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F ederal r es er v e Ba n k o f D allas

DALLAS. TEXAS

75222

C i r c u l a r No. 75-4
J a n u a r y 8, 1975

TRUTH IN LENDING
REPRINT OF REGULATION Z

TO ALL BANKS AND OTHERS CONCERNED
IN THE ELEVENTH FEDERAL RESERVE DISTRICT:

T h e Board of G o v e rn o rs of the Federal R e s e rv e System has
r e p r i n t e d its Regulation Z, " T r u t h in L e n d i n g , " in c o rp o ra tin g the a m e n d ­
ments to a n d in te r p r e ta tio n s of th at Regulation th r o u g h S e p te m b e r 30, 1974.
T h is booklet should re p la c e the e x is t in g booklet a s am ended on
Sep te m b e r 11, 1969, and s u b s e q u e n t am endm ents and i n te r p r e ta tio n s t h e r e ­
to should be removed from y o u r b i n d e r and may be d e s t r o y e d . A copy of
the new pam phle t is en clo se d .
S in c e re ly y o u r s ,
T . W. Plant
F i r s t Vice P r e s i d e n t

En closu re

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

BOARD OF GOVERNORS
o f the

FEDERAL RESERVE SYSTEM

TRUTH IN LENDING

REGULATION

z
(12 CFR 226)
Effective July 1, 1969
Amended September 30, 1974

CONTENTS
R E G U L A T IO N Z
Page

Sec. 226.1—Authority, Scope, Purpose, etc..........
(a)
(b)
(c )

A u thority , scope, a n d p u r p o s e ..............
A d m in istrativ e enfo rce m e n t ..................
Penalties a n d liabilities ..........................

5
5
5
6

Sec. 226 ,2—Definitions and Rules of Construction ..
(a) A ct
( b ) A d vertisem ent
(c) A gricultural p u rpose ..................................
(d) A m o u n t financed .......................................
(e) A nnual percentage rate ...........................
( f ) A rran g e fo r the extension o f credit . . .
(g ) Billing cycle ...................................................
(h) B o a r d .................................................................
(i) C ash price . . ^ ...............................................
( j) C o m p ara tiv e In dex o f C re d it C ost
(k) C o n su m e r cred it o r co n su m er loan . .
(1) C re d it ............................................................
(m) C r e d i t o r ..........................................................
(n) C re d it s a l e .....................................................
(o) C u sto m er .....................................................
(P ) D w elling .......................................................
(q) F in a n ce charge ...........................................
(r) O pen en d c r e d i t .........................................
(s) O rg an izatio n ................................................
( t) P erio d ............................................................
( u) Periodic r a t e ................................................
(v) P erson ............................................................
(w ) R eal p ro p e rty ..............................................
(x) Real p ro p e rty transaction ......................
(y) R esidence .....................................................
(z) Security in terest a n d s e c u r i t y ..............
( a a ) State .................................................................
( b b ) O m ission of w o rd “c o n su m er” ..........
(c c) C o n su m m atio n of t r a n s a c t i o n ...............
( d d ) C aptions a n d c a t c h li n e s ...........................

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6

6

6

Sec. 226.6— General Disclosure Requirements . .
(a )

D isclosures; general r u l e ..........................

Sec. 226.7—Open End Credit Accounts—Specific
Disclosures ............................................................
(a) Opening new a c co u n t............................
(b) Periodic statements re q u ire d ................
(c) Location of disclosures........................
(d) Finance charge imposed at time of
transaction............................................
(e) Change in t e r m s .....................................

Sec. 226.9— Right to Rescind Certain Transac­
tions ........................................................................
(a) General rule ...........................................
(b) Notice of opportunity to re s c in d .......
(c) Delay of performance ........................
(d) Effect of rescission.................................
(e) Waiver of right of rescission................
(f) Joint ownership .....................................
(g) Exceptions to general r u l e ....................

Sec. 226.4— Determination of Finance Charge . .
(a) General rule .............................................
(b) Itemized charges excludable.................
(c) Late payment, delinquency, default, and
reinstatement c h a rg e s..........................
(d) Overdraft charges ..................................
(e) Excludable charges, real property trans­
actions ...................................................
(f) Prohibited offsets ....................................
(g) Demand obligations................................
(h) Computation of insurance premiums . .

( a ) G en eral rule— open end credit accounts
(b ) G en eral ru le— o th er credit .....................
( c ) C h a rts a n d t a b l e s ........................................
( d ) M in o r irregularities ...................................
(e ) A pp ro x im atio n o f a n n u al p ercentage
ra te — o th er c r e d i t ....................................

