of the “Advance Monthly Payment” disclosed
under Item 3. The phrase “subsequent pay­
ments o f ’ should be preceded by the appropri­
ate number of payments and followed with
the appropriate terms, such as “$100.00 on
the 2d of each month thereafter.”
Item 5. This item discloses the payment the
lessee must make each month. The compo­
nent parts of the monthly payment may but
need not be itemized as to amount.
Item 6. This item discloses the total of the
monthly payments payable over the term of
25

Appendix C-3
the lease. This figure is computed by multiply­
ing the amount of the monthly payment in
Item 5 by the number of subsequent payments
in Item 4 and adding to that product the
amount of the first monthly payment.
Item 7. This item discloses the total of other
charges payable to the lessor. This excludes
charges for official fees, taxes, insurance and
charges disclosed as totals under other items.
The individual components must be identified
and itemized as to amount. A blank check box
is provided in order to add to the list, as
necessary.
Item 8. This item discloses the total amount
to be paid by the lessee during the lease term
for taxes and other official fees.
Item 9. This item provides alternative meth­
ods of disclosing insurance coverage. It pro­
vides a disclosure for situations in which the
lessee provides the coverage, in which case the
types and amounts of coverage must be speci­
fied. It provides a disclosure for situations in
which the lessee procures coverage through
the lessor, in which case the types, amounts
and costs of coverage must be specified. It also
provides for disclosure of a fee in lieu of
insurance.
Item 10. This item provides for disclosure of
the maintenance and servicing responsibilities
of the parties. These responsibilities may be
allocated either to the lessor or to the lessee,
or may be divided between them.
Item 11. This item discloses all express war­
ranties applicable to the leased property made
by the manufacturer or lessor and available to
the lessee. A brief identification of the warran­
ty must be supplied. A reference to the stan­
dard manufacturer’s warranty would suffice.
Item 12. This item discloses standards for
wear and use established by the lessor. The
lessor is permitted, but not required, to set
such standards.
26

Regulation M
Item 13. This item discloses the conditions
under which the lessee may terminate the
lease prior to the end of the lease term. It also
discloses the amount or method of determin-.
ing the amount of the charge which the lessee
must pay for early termination. This item
should disclose the conditions under which
the lessor may terminate the lease prior to the
end of the term, such as default. This item
should also be used to disclose the amount or
method of determining the amount of any de­
fault charges. The charges or method of deter­
mining the charges for early termination by
the lessor other than for lessee’s default
should be separately specified in this item.
Item 14. This disclosure of the security taken
must include, in the space provided, a brief
identification of the types of security interests
and an identification of the property covered
by each such interest.
Item 15. This disclosure indicates the amount
or method of determining the amount of any
charges for late payment.
Item 16. This item provides alternative disclo­
sures covering the several options a lessor may
offer to a lessee to purchase the leased proper­
ty. A lessor should use the disclosures applica­
ble to the lease plan used. For example, if no
option to purchase is offered, only the last sen­
tence of the item should be used. If the lessor
offers an option to purchase, the times at
which it may be exercised must be supplied.
The price must be disclosed for an option ex­
ercised at the end of the term and the price or
method of computing the price for an option
exercised during the lease term must be
supplied.

APPENDIX D—Federal Enforcement
Agencies
The following list indicates which federal
agency enforces Regulation M for particular
classes of business. Any questions concerning
compliance by a particular business should be
directed to the appropriate enforcement
agency.

Regulation M

•

National Banks
Consumer Community and Fair Lending Ex­
amination Division
Comptroller of the Currency
Washington, D.C. 20219
State Member Banks
Federal Reserve Bank serving the District in
which the state member bank is located.
Nonmember Insured Banks
Federal Deposit Insurance Corporation Re­
gional Director for the region in which the
nonmember insured bank is located.
Savings Institutions Insured by the FSLIC and
Members o f the FHLB System (except fo r sav­
ings banks insured by FDIC)
The Federal Home Loan Bank Board supervi­
sory agent in the district in which the institu­
tion is located.
Federal Credit Unions
Regional office of the National Credit Union
Administration serving the area in which the
federal credit union is located.

Appendix D
Those Subject to Civil Aeronautics Board
Director, Bureau of Consumer Protection
Civil Aeronautics Board
1825 Connecticut Avenue, N.W.
Washington, D.C. 20428
Those Subject to Packers and Stockyards Act
Nearest Packers and Stockyards Administra­
tion area supervisor
Federal Land Banks, Federal Land Bank As­
sociations, Federal Intermediate Credit Banks,
and Production Credit Associations
Farm Credit Administration
490 L’Enfant Plaza, S.W.
Washington, D.C. 20578
A ll Other Lessors (lessors operating on a local
or regional basis should use the address o f the
FTC regional office in which tney operate)
Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580

27

Truth in Lending Act
15 USC 1601; 82 Stat. 146; Pub. L. 90-321 (May 29, 1968); as amended October 26, 1970, October 28,
1974, February 27, 1976, March 23, 1976, and March 31, 1980

Public Law 90-321 (as amended), Title /
(Chapters 1, 2, and 5)

CHAPTER 1—GENERAL
PROVISIONS
Section
101 Short title
102 Findings and declaration of purpose
103 Definitions and rules of construction
104 Exempted transactions
105 Regulations
106 Determination of finance charge
107 Determination of annual percentage
rate
108 Administrative enforcement
109 Views of other agencies
110 [Repealed]
111 Effect on other laws
112 Criminal liability for willful and know­
ing violation
113 Effect on governmental agencies
114 Reports by Board and Attorney
General
115 [Repealed]

compare more readily the various credit terms
available to him and avoid the uninformed use
of credit, and to protect the consumer against
inaccurate and unfair credit billing and credit
card practices.
(b) The Congress also finds that there has
been a recent trend toward leasing automo­
biles 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 household
purposes so as to enable the lessee to compare
more readily the various lease terms available
to him, limit balloon payments in consumer
leasing, enable comparison of lease terms with
credit terms where appropriate, and to assure
meaningful and accurate disclosures of lease
terms in advertisements.

SECTION 103—Definitions and Rules of
Construction

SECTION 101—Short Title

(a) The definitions and rules of construction
set forth in this section are applicable for the
purposes of this title.

This title may be cited as the Truth in Lend­
ing Act.

(b) The term “Board" refers to the Board of
Governors of the Federal Reserve System.

SECTION 102—Findings and
Declaration of Purpose

(c) The term “organization” means a corpo­
ration, government or governmental subdivi­
sion or agency, trust, estate, partnership, co­
operative, or association.

(a) The Congress finds that economic stabili­
zation would be enhanced and the competi­
tion 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 cred­
it terms so that the consumer will be able to

(d) The term “person” means a natural per­
son or an organization.
(e) The term “credit" means the right grant­
ed by a creditor to a debtor to defer payment
of debt or to incur debt and defer its payment.
(f) The term “creditor” refers only to a per­
son who both (1) regularly extends, whether
29

§103
in connection with loans, sales of property or
services, or otherwise, consumer credit which
is payable by agreement in more than four in­
stallments or for which the payment of a fi­
nance charge is or may be required; and (2) is
the person to whom the debt arising from the
consumer credit transaction is initially pay­
able on the face of the evidence of indebted­
ness or, if there is no such evidence of indebt­
edness, by agreement. Notwithstanding the
previous sentence, a person who regularly ar­
ranges for the extension of consumer credit,
which is payable in more than four install­
ments or for which the payment of a finance
charge is or may be required, from persons
who are not creditors is a creditor, and in the
case of an open end credit plan involving a
credit card, the card issuer and any person
who honors the credit card and offers a dis­
count which is a finance charge are creditors.
For the purposes of the requirements imposed
under chapter 4 and sections 127(a)(5),
127(a)(6), 127(a)(7), 127(b)(1), 127(b)
(2), 127(b)(3), 127(b)(8), and 127(b)(10)
of chapter 2 of this title, the term “creditor”
shall also include card issuers whether or not
the amount due is payable by agreement in
more than four installments or the payment of
a finance charge is or may be required, and
the Board shall, by regulation, apply these re­
quirements to such card issuers, to the extent
appropriate, even though the requirements are
by their terms applicable only to creditors of­
fering open end credit plans.
(g) The term “credit sale” refers to any sale
in which the seller is a creditor. The term in­
cludes any contract in the form of a bailment
or lease if the bailee or lessee contracts to pay
as compensation for use a sum substantially
equivalent to or in excess of the aggregate val­
ue of the property and services involved and it
is agreed that the bailee or lessee will become,
or for no other or a nominal consideration has
the option to become, the owner of the prop­
erty 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 or extended is a natural
30

Regulation M (Statutory Provisions)
person, and the money, property, or services
which are the subject of the transaction are
primarily for personal, family, or household
purposes.
(i) The term “open end credit plan” means a
plan under which the creditor reasonably con­
templates repeated transactions, which pre­
scribes the terms of such transactions, and
which provides for a finance charge which
may be computed from time to time on the
outstanding unpaid balance. A credit plan
which is an open end credit plan within the
meaning of the preceding sentence is an open
end credit plan even if credit information is
verified from time to time.
(j) The term “adequate notice”, as used in
section 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 cred­
it card, or on each periodic statement of ac­
count, issued to the cardholder, or by any oth­
er means reasonably assuring the receipt
thereof by the cardholder.
(k) The term “credit card” means any card,
plate, coupon book or other credit device ex­
isting for the purpose of obtaining money,
property, labor, or services on credit.
(/) 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
person who has agreed with the card issuer to
pay obligations arising from the issuance of a
credit card to another person.
(n) The term “card issuer” means any person
who issues a credit card, or the agent of such
person with respect to such card.

Regulation M (Statutory Provisions)
(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 authori­
ty 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 in­
creasing the regular price to a cardholder
which is not imposed upon customers paying
by cash, check, or similar means.
(r) The term “State” refers to any State, the
Commonwealth of Puerto Rico, the District
of Columbia, and any territory or possession
of the United States.
(s) The term “agricultural purposes” in­
cludes the production, harvest, exhibition,
marketing, transportation, processing, or
manufacture of agricultural products by a nat­
ural person who cultivates, plants, propagates,
or nurtures those agricultural products, in­
cluding but not limited to the acquisition of
farmland, real property with a farm residence,
and personal property and services used pri­
marily in farming.
(t) The term “agriculturalproducts” 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 prod­
ucts raised or produced on farms and any
processed or manufactured products thereof.
(u) The term “material disclosures” means
the disclosure, as required by this title, of the
annual percentage rate, the method of deter­
mining the finance charge and the balance
upon which a finance charge will be imposed,
the amount of the finance charge, the amount
to be financed, the total of payments, the
number and amount of payments, and the due
dates or periods of payments scheduled to re­
pay the indebtedness.

§ 104
(v) The term “dwelling” means a residential
structure or mobile home which contains one
to four family housing units, or individual
units of condominiums or cooperatives.
(w) The term “residential mortgage transac­
tion” means a transaction in which a mortage,
deed of trust, purchase money security inter­
est arising under an installment sales contract,
or equivalent consensual security interest is
created or retained against the consumer’s
dwelling to finance the acquisition or initial
construction of such dwelling.
(x) 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 or the provision thereof
in question.
(y) The disclosure of an amount or percent­
age which is greater than the amount or per­
centage required to be disclosed under this ti­
tle does not in itself constitute a violation of
this title.

SECTION 104—Exempted Transactions
This title does not apply to the following:
(1) Credit transactions involving exten­
sions of credit primarily for business, com­
mercial, or agricultural purposes, or to gov­
ernment or governmental agencies or
instrumentalities, or to. organizations.
(2) Transactions in securities or commodi­
ties accounts by a broker-dealer registered
with the Securities and Exchange
Commission.
(3) Credit transactions, other than those
in which a security interest is or will be ac­
quired in real property, or in personal prop­
erty used or expected to be used as the prin­
cipal dwelling of the consumer, in which
the total amount financed exceeds $25,000.
(4) Transactions under public utility tar­
iffs, if the Board determines that a State
regulatory body regulates the charges for
the public utility services involved, the
charges for delayed payment, and any dis­
count allowed for early payment.
31

§ 105

SECTION 105—Regulations
(a) The Board shall prescribe regulations to
carry out the purposes of this title. These reg­
ulations may contain such classifications, dif­
ferentiations, or other provisions, and may
provide for such adjustments and exceptions
for any class of transactions, as in the judg­
ment of the Board are necessary or proper to
effectuate the purposes of this title, to prevent
circumvention or evasion thereof, or to facili­
tate compliance therewith.
(b) The Board shall publish model disclosure
forms and clauses for common transactions to
facilitate compliance with the disclosure re­
quirements of this title and to aid the borrow­
er or lessee in understanding the transaction
by utilizing readily understandable language
to simplify the technical nature of the disclo­
sures. In devising such forms, the Board shall
consider the use by creditors or lessors of data
processing or similar automated equipment.
Nothing in this title may be construed to re­
quire a creditor or lessor to use any such mod­
el form or clause prescribed by the Board un­
der this section. A creditor or lessor shall be
deemed to be in compliance with the disclo­
sure provisions of this title with respect to
other than numerical disclosures if the credi­
tor or lessor (1) uses any appropriate model
form or clause as published by the Board, or
(2) uses any such model form or clause and
changes it by (A ) deleting any information
which is not required by this title, or (B) rear­
ranging the format, if in making such deletion
or rearranging the format, the creditor or les­
sor does not affect the substance, clarity, or
meaningful sequence of the disclosure.
(c) Model disclosure forms and clauses shall
be adopted by the Board after notice duly giv­
en in the Federal Register and an opportunity
for public comment in accordance with sec­
tion 553 of title 5, United States Code.
(d) Any regulation of the Board, or any
amendment or interpretation thereof, requir­
ing any disclosure which differs from the dis­
closures previously required by this chapter,
32

Regulation M (Statutory Provisions)
chapter 4, or chapter 5, or by any regulation
of the Board promulgated thereunder shall
have an effective date of that October 1 which
follows by at least six months the date of
promulgation, except that the Board may at
its discretion take interim action by regula­
tion, amendment, or interpretation to length­
en the period of time permitted for creditors
or lessors to adjust their forms to accommo­
date new requirements or shorten the length
of time for creditors or lessors to make such
adjustments when it makes a specific finding
that such action is necessary to comply with
the findings of a court or to prevent unfair or
deceptive disclosure practices. Notwithstand­
ing the previous sentence, any creditor or les­
sor may comply with any such newly promul­
gated disclosure requirements prior to the
effective date of the requirements.

SECTION 106—Determination of
Finance Charge
(a) Except as otherwise provided in this sec­
tion, the amount of the finance charge in con­
nection 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 di­
rectly or indirectly by the creditor as an inci­
dent to the extension of credit. The finance
charge does not include charges of a type pay­
able in a comparable cash transaction. Exam­
ples of charges which are included in the fi­
nance charge include any of the following
types of charges which are applicable.
(1) Interest, time price differential, and
any amount payable under a point, dis­
count, or other system of additional
charges.
(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 guar­
antee or insurance protecting the creditor
against the obligor’s default or other credit
loss.

Regulation M (Statutory Provisions)
(b) Charges or premiums for credit life, acci­
dent, or health insurance written in connec­
tion with any consumer credit transaction
shall be included in the finance charge unless
(1) the coverage of the debtor by the insur­
ance is not a factor in the approval by the
creditor of the extension of credit, and this
fact is clearly disclosed in writing to the
person applying for or obtaining the exten­
sion of credit; and
(2) in order to obtain the insurance in con­
nection 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 disclo­
sure to him of the cost thereof.
(c) Charges or premiums for insurance, writ­
ten in connection with any consumer credit
transaction, against loss of or damage to prop­
erty or against liability arising out of the own­
ership or use of property, shall be included in
the finance charge unless a clear and specific
statement in writing is furnished by the credi­
tor to the person to whom the credit is extend­
ed, 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 regula­
tions of the Board in connection with any
transaction, then the creditor need not include
that item in the computation of the finance
charge with respect to that transaction:
(1) Fees and charges prescribed by law
which actually are or will be paid to public
officials for determining the existence of or
for perfecting or releasing or satisfying any
security related to the credit transaction.
(2) The premium payable for any insur­
ance in lieu of perfecting any security inter­
est otherwise required by the creditor in
connection with the transaction, if the pre­
mium does not exceed the fees and charges
described in paragraph (1) which would
otherwise be payable.
(e) The following items, when charged in
connection with any extension of credit se­

cured 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 examina­
tion, title insurance, or similar purposes.
(2) Fees for preparation of a deed, settle­
ment statement, or other documents.
(3) Escrows for future payments of taxes
and insurance.
(4) Fees for notarizing deeds and other
documents.
(5) Appraisal fees.
(6) Credit reports.