Page
13
13
13
13
13
13
14

Sec. 226.8—Credit Other Than Open End—Spe­
cific Disclosures ...................................................
(a) General rule ...........................................
(b) Disclosures in sale and nonsalecredit
(c) Credit sales ...........................................
(d) Loans and other nonsale c r e d i t.........
(e) Finance charge payable separately or
withheld; required deposit balance .
(f) First lien to finance construction of
dwelling ...............................................
(g) Orders by mail or telep h on e................
(h) Series of s a le s .........................................
(i) Advances under loan commitments. . .
(j) Refinancing, consolidating or increasing
(k) Assumption of an obligation .............
(1) Deferrals or extensions........................
(m) Series of single payment obligations . .
(n) Permissible periodic statements .........
(o) Discount for prompt payment of sales
transactions ..........................................
(p) Agricultural credit—information not de­
terminable .............................................

Sec. 226.3—Exempted Transactions ...................
(a) Business or governmental credit .........
(b) Certain transactions in security or com­
modities a c co u n ts................................
(c) Non-real property credit over $25,000
(d) Certain public utility bills ...................

Sec. 226.5— Determination of Annual Percentage
Rate ..................................................................................

(b) Inconsistent State requirem ents............
(c) Additional information ........................
(d) Multiple creditors; joint disclosure. . .
(e) Multiple customers; disclosure to one
(f) Unknown information estim ate............
(g) Effect of subsequent occurrence..........
(h) Overstatem ent.........................................
(i) Preservation and inspection of evidence
of com pliance......................................
(j) Leap year ................................................

9
9

10
11
12
12

12
12

Sec. 226.10—Advertising Credit Terms ...........
(a) General rule ...........................................
(b) Catalogs and multi-page advertisements
(c) Advertising of open end credit .........
(d) Advertising of credit other than open
e n d .........................................................
(e) Advertising of FHA Section 235 fi­
nancing .................................................
Sec. 226.11—Comparative Index of Credit Cost
for Open End Credit .........................................
(a) General r u l e ............................................
(b) Computation of Comparative Index of
Credit C o s t ...........................................
(c) Form of disclosure.................................

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15
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26

Page

Page
Sec. 226.12— Exemption of Certain State Regu­
lated Transactions .....................................................

26

( a ) E x em p tio n fo r S tate reg u la ted tra n s ­
actions ..........................................................
( b ) P ro c e d u res a n d c r i t e r i a ..............................
(c ) Civil l i a b i l i t y ..................................................
( d ) E xem p tions g r a n t e d ...................................

26
26
26
26

Sec. 226.13— Credit Cards— Issuance and Lia­
bility ................................................................................
(a)

( b ) Issuance o f credit cards ..........................
(c ) C on ditions o f liability o f c a rd h o ld e r . .
( d ) O th e r conditions o f l i a b i l i t y ..................
(e ) N o tice to c a r d h o l d e r .................................
(f ) N otice to c ard i s s u e r .................................
(g ) A ction to en fo rce liability .....................
( h ) Effect on o th er applicable law or
agreem en t ...................................................

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28

26

S up plem ental definitions ap plicable to
this section
...........................................

26

T R U T H IN L E N D IN G A C T
S T A T U T O R Y A P P E N D IX

Page

Page

§
§

TITLE I—CONSUMER CREDIT
COST DISCLOSURE
Chapter 1—General Provisions
§
§
§
§
§
§
§
§
§
§
§
§
§
§

§

101. Short title ..........................................
102. Findings and declaration of pur­
pose ...................................................
103. Definitions and rules of construc­
tion ...................................................
104. Exempted transactions ..................
105. Regulations .......................................
106. Determination of finance charge .
107. Determination of annual percent­
age rate ...........................................
108. Administrative enforcement . . . .
109. Views of other agencies ................
110. Advisory Committee ....................
111. Effect on other laws ......................
112. Criminal liability for willful and
knowing violation ..........................
113. Penalties inapplicable to govern­
mental agencies ..............................
114. Reports by Board and Attorney
General .............................................

§

29

§

29
30
30
30

§
§

31
32
32
33
33
33
33
33

Chapter 2— Credit Transactions
§ 121. General requirement of disclosure
§ 122. Form of disclosure; additional in­
formation .........................................
§ 123. Exemption
for
State-regulated
transactions ....................................