SECTION 107—Determination of
Annual Percentage Rate
(a) The annual percentage rate applicable to
any extension of consumer credit shall be de­
termined, in accordance with the regulations
of the Board,
(1) in the case of any extension of credit
other than under an open end credit plan,
as
(A) that nominal annual percentage
rate which will yield a sum equal to the
amount of the finance charge when it is
applied to the unpaid balances of the
amount financed, calculated according to
the actuarial method of allocating pay­
ments made on a debt between the
amount financed and the amount of the
finance charge, pursuant to which a pay­
ment is applied first to the accumulated
finance charge and the balance is applied
to the unpaid amount financed; or
(B) the rate determined by any method
prescribed by the Board as a method
which materially simplifies computation
while retaining reasonable accuracy as
compared with the rate determined un­
der subparagraph (A).
(2) in the case of any extension of credit
under an open end credit plan, as the quo­
tient (expressed as a percentage) of the to­
tal 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.
33

§107
(b) Where a creditor imposes the same fi­
nance 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 mean­
ingful, or would be materially misleading, the
annual percentage rate shall be computed on
such other basis as the Board may by regula­
tion require.
(c) The disclosure of an annual percentage
rate is accurate for the purpose of this title if
the rate disclosed is within a tolerance not
greater than one-eighth of 1 per centum more
or less than the actual rate or rounded to the
nearest one-fourth of 1 per centum. The
Board may allow a greater tolerance to simpli­
fy compliance where irregular payments are
involved.
(d) The Board may authorize the use of rate
tables or charts which may provide for the
disclosure of annual percentage rates which
vary from the rate determined in accordance
with subsection (a )(1 )(A ) by not more than
such tolerances as the Board may allow. The
Board may not allow a tolerance greater than
8 per centum of that rate except to simplify
compliance where irregular payments are
involved.
(e) In the case of creditors determining the
annual percentage rate in a manner other than
as described in subsection (d), the Board may
authorize other reasonable tolerances.

SECTION 108—Administrative
Enforcement
(a) Compliance with the requirements im­
posed under this title shall be enforced under
(1) section 8 of the Federal Deposit Insur­
ance Act, in the case of
(A) national banks, by the Comptroller
of the Currency.
(B) member banks of the Federal Re­
serve System (other than national
banks), by the Board.
(C) banks insured by the Federal De­
posit Insurance Corporation (other than
34

Regulation M (Statutory Provisions)
members of the Federal Reserve Sys­
tem), by the Board of Directors of the
Federal Deposit Insurance Corporation.
(2) section 5(d) of the Home Owners’
Loan Act of 1933, section 407 of the Na­
tional Housing Act, and sections 6(i) and
17 of the Federal Home Loan Bank Act, by
the Federal Home Loan Bank Board (act­
ing directly or through the Federal Savings
and Loan Insurance Corporation), in the
case of any institution subject to any of
those provisions.
(3) the Federal Credit Union Act, by the
Administrator of the National Credit Un­
ion Administration 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 Farm Credit Act of 1971, by the
Farm Credit Administration with respect to
any Federal land bank, Federal land bank
association, Federal intermediate credit
bank, or production credit association.
(b) For the purpose of the exercise by any
agency referred to in subsection (a) of its
powers under any Act referred to in that sub­
section, a violation of any requirement im­
posed under this title shall be deemed to be a
violation of a requirement imposed under that
Act. In addition to its powers under any pro­
vision of law specifically referred to in subsec­
tion (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
specifically committed to some other Govern­
ment agency under subsection (a), the Feder­
al Trade Commission shall enforce such re­
quirements. For the purpose of the exercise by
the Federal Trade Commission of its func­
tions and powers under the Federal Trade

Regulation M (Statutory Provisions)
Commission Act, a violation of any require­
ment 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 Trade Commission under the
Federal Trade Commission Act are available
to the Commission to enforce compliance by
any person with the requirements imposed un­
der this title, irrespective of whether that per­
son is engaged in commerce or meets any oth­
er jurisdictional tests in the Federal Trade
Commission Act.
(d) The authority of the Board to issue regu­
lations under this title does not impair the au­
thority of any other agency designated in this
section to make rules respecting its own pro­
cedures in enforcing compliance with require­
ments imposed under this title.
(e) ( I) In carrying out its enforcement activi­
ties under this section, each agency referred
to in subsection (a) or (c), in cases where
an annual percentage rate or finance charge
was inaccurately disclosed, shall notify the
creditor of such disclosure error and is au­
thorized in accordance with the provisions
of this subsection to require the creditor to
make an adjustment to the account of the
person to whom credit was extended, to as­
sure that such person will not be required
to pay a finance charge in excess of the fi­
nance charge actually disclosed or the dol­
lar equivalent of the annual percentage rate
actually disclosed, whichever is lower. For
the purposes of this subsection, except
where such disclosure error resulted from a
willful violation which was intended to
mislead the person to whom credit was ex­
tended, in determining whether a disclosure
error has occurred and in calculating any
adjustment, (A) each agency shall apply
(i) with respect to the annual percentage
rate, a tolerance of one-quarter of 1 percent
more or less than the actual rate, deter­
mined without regard to section 107(c) of
this title, and (ii) with respect to the fi­
nance charge, a corresponding numerical
tolerance as generated by the tolerance pro­
vided under this subsection for the annual
percentage rate; except that (B) with re­
spect to transactions consummated after

§ 108
two years following the effective date of sec­
tion 608 of the Truth in Lending Simplifica­
tion and Reform Act, each agency shall
apply (i) for transactions that have a
scheduled amortization of ten years or less,
with respect to the annual percentage rate,
a tolerance not to exceed one-quarter of 1
percent more or less than the actual rate,
determined without regard to section
107(c) of this title, but in no event a toler­
ance of less than the tolerances allowed un­
der section 107(c), (ii) for transactions
that have a scheduled amortization of more
than ten years, with respect to the annual
percentage rate, only such tolerances as are
allowed under section 107(c) of this title,
and (iii) for all transactions, with respect to
the finance charge, a corresponding numeri­
cal tolerance as generated by the tolerances
provided under this subsection for the an­
nual percentage rate.
(2) Each agency shall require such an ad­
justment when it determines that such dis­
closure error resulted from (A) a clear and
consistent pattern or practice of violations,
(B) gross negligence, or (C) a willful viola­
tion which was intended to mislead the per­
son to whom the credit was extended. Not­
withstanding the preceding sentence, except
where such disclosure error resulted from a
willful violation which was intended to mis­
lead the person to whom credit was extend­
ed, an agency need not require such an
adjustment if it determines that such
disclosure error—
(A) resulted from an error involving the
disclosure of a fee or charge that would
otherwise be excludable in computing the
finance charge, including but not limited
to violations involving the disclosures de­
scribed in sections 106(b), (c) and (d)
of this title, in which event the agency
may require such remedial action as it
determines to be equitable, except that
for transactions consummated after two
years after the effective date of section
608 of the Truth in Lending Simplifica­
tion and Reform Act, such an adjustment
shall be ordered for violations of section
106(b);
(B) involved a disclosed amount which
was 10 per centum or less of the amount
35

§108
that should have been disclosed and (i)
in cases where the error involved a dis­
closed finance charge, the annual per­
centage rate was disclosed correctly, and
(ii) in cases where the error involved a
disclosed annual percentage rate, the fi­
nance charge was disclosed correctly; in
which event the agency may require such
adjustment as it determines to be
equitable;
(C) involved a total failure to disclose
either the annual percentage rate or the
finance charge, in which event the agency
may require such adjustment as it deter­
mines to be equitable; or
(D ) resulted from any other unique cir­
cumstance involving clearly technical
and nonsubstantive disclosure violations
that do not adversely affect information
provided to the consumer and that have
not misled or otherwise deceived the
consumer.
In the case of other such disclosure errors,
each agency may require such an
adjustment.
(3) Notwithstanding paragraph (2), no
adjustment shall be ordered (A) if it would
have a significantly adverse impact upon
the safety or soundness of the creditor, but
in any such case, the agency may require a
partial adjustment in an amount which does
not have such an impact except that with
respect to any transaction consummated af­
ter the effective date of section 608 of the
Truth in Lending Simplification and Re­
form Act, the agency shall require the full
adjustment, but permit the creditor to make
the required adjustment in partial payments
over an extended period of time which the
agency considers to be reasonable, (B) if
the amount of the adjustment would be less
than $1, except that if more than one year
has elapsed since the date of the violation,
the agency may require that such amount
be paid into the Treasury of the United
States, or (C) except where such disclosure
error resulted from a willful violation which
was intended to mislead the person to
whom credit was extended, in the case of an
open-end credit plan, more than two years
after the violation, or in the case of any oth­
er extension of credit, as follows:

Regulation M (Statutory Provisions)
(i) with respect to creditors that are
subject to examination by the agencies
referred to in paragraphs (1) through
(3) of section 108(a) of this title,
except in connection with violations
arising from practices identified in the
current examination and only in con­
nection with transactions that are con­
summated after the date of the imme­
diately preceding examination, except
that where practices giving rise to vio­
lations identified in earlier examina­
tions have not been corrected, adjust­
ments for those violations shall be
required in connection with transac­
tions consummated after the date of
the examination in which such prac­
tices were first identified;
(ii) with respect to creditors that are
not subject to examination by such
agencies, except in connection with
transactions that are consummated af­
ter May 10, 1978; and
(iii) in no event after the later of (I)
the expiration of the life of the credit
extension, or (II) two years after the
agreement to extend credit was
consummated.
(4) (A ) Notwithstanding any other provi­
sion of this section, an adjustment under
this subsection may be required by an
agency referred to in subsection (a) or
(c) only by an order issued in accord­
ance with cease and desist procedures
provided by the provision of law referred
to in such subsections.
(B) In the case of an agency which is
not authorized to conduct cease and de­
sist proceedings, such an order may be
issued after an agency hearing on the rec­
ord conducted at least thirty but not
more than sixty days after notice of the
alleged violation is served on the creditor.
Such a hearing shall be deemed to be a
hearing which is subject to the provisions
of section 8(h) of the Federal Deposit
Insurance Act and shall be subject to ju­
dicial review as provided therein.
(5) Except as otherwise specifically pro­
vided in this subsection and notwithstand­
ing any provision of law referred to in sub­
section (a) or (c), no agency referred to in

Regulation M (Statutory Provisions)
subsection (a) or (c) may require a credi­
tor to make dollar adjustments for errors in
any requirements under this title, except
with regard to the requirements of section
165.
(6) A creditor shall not be subject to an
order to make an adjustment, if within sixty
days after discovering a disclosure error,
whether pursuant to a final written exami­
nation report or through the creditor’s own
procedures, the creditor notifies the person
concerned of the error and adjusts the ac­
count so as to assure that such person will
not be required to pay a finance charge in
excess of the finance charge actually dis­
closed or the dollar equivalent of the annual
percentage rate actually disclosed, whichev­
er is lower.
(7) Notwithstanding the second sentence
of subsection (e)(1), subsection (e)(3)
(C )(i), and subsection (e )(3 )(C )(ii),
each agency referred to in subsection (a) or
(c) shall require an adjustment for an an­
nual percentage rate disclosure error that
exceeds a tolerance of one quarter of one
percent less than the actual rate, deter­
mined without regard to section 107(c) of
this title, except in the case of an irregular
mortgage lending transaction, with respect
to any transaction consummated between
January 1, 1977, and the effective date of
section 608 of the Truth in Lending Simpli­
fication and Reform Act.

SECTION 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.

SECTION 110— [Repealed]
SECTION 111—Effect on Other Laws
(a)(1) Chapters 1, 2, and 3 do not annul,

§111
alter, or affect the laws of any State relating
to the disclosure of information in connec­
tion with credit transactions, except to the
extent that those laws are inconsistent with
the provisions of this title, and then only to
the extent of the inconsistency. Upon its
own motion or upon the request of any
creditor, State, or other interested party
which is submitted in accordance with pro­
cedures prescribed in regulations of the
Board, the Board shall determine whether
any such inconsistency exists. If the Board
determines that a State-required disclosure
is inconsistent, creditors located in that
State may not make disclosures using the
inconsistent term or form, and shall incur
no liability under the law of that State for
failure to use such term or form, notwith­
standing that such determination is subse­
quently amended, rescinded, or determined
by judicial or other authority to be invalid
for any reason.
(2) Upon its own motion or upon the re­
quest of any creditor, State, or other
interested party which is submitted in
accordance with procedures prescribed in
regulations of the Board, the Board shall
determine whether any disclosure required
under the law of any State is substantially
the same in meaning as a disclosure re­
quired under this title. If the Board deter­
mines that a State-required disclosure is
substantially the same in meaning as a dis­
closure required by this title, then creditors
located in that State may make such disclo­
sure in compliance with such State law in
lieu of the disclosure required by this title,
except that the annual percentage rate and
finance charge shall be disclosed as required
by section 122.
(b) This title does not otherwise annul, alter
or affect in any manner the meaning, scope or
applicability of the laws of any State, includ­
ing, but not limited to, laws relating to the
types, amounts or rates of charges, or any ele­
ment or elements of charges, permissible un­
der such laws in connection with the exten­
sion 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.
37

§111
(c) In any action or proceeding in any court
involving a consumer credit sale, the disclo­
sure of the annual percentage rate as required
under this title in connection with that sale
may not be received as evidence that the sale
was a loan or any type of transaction other
than a credit sale.
(d) Except as specified in sections 125, 130,
and 166, this title and the regulations issued
thereunder do not affect the validity or en­
forceability of any contract or obligation un­
der State or Federal law.

SECTION 112—Criminal Liability for
Willful and Knowing Violation
Whoever willfully and knowingly
(1) gives false or inaccurate information or
fails to provide information which he is re­
quired to disclose under the provisions of
this title or any regulation issued there­
under,
(2) uses any chart or table authorized by
the Board under section 107 in such a man­
ner as to consistently understate the annual
percentage rate determined under section
107(a)(1)(A ), or
(3) otherwise fails to comply with any re­
quirement imposed under this title, shall be
fined not more than $5,000 or imprisoned
not more than one year, or both.

SECTION 113—Effect on Governmental
Agencies
(a) Any department or agency of the United
States which administers a credit program in
which it extends, insures, or guarantees con­
sumer credit and in which it provides instru­
ments to a creditor which contain any disclo­
sures required by this title shall, prior to the
issuance or continued use of such instruments,
consult with the Board to assure that such in­
struments comply with this title.
(b) No civil or criminal penalty provided un38

Regulation M (Statutory Provisions)
der this title for any violation thereof may be
imposed upon the United States or any de­
partment or agency thereof, or upon any State
or political subdivision thereof, or any agency
of any State or political subdivision.

(c) A creditor participating in a credit pro­
gram administered, insured, or guaranteed by
any department or agency of the United States
shall not be held liable for a civil or criminal
penalty under this title in any case in which
the violation results from the use of an instru­
ment required by any such department or
agency.

(d) A creditor participating in a credit pro­
gram administered, insured, or guaranteed by
any department or agency of the United States
shall not be held liable for a civil or criminal
penalty under the laws of any State (other
than laws determined under section 111 to be
inconsistent with this title) for any technical
or procedural failure, such as a failure to use a
specific form, to make information available
at a specific place on an instrument, or to use
a specific typeface, as required by State law,
which is caused by the use of an instrument
required to be used by such department or
agency.

SECTION 114— Reports by Board and
Attorney General
Each year the Board and the Attorney Gener­
al shall, respectively, make reports to the Con­
gress concerning the administration of their
functions under this title, including such rec­
ommendations as the Board and the Attorney
General, respectively, deem necessary or ap­
propriate. In addition, each report of the
Board shall include its assessment of the ex­
tent to which compliance with the require­
ments imposed under this title is being
achieved.

SECTION 115—[Repealed]

Regulation M (Statutory Provisions)

CHAPTER 2—CREDIT
TRANSACTIONS
Section
121 General requirement of disclosure
122 Form of disclosure; additional
information
123 Exemption for State-regulated
transactions
124 Effect of subsequent occurrence
125 Right of rescission as to certain
transactions
126 [Repealed]
127 Open end consumer credit plans
128 Consumer credit not under open end
credit plans
129 [Repealed]
130 Civil liability
131 Liability of assignees
132 Issuance of credit cards
133 Liability of holder of credit card
134 Fraudulent use of credit card
135 Business credit cards
136 Dissemination of annual percentage
rates

SECTION 121—General Requirement of
Disclosure

•

(a) Subject to subsection (b), a creditor or
lessor shall disclose to the person who is obli­
gated on a consumer lease or a consumer
credit transaction the information required
under this title. In a transaction involving
more than one obligor, a creditor or lessor,
except in a transaction under section 125,
need not disclose to more than one of such
obligors if the obligor given disclosure is a pri­
mary obligor.

§123
that any portion of the information required
to be disclosed by this title may be given in the
form of estimates where the provider of such
information is not in a position to know exact
information.
(d) The Board shall determine whether toler­
ances for numerical disclosures other than the
annual percentage rate are necessary to facili­
tate compliance with this title, and if it deter­
mines that such tolerances are necessary to
facilitate compliance, it shall by regulation
permit disclosures within such tolerances. The
Board shall exercise its authority to permit
tolerances for numerical disclosures other
than the annual percentage rate so that such
tolerances are narrow enough to prevent such
tolerances from resulting in misleading disclo­
sures or disclosures that circumvent the pur­
poses of this title.

SECTION 122—Form of Disclosure;
Additional Information
(a) Information required by this title shall be
disclosed clearly and conspicuously, in ac­
cordance with regulations of the Board. The
terms ‘annual percentage rate’ and ‘finance
charge’ shall be disclosed more conspicuously
than other terms, data, or information provid­
ed in connection with a transaction, except in­
formation relating to the identity of the credi­
tor. Regulations of the Board need not require
that disclosures pursuant to this title be made
in the order set forth in this title and, except
as otherwise provided, may permit the use of
terminology different from that employed in
this title if it conveys substantially the same
meaning.