S

29

34
34
34

§
§
§

124. Effect of subsequent occurrence .
125. Right of rescission as to certain
transactions ......................................
126. Content of periodic statements . .
127. Open end consumer credit plans . .
128. Sales not under open end credit
plans .................................................
129. Consumer loans not under open
end credit plans ............................
130. Civil liability ...................................
131. Written acknowledgment as proof
of re c e ip t...........................................
132. Issuance of credit c a r d s ..................
133. Liability of holder of credit card. .
134. Fraudulent use of credit card . . . .

Chapter 3—Credit Advertising
§ 141. Catalogs and multiple-page adver­
tisements ...........................................
§ 142. Advertising of downpayments and
installments .................................... .
§ 143. Advertising of open end credit
plans .................................................
§ 144. Advertising of credit other than
open end p l a n s ................................
§ 145. Nonliability of media ....................
TITLE V— GENERAL PROVISIONS
§ 501. Severability .......................................
§ 502. Captions and catchlines for refer­
ence only .........................................
§ 503. Grammatical u s a g e s ........................
§ 504. Effective dates .................................

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3“
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40

IN T E R P R E T A T IO N S O F R E G U L A T IO N Z
Section of Regulation Z to Which
Interpretation Relates
Page

Page

I. Section 226.1— Authority, Scope, Purpose, Etc.
§ 226.101

Use o f “a n n u a l percentage ra te ”
in oral com m u n icatio n s ............

§ 226.202
41

II. Section 226.2—Definitions and Rules of Con­
struction
§ 226.201

L ay -A w ay P lans as extensions o f
cred it .....................................................

§ 226.203

Security interest— confessions o f
ju d g m en t— cognovit n o t e s ............
O pen end credit distinguished
f ro m o th e r cred it ...........................

41
42

III. Section 226.3—Exempted Transactions
§ 226.301
41

A g ricu ltu ral purposes— w hen ex ­
em p t fro m the R egulation ..........

42

Page

Page
§ 226.302

Credit for business or commer­
cial purposes—more than. 4 fam­
ily u n i t s ...........................................

42

§ 226.706

IV. Section 226.4— Determination of Finance
Charge
§ 226.401 Service charges on accounts not
paid within a given period of time 42
43
§ 226.402 Term of insurance coverage . . . .
§ 226.403 Disclosure of cost of property
insurance when not obtainable
from or through the creditor .. . 43
§ 226.404 Premiums for vendor’s single in­
terest insurance required by cred­
itor ................................................... 43
§ 226.405 Property insurance written in
connection with a tran sactio n obtained from or through the
creditor ........................................... 44
§ 226.406 Seller’s points and discounts un­
der Regulation Z .......................... 44
§ 226.407 Charges for membership in open
end credit p l a n .............................. 44

§ 226.707

V. Section 226.5—Determination of Annual Per­
centage Rate
§ 226.501 Use of ranges or brackets to de­
termine periodic rate of finance
charge on open end accounts . .
§ 226.502 Annual percentage rate on single
add-on rate transactions...............
§ 226.503 Minor irregularities — maximum
irregular period lim its .................
§ 226.504 Treatment of “Pick-Up Payment”
in an instalment contract ...........
§ 226.505 Application of the minor irregu­
larities provisions in determining
the amount of the finance charge
§ 226.506 Daily periodic rate; computation
of the annual percentage rate. .
VI. Section 226.6— General Disclosure Require­
ments
§ 226.601 Overstatement of annual percent­
age rate ...........................................
§ 226.602 (Rescinded effective 3/1 /74 )
§ 226.603 Disclosures in transaction involv­
ing multiple customers ...............
§ 226.604 Inconsistent State requirements ..
§ 226.605 (Rescinded effective 3/1 /7 4)
VII. Section 226.7— Open
End Credit Accounts— Specific Disclosures
§ 226.701 Periodic statements — Finance
charge resulting from more than
one periodic rate ............................
§ 226.702 (Revoked effective 6 /1 /7 3 )
§ 226.703 Finance charge based on average
daily balance in open end credit
accounts ........................................
§ 226.704 (Revoked effective 6/1 /7 3)
§ 226.705 Open end credit—change in the
method of determining the bal-

45
45
45
45
46
47

47
47
48

48

48

ance on which finance charges
are computed ................... ............
Open end credit— allocation of
payments .........................................
Disclosures — variable periodic
r a t e s ....................... .........................