(b) If a transaction involves one creditor as
defined in section 103(f), or one lessor as de­
fined in section 181(3), such creditor or lessor
shall make the disclosures. If a transaction in­
volves more than one creditor or lessor, only
one creditor or lessor shall be required to
make the disclosures. The Board shall by reg­
ulation specify which creditor or lessor shall
make the disclosures.

(b) Any creditor or lessor may supply addi­
tional information or explanation with any
disclosures required under chapters 4 and 5
and, except as provided in section 128(b)(1),
under this chapter.

(c) The Board may provide by regulation

The Board shall by regulation exempt from

SECTION 123—Exemption for StateRegulated Transactions

39

§ 123
the requirements of this chapter any class of
credit transactions within any State if it deter­
mines that under the law of that State that
class of transactions is subject to requirements
substantially similar to those imposed under
this chapter, and that there is adequate provi­
sion for enforcement.

SECTION 124—Effect of Subsequent
Occurrence
If information disclosed in accordance with
this chapter is subsequently rendered inaccu­
rate as the result of any act, occurrence, or
agreement subsequent to the delivery of the
required disclosures, the inaccuracy resulting
therefrom does not constitute a violation of
this chapter.

SECTION 125—Right of Rescission as
to Certain Transactions
(a) Except as otherwise provided in this sec­
tion, in the case of any consumer credit trans­
action (including opening or increasing the
credit limit for an open end credit plan) in
which a security interest, including any such
interest arising by operation of law, is or will
be retained or acquired in any property which
is used as the principal dwelling of the person
to whom credit is extended, the obligor shall
have the right to rescind the transaction until
midnight of the third business day following
the consummation of the transaction or the
delivery of the information and rescission
forms required under this section together
with a statement containing the material dis­
closures required under this title, whichever is
later, by notifying the creditor, in accordance
with regulations of the Board, of his intention
to do so. The creditor shall clearly and con­
spicuously disclose, in accordance with regu­
lations of the Board, to any obligor in a trans­
action subject to this section the rights of the
obligor under this section. The creditor shall
also provide, in accordance with regulations
of the Board, appropriate forms for the obli­
gor to exercise his right to rescind any trans­
action subject to this section.
40

Regulation M (Statutory Provisions)
(b) When an obligor exercises his right to re­
scind under subsection (a), he is not liable for
any finance or other charge, and any security
interest given by the obligor, including any
such interest arising by operation of law, be­
comes void upon such a rescission. Within 20
days after receipt of a notice of rescission, the
creditor shall return to the obligor any money
or property given as earnest money, downpay­
ment, or otherwise, and shall take any action
necessary or appropriate to reflect the termi­
nation of any security interest created under
the transaction. If the creditor has delivered
any property to the obligor, the obligor may
retain possession of it. Upon the performance
of the creditor’s obligations under this section,
the obligor shall tender the property to the
creditor, except that if return of the property
in kind would be impracticable or inequitable,
the obligor shall tender its reasonable value.
Tender shall be made at the location of the
property or at the residence of the obligor, at
the option of the obligor. If the creditor does
not take possession of the property within 20
days after tender by the obligor, ownership of
the property vests in the obligor without obli­
gation on his part to pay for it. The proce­
dures prescribed by this subsection shall apply
except when otherwise ordered by a court.
(c) Notwithstanding any rule of evidence,
written acknowledgment of receipt of any dis­
closures required under this title by a person
to whom information, forms, and a statement
is required to be given pursuant to this section
does no more than create a rebuttable pre­
sumption of delivery thereof.
(d) The Board may, if it finds that such ac­
tion is necessary in order to permit homeown­
ers to meet bona fide personal financial emer­
gencies, prescribe regulations authorizing the
modification or waiver of any rights created
under this section to the extent and under the
circumstances set forth in those regulations.
(e) (1) This section does not apply to—
(A) a residential mortgage transaction
as defined in section 103 (w);
(B) a transaction which constitutes a re­
financing or consolidation (with no new
advances) of the principal balance then

Regulation M (Statutory Provisions)
due and any accrued and unpaid finance
charges of an existing extension of credit
by the same creditor secured by an inter­
est in the same property;
(C) a transaction in which an agency of
a State is the creditor; or
(D ) advances under a preexisting open
end credit plan if a security interest has
already been retained or acquired and
such advances are in accordance with a
previously established credit limit for
such plan.
(2) The provisions of paragraph (1 )(D )
shall cease to be effective 3 years after the
effective date of the Truth in Lending Sim­
plification and Reform Act.
(f) An obligor’s right of rescission shall ex­
pire three years after the date of consumma­
tion of the transaction or upon the sale of the
property, whichever occurs first, notwith­
standing the fact that the information and
forms required under this section or any other
disclosures required under this chapter have
not been delivered to the obligor, except that
if (1) any agency empowered to enforce the
provisions of this title institutes a proceeding
to enforce the provisions of this section within
three years after the date of consummation of
the transaction, (2) such agency finds a viola­
tion of section 125, and (3) the obligor’s right
to rescind is based in whole or in part on any
matter involved in such proceeding, then the
obligor’s right of rescission shall expire three
years after the date of consummation of the
transaction or upon the earlier sale of the
property, or upon the expiration of one year
following the conclusion of the proceeding, or
any judicial review or period for judicial re­
view thereof, whichever is later.
(g) In any action in which it is determined
that a creditor has violated this section, in ad­
dition to rescission the court may award relief
under section 130 for violations of this title
not relating to the right to rescind.

SECTION 126— [Repealed]

§127

SECTION 127—Open End Consumer
Credit Plans
(a) Before opening any account under an
open end consumer credit plan, the creditor
shall disclose to the person to whom credit is
to be extended each of the following items, to
the extent applicable:
(1) The conditions under which a finance
charge may be imposed, including the time
period (if any) within which any credit ex­
tended may be repaid without incurring a
finance charge, except that the creditor
may, at his election and without disclosure,
impose no such finance charge if payment is
received after the termination of such time
period. If no such time period is provided,
the creditor shall disclose such fact.
(2) The method of determining the bal­
ance upon which a finance charge will be
imposed.
(3) The method of determining the
amount of the finance charge, including any
minimum or fixed amount imposed as a fi­
nance charge.
(4) Where one or more periodic rates may
be used to compute the finance charge, each
such rate, the range of balances to which it
is applicable, and the corresponding nomi­
nal annual percentage rate determined by
multiplying the periodic rate by the number
of periods in a year.
(5) Identification of other charges which
may be imposed as part of the plan, and
their method of computation, in accordance
with regulations of the Board.
(6) In cases where the credit is or will be
secured, a statement that a security interest
has been or will be taken in (A) the proper­
ty purchased as part of the credit transac­
tion, or (B) property not purchased as part
of the credit transaction identified by item
or type.
(7) A statement, in a form prescribed by
regulations of the Board of the protection
provided by sections 161 and 170 to an obli­
gor and the creditor’s responsibilities under
sections 162 and 170. With respect to one
billing cycle per calendar year, at intervals
41

§ 127
of not less than six months or more than
eighteen months, the creditor shall transmit
such statement to each obligor to whom the
creditor is required to transmit a statement
pursuant to section 127(b) for such billing
cycle.
(b) The creditor of any account under an
open end consumer credit plan shall transmit
to the obligor, for each billing cycle at the end
of which there is an outstanding balance in
that account or with respect to which a fi­
nance charge is imposed, a statement setting
forth each of the following items to the extent
applicable:
(1) The outstanding balance in the ac­
count at the beginning of the statement
period.
(2) The amount and date of each extension
of credit during the period, and a brief iden­
tification, on or accompanying the state­
ment of each extension of credit in a form
prescribed by the Board sufficient to enable
the obligor either to identify the transaction
or to relate it to copies of sales vouchers or
similar instruments previously furnished,
except that a creditor’s failure to disclose
such information in accordance with this
paragraph shall not be deemed a failure to
comply with this chapter or this title if (A)
the creditor maintains procedures reason­
ably adapted to procure and provide such
information, and (B) the creditor responds
to and treats any inquiry for clarification or
documentation as a billing error and an er­
roneously billed amount under section 161.
In lieu of complying with the requirements
of the previous sentence, in the case of any
transaction in which the creditor and seller
are the same person, as defined by the
Board, and such person’s open end credit
plan has fewer than 15,000 accounts, the
creditor may elect to provide only the
amount and date of each extension of credit
during the period and the seller’s name and
location where the transaction took place if
(A) a brief identification of the transaction
has been previously furnished, and (B) the
creditor responds to and treats any inquiry
for clarification or documentation as a bill­
ing error and an erroneously billed amount
under section 161.

Regulation M (Statutory Provisions)
(3) The total amount credited to the ac­
count during the period.
(4) The amount of any finance charge add­
ed to the account during the period, item­
ized to show the amounts, if any, due to the
application of percentage rates and the
amount, if any, imposed as a minimum or
fixed charge.
(5) Where one or more periodic rates may
be used to compute the finance charge, each
such rate, the range of balances to which it
is applicable, and, unless the annual per­
centage rate (determined under section
107(a)(2)) is required to be disclosed pur­
suant to paragraph (6), the corresponding
nominal annual percentage rate determined
by multiplying the periodic rate by the
number of periods in a year.
(6) Where the total finance charge exceeds
50 cents for a monthly or longer billing cy­
cle, or the pro rata part of 50 cents for a
billing cycle shorter than monthly, the total
finance charge expressed as an annual per­
centage rate (determined under 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 of the balance to which it is
applicable.
(7) The balance on which the finance
charge was computed and a statement of
how the balance was determined. If the bal­
ance is determined without first deducting
all credits during the period, that fact and
the amount of such payments shall also be
disclosed.
(8) The outstanding balance in the ac­
count at the end of the period.
(9) The date by which or the period (if
any) within which payment must be made
to avoid additional finance charges, except
that the creditor may, at his election and
without disclosure, impose no such addi­
tional finance charge if payment is received
after such date or the termination of such
period.
(10) The address to be used by the creditor
for the purpose of receiving billing inquiries
from the obligor.

Regulation M (Statutory Provisions)

SECTION 128—Consumer Credit Not
Under Open End Credit Plans
(a) For each consumer credit transaction
other than under an open end credit plan, the
creditor shall disclose each of the following
items, to the extent applicable:
(1) The identity of the creditor required to
make disclosure.
(2) (A) The ‘amount financed’, using that
term, which shall be the amount of credit
of which the consumer has actual use.
This amount shall be computed as fol­
lows, but the computations need not be
disclosed and shall not be disclosed with
the disclosures conspicuously segregated
in accordance with subsection (b)(1):
(i) take the principal amount of the
loan or the cash price less downpay­
ment and trade-in;
(ii) add any charges which are not
part of the finance charge or of the
principal amount of the loan and
which are financed by the consumer,
including the cost of any items exclud­
ed from the finance charge pursuant to
section 106; and
(iii) subtract any charges which are
part of the finance charge but which
will be paid by the consumer before or
at the time of the consummation of the
transaction, or have been withheld
from the proceeds of the credit.
(B) In conjunction with the disclosure
of the amount financed, a creditor shall
provide a statement of the consumer’s
right to obtain, upon a written request, a
written itemization of the amount fi­
nanced. The statement shall include
spaces for a ‘yes’ and ‘no’ indication to be
initialed by the consumer to indicate
whether the consumer wants a written
itemization of the amount financed.
Upon receiving an affirmative indication,
the creditor shall provide, at the time
other disclosures are required to be fur­
nished, a written itemization of the
amount financed. For the purposes of
this subparagraph, ‘itemization of the
amount financed’ means a disclosure of
the following items, to the extent
applicable:

§128
(i) the amount that is or will be paid
directly to the consumer;
(ii) the amount that is or will be cred­
ited to the consumer’s account to dis­
charge obligations owed to the
creditor;
(iii) each amount that is or will be
paid to third persons by the creditor on
the consumer’s behalf, together with
an identification of or reference to the
third person; and
(iv) the total amount of any charges
described in the preceding subpara­
graph (A) (iii).
(3) The ‘finance charge’, not itemized, us­
ing that term.
(4) The finance charge expressed as an ‘an­
nual percentage rate’, using that term. This
shall not be required if the amount financed
does not exceed $75 and the finance charge
does not exceed $5, or if the amount fi­
nanced exceeds $75 and the finance charge
does not exceed $7.50.
(5) The sum of the amount financed and
the finance charge, which shall be termed
the ‘total of payments’.
(6) The number, amount, and due dates or
period of payments scheduled to repay the
total of payments.
(7) In a sale of property or services in
which the seller is the creditor required to
disclose pursuant to section 121 (b), the ‘to­
tal sale price’, using that term, which shall
be the total of the cash price of the property
or services, additional charges, and the fi­
nance charge.
(8) Descriptive explanations of the terms
‘amount financed’, ‘finance charge’, ‘annual
percentage rate’, ‘total of payments’, and
‘total sale price’ as specified by the Board.
The descriptive explanation of ‘total sale
price’ shall include reference to the amount
of the downpayment.
(9) Where the credit is secured, a state­
ment that a security interest has been taken
in (A) the property which is purchased as
part of the credit transaction, or (B) prop­
erty not purchased as part of the credit
transaction identified by item or type.
(10) Any dollar charge or percentage
amount which may be imposed by a credi­
tor solely on account of a late payment,
43

§ 128
other than a deferral or extension charge.
(11) A statement indicating whether or
not the consumer is entitled to a rebate of
any finance charge upon refinancing or pre­
payment in full pursuant to acceleration or
otherwise, if the obligation involves a pre­
computed finance charge. A statement indi­
cating whether or not a penalty will be im­
posed in those same circumstances if the
obligation involves a finance charge com­
puted from time to time by application of a
rate to the unpaid principal balance.
(12) A statement that the consumer
should refer to the appropriate contract
document for any information such docu­
ment provides about nonpayment, default,
the right to accelerate the maturity of the
debt, and prepayment rebates and penalties.
(13) In any residential mortgage transac­
tion, a statement indicating whether a sub­
sequent purchaser or assignee of the con­
sumer may assume the debt obligation on
its original terms and conditions.
(b)(1) Except as otherwise provided in this
chapter, the disclosures required under sub­
section (a) shall be made before the credit
is extended. Except for the disclosures re­
quired by subsection (a) (1) of this section,
all disclosures required under subsection
(a) and any disclosure provided for in sub­
section (b), (c), or (d) of section 106 shall
be conspicuously segregated from all other
terms, data, or information provided in
connection with a transaction, including
any computations or itemization.
(2) In the case of a residential mortgage
transaction, as defined in section 103(w),
which is also subject to the Real Estate Set­
tlement Procedures Act, good faith esti­
mates of the disclosures required under sub­
section (a) shall be made in accordance
with regulations of the Board under section
121(c) before the credit is extended, or
shall be delivered or placed in the mail not
later than three business days after the
creditor receives the consumer’s written ap­
plication, whichever is earlier. If the disclo­
sure statement furnished within three days
of the written application contains an annu­
al percentage rate which is subsequently
rendered inaccurate within the meaning of

Regulation M (Statutory Provisions)
section 107(c), the creditor shall furnish
another statement at the time of settlement
or consummation.

(c)(1 ) If a creditor receives a purchase order
by mail or telephone without personal solic­
itation, and the cash price and the total sale
price and the terms of financing, including
the annual percentage rate, are set forth in
the creditor’s catalog or other printed mate­
rial distributed to the public, then the dis­
closures required under subsection (a) may
be made at any time not later than the date
the first payment is due.
(2) If a creditor receives a request for a
loan by mail or telephone without personal
solicitation and the terms of financing, in­
cluding the annual percentage rate for rep­
resentative amounts of credit, are set forth
in the creditor’s printed material distribut­
ed to the public, or in the contract of loan
or other printed material delivered to the
obligor, 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
pursuant 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 percent­
age 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 received payments aggregat­
ing the amount of the sales price including
any finance charges attributable 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. For 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.

Regulation M (Statutory Provisions)

SECTION 129—[Repealed]
SECTION 130—Civil Liability

§130
liability determined under paragraph (2)
only for failing to comply with the require­
ments of section 125, section 127(a), or of
paragraph (4), (5), (6), (7), (8), (9), or
(10) of section 127(b) or for failing to
comply with disclosure requirements under
State law for any term or item which the
Board has determined to be substantially
the same in meaning under section
111(a)(2) as any of the terms or items re­
ferred to in section 127(a) or any of those
paragraphs of section 127(b). In connec­
tion with the disclosures referred to in sec­
tion 128, a creditor shall have a liability
determined under paragraph (2) only for
failing to comply with the requirements of
section 125 or of paragraph (2) (insofar as
it requires a disclosure of the ‘amount fi­
nanced’), (3), (4), (5), (6), or (9) of sec­
tion 128(a), or for failing to comply with
disclosure requirements under State law for
any term which the Board has determined
to be substantially the same in meaning un­
der section 111(a)(2) as any of the terms
referred to in any of those paragraphs of
section 128(a). With respect to any failure
to make disclosures required under this
chapter or chapter 4 or 5 of this title, liabili­
ty shall be imposed only upon the creditor
required to make disclosure, except as pro­
vided in section 131.