VIII. Section 226.8— Credit Other Than Open
End—Specific Disclosures
§ 226.801 Location of disclosures.when con­
tract, security agreement, and evi­
dence of transaction are combined
in a single d o cu m en t...................
§ 226.802 Disclosures on mail or telephone
orders .............................................
§ 226.803 Disclosures when discounts apply
for prompt p a y m e n t.....................
§ 226.804 Series of sales— content of agree­
ment ...............................................
§ 226.805 Series of sales as distinguished
from refinancing, consolidating,
or increasing..................................
§ 226.806 Deposit balances applied toward
satisfaction of customer’s obliga­
tion .................................................
§ 226.807 Assumption of an obligation—
disclosures......................................
§ 226.808 Disclosure of amount of scheduled
payments ........................................
§ 226.809 Disclosures for certain student
loans ................................................
§ 226.810 Disclosures—variable interest rates
§ 226.811 Renewals of notes .........................
§ 226.812 Advances under open end real
estate mortgages for agricultural
purposes .........................................
§ 226.813 Disclosures on multiple advance
loans ...............................................
§ 226.814 Premiums for insurance added to
an existing b a la n c e ........................
§ 226.815 Disclosure for demand loans . . .
§ 226.816 Mortgages with demand features
§ 226.817 Reduction in annual percentage
rate .................................................
§ 226.818 Refund of unearned finance
charge; prepayment penalty . . . .
§ 226.819 Prepaid finance charges; add-ons
and discounts ................................
IX. Section 226.9—Right to Rescind Certain
Transactions
§ 226.901 Waiver of security interests—ef­
fect on the right of recission . .
§ 226.902 “Customers” and joint owners of
property under the right of rescis­
sion .................................................
§ 226.903 Refinancing and increasing—dis­
closures and effects on the right
of rescission ..................................
X. Section 226.10—Advertising Credit Terms
§ 226.1001 Advertising of credit terms in
other than open end credit . . . .
§ 226.1002 Catalogs—tables or schedules of
credit terms ..................................

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58

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59
59

59
60

APPENDICES
Appendix A
Appendix B

Questions and Answers ........................... 61 Appendix C Sample Page from Annual PerForm of Notice of Right of Recentage Rate T a b le s ..................... 71
cission ......................................................... 69Appendix D Federal Enforcement Agencies . .
72

REGULATION

Z
(12 C F R 226)
Effective July 1, 1969
A m e n d ed S ep tem ber 30, 1974

TRUTH IN LENDING
R E G U L A T IO N *
**SEC T IO N 226.1— A U T H O R IT Y , SCOPE,
PU R PO S E , ETC.

the custom er m ay readily com pare the various
credit term s available to him from different
sources and avoid the uninform ed use o f credit.
(a)
Authority, scope, and purpose. (1) This
This P art also implements the provision of the
P art comprises the regulations issued by the
Act under which a custom er has a right in cer­
Board of G overnors o f the Federal Reserve Sys­
tain circumstances to cancel a credit transaction
tem pursuant to Title I (Truth in Lending Act)
which involves a lien on his residence. A dvertis­
and Title V (General Provisions) of the C on­
ing of consum er credit term s m ust comply with
sum er Credit Protection Act, as am ended (15
specific requirem ents, and certain credit term s
U.S.C. § 1601 et seq.). Except as otherwise p ro ­
may not be advertised unless the creditor usually
vided herein, this P art applies to all persons who
and customarily extends such terms. This P art
in the ordinary course of business regularly ex­
also contains prohibitions against the issuance of
tend, or offer to extend, or arrange, o r offer to
unsolicited credit cards and limits on the card­
arrange, for the extension of consum er credit as
holder’s liability for unauthorized use of a credit
defined in paragraph (k) of § 226.2, and to all
card. N either the Act nor this P art is intended to
persons who issue credit cards.
control charges for consum er credit, or interfere
(2)
This P art implements the Act, the purpose
with trade practices except to the extent th a t such
of which is to assure th at every custom er who
practices m ay be inconsistent with the purpose of
has need for consum er credit is given meaningful
the Act.
inform ation with respect to the cost of that credit
(b) Administrative enforcement. (1) As set
which, in most cases, m ust be expressed in the
forth m ore fully in section 108 of the Act, ad­
dollar am ount of finance charge, and as an an­
ministrative enforcem ent of the A ct and this P art
nual percentage rate com puted on the unpaid bal­
with respect to certain creditors and credit card
ance of the am ount financed. O ther relevant
issuers is assigned to the Com ptroller o f the C u r­
credit inform ation must also be disclosed so that
rency, Board of D irectors of the Federal Deposit
* This text corresponds to the Code of Federal Regula­ Insurance C orporation, Federal H om e L oan Bank
tions, Title 12, Chapter II, Part 226, cited as 12 CFR
B oard (acting directly or through the Federal
226. The words “this Part” , as used herein, mean Regu­
Savings and Loan Insurance Corporation), A d­
lation Z.
m inistrator of the N ational Credit U nion A dm in ­
** Amended 1/25/71.