(a) Except as otherwise provided in this sec­
tion, any creditor who fails to comply with
any requirement imposed under this chapter,
including any requirement under section 125,
or chapter 4 or 5 of this title with respect to
any person is liable to such person in an
amount equal to the sum of—
(1) any actual damage sustained by such
person as a result of the failure;
(2 )(A )(i) in the case of an individual ac­
tion twice the amount of any finance
charge in connection with the transac­
tion, or (ii) in the case of an individual
action relating to a consumer lease under
chapter 5 of this title, 25 per centum of
the total amount of monthly payments
under the lease, except that the liability
under this subparagraph shall not be less
than $100 nor greater than $1,000; or
(B) in the case of a class action, such
amount as the court may allow, except
that as to each member of the class no
minimum recovery shall be applicable,
and the total recovery under this sub­
paragraph in any class action or series of
class actions arising out of the same fail­
ure to comply by the same creditor shall
not be more than the lesser of $500,000
or 1 per centum of the net worth of the (b) A creditor or assignee has no liability un­
creditor; and
der this section or section 108 or section 112
(3)
in the case of any successful action for
to any failure to comply with any require­
enforce the foregoing liability or in any ac­ ment imposed under this chapter or chapter 5,
tion in which a person is determined to if within sixty days after discovering an error,
have a right of rescission under section 125, whether pursuant to a final written examina­
the costs of the action, together with a rea­ tion report or notice issued under section
sonable attorney’s fee as determined by the 108(e)(1) or through the creditor’s or assign­
court. In determining the amount of award ee’s own procedures, and prior to the institu­
in any class action, the court shall consider, tion of an action under this section or the re­
among other relevant factors, the amount ceipt of written notice of the error from the
of any actual damages awarded, the fre­ obligor, the creditor or assignee notifies the
quency and persistence of failures of com­ person concerned of the error and makes
pliance by the creditor, the resources of the whatever adjustments in the appropriate ac­
creditor, the number of persons adversely count are necessary to assure that the person
affected, and the extent to which the credi­ will not be required to pay an amount in ex­
tor’s failure of compliance was intentional. cess of the charge actually disclosed, or the
In connection with the disclosures referred dollar equivalent of the annual percentage
to in section 127, a creditor shall have a rate actually disclosed, whichever is lower.
45

§130
(c) A creditor or assignee may not be held
liable in any action brought under this section
or section 125 for a violation of this title if the
creditor or assignee shows by a preponderance
of evidence that the violation was not inten­
tional and resulted from a bona fide error not­
withstanding the maintenance of procedures
reasonably adapted to avoid any such error.
Examples of a bona fide error include, but are
not limited to, clerical, calculation, computer
malfunction and programing, and printing er­
rors, except that an error of legal judgment
with respect to a person’s obligations under
this title is not a bona fide error.
(d) When there are multiple obligors in a
consumer credit transaction or consumer
lease, there shall be no more than one recov­
ery of damages under subsection (a) (2) for a
violation of this title.
(e) Any action under this section may be
brought in any United States district court, or
in any other court of competent jurisdiction,
within one year from the date of the occur­
rence of the violation. This subsection does
not bar a person from asserting a violation of
this title in an action to collect the debt which
was brought more than one year from the date
of the occurrence of the violation as a matter
of defense by recoupment or set-off in such
action, except as otherwise provided by State
law.
(f) No provision of this section, section
108(b), section 108(c), section 108(e), or
section 112 imposing any liability shall apply
to any act done or omitted in good faith in
conformity with any rule, regulation, or inter­
pretation thereof by the Board or in conformi­
ty with any interpretation or approval by an
official or employee of the Federal Reserve
System duly authorized by the Board to issue
such interpretations or approvals under such
procedures as the Board may prescribe there­
for, notwithstanding that after such act or
omission has occurred, such rule, regulation,
interpretation, or approval is amended, re­
scinded, or determined by judicial or other au­
thority to be invalid for any reason.
(g) The multiple failure to disclose to any
46

Regulation M (Statutory Provisions)
person any information required under this
chapter or chapter 4 or 5 of this title to be
disclosed in connection with a single account
under an open end consumer credit plan, oth­
er single consumer credit sale, consumer loan,
consumer lease, or other extension of consum­
er credit, shall entitle the person to a single
recovery under this section but continued
failure to disclose after a recovery has been
granted shall give rise to rights to additional
recoveries. This subsection does not bar any
remedy permitted by section 125.
(h) A person may not take any action to off­
set any amount for which a creditor or assign­
ee is potentially liable to such person under
subsection (a) (2) against any amount owed
by such person, unless the amount of the cred­
itor’s or assignee’s liability under this title has
been determined by judgment of a court of
competent jurisdiction in an action of which
such person was a party. This subsection does
not bar a consumer then in default on the ob­
ligation from asserting a violation of this title
as an original action, or as a defense or coun­
terclaim to an action to collect amounts owed
by the consumer brought by a person liable
under this title.

SECTION 131—Liability of Assignees
(a) Except as otherwise specifically provided
in this title, any civil action for a violation of
this title or proceeding under section 108
which may be brought against a creditor may
be maintained against any assignee of such
creditor only if the violation for which such
action or proceeding is brought is apparent on
the face of the disclosure statement, except
where the assignment was involuntary. For
the purpose of this section, a violation appar­
ent on the face of the disclosure statement in­
cludes, but is not limited to (1) a disclosure
which can be determined to be incomplete or
inaccurate from the face of the disclosure
statement or other documents assigned, or
(2) a disclosure which does not use the terms
required to be used by this title.
(b) Except as provided in section 125(c), in

Regulation M (Statutory Provisions)

§ 134

any action or proceeding by or against any
subsequent assignee of the original creditor
without knowledge to the contrary by the as­
signee when he acquires the obligation, writ­
ten acknowledgement of receipt by a person to
whom a statement is required to be given pur­
suant to this title shall be conclusive proof of
the delivery thereof and, except as provided in
subsection (a), of compliance with this chap­
ter. This section does not affect the rights of
the obligor in any action against the original
creditor.

(F) the card issuer has provided a meth­
od whereby the user of such card can be
identified as the person authorized to use
it.
(2) For purposes of this section, a card is­
suer has been notified when such steps as
may be reasonably required in the ordinary
course of business to provide the card issuer
with the pertinent information have been
taken, whether or not any particular officer,
employee, or agent of the card issuer does
in fact receive such information.

(c) Any consumer who has the right to re­
scind a transaction under section 125 may re­
scind the transaction as against any assignee
of the obligation.

(b) In any action by a card issuer to enforce
liability for the use of a credit card, the bur­
den 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 condi­
tions of liability for the unauthorized use of a
credit card, as set forth in subsection (a),
have been met.

SECTION 132—Issuance of Credit
Cards
No credit card shall be issued except in re­
sponse to a request or application therefor.
This prohibition does not apply to the issu­
ance of a credit card in renewal of, or in sub­
stitution for, an accepted credit card.

SECTION 133—Liability of Holder of
Credit Card
(a)(1 ) A cardholder shall be liable for the
unauthorized use of a credit card only if—
(A) the card is an accepted credit card;
(B) the liability is not in excess of $50;
(C) the card issuer gives adequate notice
to the cardholder of the potential
liability;
(D) the card issuer has provided the
cardholder with a description of a means
by which the card issuer may be notified
of loss or theft of the card, which descrip­
tion may be provided on the face or re­
verse side of the statement required by
section 127 (b) or on a separate notice ac­
companying such statement;
(E) the unauthorized use occurs before
the card issuer has been notified that an
unauthorized use of the credit card has
occurred or may occur as the result of
loss, theft, or otherwise; and

(c) Nothing in this section imposes liability
upon a cardholder for the unauthorized use of
a credit card in excess of his liability for such
use under other applicable law or under any
agreement with the card issuer.
(d) Except as provided in this section, a
cardholder incurs no liability from the unau­
thorized use of a credit card.

SECTION 134—Fraudulent Use of
Credit Card
(a) Whoever knowingly in a transaction af­
fecting interstate or foreign commerce, uses or
attempts or conspires to use any counterfeit,
fictitious, altered, forged, lost, stolen, or
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 or more; or
(b) Whoever, with unlawful or fraudulent in­
tent, transports or attempts or conspires to
transport in interstate or foreign commerce a
counterfeit, fictitious, altered, forged, lost, sto­
len, or fraudulently obtained credit card
knowing the same to be counterfeit, fictitious,
47

§134
altered, forged, lost, stolen, or fraudulently
obtained; or
(c) Whoever, with unlawful or fraudulent in­
tent, uses any instrumentality of interstate or
foreign commerce to sell or transport a coun­
terfeit, fictitious, altered, forged, lost, stolen,
or fraudulently obtained credit card knowing
the same to be counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained;
or
(d) Whoever knowingly receives, conceals,
uses, or transports money, goods, services, or
anything else of value (except tickets for in­
terstate or foreign transportation) which (1)
within any one-year period has a value aggre­
gating $1,000 or more, (2) has moved in or is
part of, or which constitutes interstate or for­
eign commerce, and (3) has been obtained
with a counterfeit, fictitious, altered, forged,
lost, stolen, or fraudulently obtained credit
card; or
(e) Whoever knowingly receives, conceals,
uses, sells, or transports in interstate or for­
eign commerce one or more tickets for inter­
state or foreign transportation, which (1)
within any one-year period have a value ag­
gregating $500 or more, and (2) have been
purchased or obtained with one or more coun­
terfeit, fictitious, altered, forged, lost, stolen,
or fraudulently obtained credit cards; or
(f) Whoever in a transaction affecting inter­
state or foreign commerce furnishes money,
property, services, or anything else of value,
which within any one-year period has a value
aggregating $1,000 or more, through the use
of any counterfeit, fictitious, altered, forged,
lost, stolen, or fraudulently obtained credit
card knowing the same to be counterfeit, ficti­
tious, altered, forged, lost, stolen, or fraudu­
lently obtained—
shall be fined not more than $10,000 or im­
prisoned not more than ten years, or both.

SECTION 135—Business Credit Cards
The exemption provided by section 104(1)
does not apply to the provisions of sections
48

Regulation M (Statutory Provisions)
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 unautho­
rized use of such credit cards without regard
to the provisions of section 133, but in no case
may such business or other organization or
card issuer impose liability upon any employ­
ee with respect to unauthorized use of such a
credit card except in accordance with and
subject to the limitations of section 133.

SECTION 136—Dissemination of
Annual Percentage Rates
(a) The Board shall collect, publish, and dis­
seminate to the public, on a demonstration ba­
sis in a number of standard metropolitan sta­
tistical areas to be determined by the Board,
the annual percentage rates charged for repre­
sentative types of nonsale credit by creditors
in such areas. For the purpose of this section,
the Board is authorized to require creditors in
such areas to furnish information necessary
for the Board to collect, publish, and dissemi­
nate such information.

(b) The Board is authorized to enter into
contracts or other arrangements with appro­
priate persons, organizations, or State agen­
cies to carry out its functions under subsection
(a) and to furnish financial assistance in sup­
port thereof.

CHAPTER 5— CONSUMER LEASES
Section
181 Definitions
182 Consumer lease disclosures
183 Lessee’s liability on expiration or termi­
nation of lease
184 Consumer lease advertising
185 Civil liability
186 Relation to State laws

Regulation M (Statutory Provisions)

SECTION 181—Definitions
For purposes of this chapter—
(1) The term “consumer lease” means a
contract in the form of a lease or bailment
for the use of personal property by a natural
person for a period of time exceeding four
months, and for a total contractual obliga­
tion not exceeding $25,000, primarily for
personal, family, or household purposes,
whether or not the lessee has the option to
purchase or otherwise become the owner of
the property at the expiration of the lease,
except that such term shall not include any
credit sale as defined in section 103(g).
Such term does not include a lease for agri­
cultural, business, or commercial purposes,
or to a government or governmental agency
or instrumentality, or to an organization.
(2) The term “lessee” means a natural per­
son 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 consum­
er lease.
(4) The term “personal property” means
any property which is not real property un­
der the laws of the State where situated at
the time offered or otherwise made avail­
able for lease.
(5) The terms “security” and “security in­
terest” mean any interest in property which
secures payment or performance of an
obligation.

SECTION 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 identi­
fied setting out accurately and in a clear and
conspicuous manner the following informa­
tion with respect to that lease, as applicable:
(1) A brief description or identification of
the leased property;
(2) The amount of any payment by the les­
see required at the inception of the lease;
(3) The amount paid or payable by the les­
see for official fees, registration, certificate

§ 182

of title, or license fees or taxes;
(4) The amount of other charges payable
by the lessee not included in the periodic
payments, a description of the charges and
that the lessee shall be liable for the differ­
ential, 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 amount or method
of determining the amount 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 prop­
erty and at what price and time;
(6) A statement identifying all express
warranties and guarantees made by the
manufacturer or lessor with respect to the
leased property, and identifying the party
responsible for maintaining or servicing the
leased property together with a description
of the responsibility;
(7) A brief description of insurance pro­
vided 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 con­
nection with the lease and a clear identifica­
tion of the property to which the security
interest relates;
(9) The number, amount, and due dates or
periods of payments under the lease and the
total amount of such periodic payments;
(10) Where the lease provides that the les­
see shall be liable for the anticipated fair
market value of the property on expiration
of the lease, the fair market value of the
property at the inception of the lease, the
aggregate cost of the lease on expiration,
and the differential between them; and
(11) A statement of the conditions under
which the lessee or lessor may terminate the
lease prior to the end of the term and the
amount or method of determining any pen­
alty or other charge for delinquency, de­
fault, late payments, or early termination.
The disclosures required under this section
may be made in the lease contract to be signed
by the lessee. The Board may provide by regu­
lation that any portion of the information re­
quired to be disclosed under this section may
49

Regulation M (Statutory Provisions)
be given in the form of estimates where the
lessor is not in a position to know exact
information.

actual harm caused by the delinquency, de­
fault, or early termination, the difficulties of
proof of loss, and the inconvenience or non­
feasibility of otherwise obtaining an adequate
remedy.

SECTION 183—Lessee’s Liability on
Expiration or Termination of Lease

(c) If a lease has a residual value provision at
the termination of the lease, the lessee may
obtain at his expense, a professional appraisal
of the leased property by an independent third
party agreed to by both parties. Such apprais­
al shall be final and binding on the parties.

(a) Where the lessee’s liability on expiration
of a consumer lease is based on the estimated
residual value of the property such estimated
residual value shall be a reasonable approxi­
mation of the anticipated actual fair market
value of the property on lease expiration.
There shall be a rebuttable 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 expira­
tion of a consumer lease there shall be a re­
buttable presumption that the lessor’s estimat­
ed residual value is not in good faith to the
extent that the estimated residual value ex­
ceeds the actual residual value by more than
three times the average payment allocable to a
monthly period under the lease and such les­
sor 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 pre­
sumptions stated in this section shall not ap­
ply to the extent the excess of estimated over
actual residual value is due to physical dam­
age 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 delinquen­
cy, default, or early termination may be speci­
fied in the lease but only at an amount which
is reasonable in the light of the anticipated or
50

SECTION 184—Consumer Lease
Advertising
(a) No advertisement to aid, promote, or as­
sist directly or indirectly any consumer lease
shall state the amount of any payment, the
number of required payments, or that any or
no downpayment or other payment is
required at inception of the lease unless the
advertisement also states clearly and conspic­
uously and in accordance with regulations is­
sued by the Board each of the following items
of information which is applicable:
(1) That the transaction advertised is a
lease.
(2) The amount of any payment required
at the inception of the lease or that no such
payment is required if that is the case.
(3) The number, amounts, due dates or pe­
riods of scheduled payments, and the total
of payments under the lease.
(4) 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 amount or method
of determining the amount 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 prop­
erty and at what price and time.
( b) There is no liability under this section on
the part of any owner or personnel, as such, of
any medium in which an advertisement ap­
pears or through which it is disseminated.

Regulation M (Statutory Provisions)

SECTION 185—Civil Liability

•

(a) Any lessor who fails to comply with any
requirement imposed under section 182 or 183
of this chapter with respect to any person is
liable to such person as provided in section
130.
(b) Any lessor who fails to comply with any
requirement imposed under section 184 of this
chapter with respect to any person who suffers
actual damage from the violation is liable to
such person as provided in section 130. For
the purposes of this section, the term “credi­
tor” as used in sections 130 and 131 shall in­
clude a lessor as defined in this chapter.
(c) Notwithstanding section 130(e), any ac­
tion under this section may be brought in any
United States district court or in any other
court of competent jurisdiction. Such actions
alleging a failure to disclose or otherwise com­
ply with the requirements of this chapter shall
be brought within one year of the termination
of the lease agreement.

§186

SECTION 186—Relation to State Laws
(a) This chapter does not annul, alter, or af­
fect, or exempt any person subject to the pro­
visions of this chapter from complying with,
the laws of any State with respect to consumer
leases, except to the extent that those laws are
inconsistent with any provision of this chap­
ter, and then only to the extent of the incon­
sistency. The Board is authorized to deter­
mine whether such inconsistencies exist. The
Board may not determine that any State law is
inconsistent with any provision of this chapter
if the Board determines that such law gives
greater protection and benefit to the
consumer.
(b) The Board shall by regulation exempt
from the requirements of this chapter any
class of lease transactions within any State if it
determines that under the law of that State
that class of transactions is subject to require­
ments substantially similar to those imposed
under this chapter or that such law gives
greater protection and benefit to the consum­
er, and that there is adequate provision for
enforcement.

51