REGULATION Z

§ 226.2

istration, Interstate Com m erce Commission, Civil
Aeronautics Board, Secretary of A griculture, and
Board of Governors o f the Federal Reserve Sys­
tem.
(2)
Except to the extent that administrative en­
forcem ent is specifically com m itted to other au­
thorities, compliance with the requirem ents
imposed under the Act and this P art will be en­
forced by the Federal T rade Commission.
(c)
Penalties and liabilities. Section 112 of the
A ct provides for crim inal liability for willful and
knowing failure to com ply with any requirem ent
imposed under the A ct and this Part, and section
130 of the A ct provides for civil liability on the
p art o f any creditor who fails to disclose any in­
form ation required under C hapter 2 of the Act
and un d er the corresponding provisions of this
Part. Section 134 provides for criminal liability
for the fraudulent use of a credit card to obtain
goods or services having a retail value aggregat­
ing $5,000 or more. Pursuant to section 108 of
the Act, violations of the Act or this P art consti­
tute violations of other Federal laws which may
provide further penalties.

SEC T IO N 226.2— D E F IN IT IO N S A N D
RU L E S O F C O N ST R U C T IO N
F o r the purposes of this Part, unless the con­
text indicates otherwise, the following definitions
and rules of construction apply:
(a) “Act” refers to the T ru th in Lending Act
(Title I of the Consum er Credit Protection Act).
(b) “Advertisement” means any commercial
message in any newspaper, magazine, leaflet, flyer
or catalog, on radio, television or public address
system, in direct mail literature or other printed
material, on any interior or exterior sign or dis­
play, in any window display, in any point-oftransaction literature o r price tag which is deliv­
ered or m ade available to a custom er or
prospective customer in any m anner whatsoever.
(c) “Agricultural purpose” m eans a purpose re­
lated to the production, harvest, exhibition, m ar­
keting, transportation, processing, or m anufacture
of agricultural products by a natural person who
cultivates, plants, propagates, or nurtures those
agricultural products. “Agricultural products” in­
cludes agricultural, horticultural, viticultural, and
dairy products, livestock, wildlife, poultry, bees,
forest products, fish and shellfish, and any p ro ­

ducts thereof, including processed and m anufac­
tured products, and any and all products raised
or produced on farm s and any processed or m an ­
ufactured products thereof.
(d) “Amount
credit of which
use determ ined
(c)(7) and (d)(1)

financed” means the am ount of
the custom er will have the actual
in accordance with paragraphs
of § 226.8.

(e) “Annual percentage rate” means the annual
percentage rate of finance charge determ ined in
accordance with § 226.5.
(f) “Arrange for the extension of credit”
means to provide or offer to provide consumer
credit which is o r will be extended by another
person under a business or other relationship p ur­
suant to which the person arranging such credit
receives or will receive a fee, compensation, or
other consideration for such service or has
knowledge o f the credit terms and participates in
the preparation of the contract docum ents re­
quired in connection with the extension of credit.
It does not include honoring a credit card o r sim­
ilar device where no finance charge is imposed at
the time of that transaction.
(g) “Billing cycle” means the time interval be­
tween regular periodic billing statem ent dates.
Such intervals may be considered equal intervals
of time unless a billing date varies m ore than 4
days from the regular date.
(h) “Board” refers to the Board of Governors
of the Federal Reserve System.
(i) “Cash price” means the price at which the
creditor offers, in the ordinary course of business,
to sell for cash the property or services which are
the subject o f a consum er credit transaction. It
may include the cash price of accessories or serv­
ices related to the sale such as delivery, installa­
tion, alterations, modifications, and improve­
ments, and m ay include taxes to the extent
imposed on the cash sale, but shall not include
any other charges of the types described in
§ 226.4.
(j) “Comparative Index o f Credit Cost” means
the relative measure of the cost o f credit under
an open end credit account, com puted in accord­
ance with § 226.11, and is the expression of the
“average effective annual percentage rate of re­
turn” and the “projected rate of retu rn ” which
appear in section 127(a)(5) of the Act.
(k) “Consumer credit” m eans credit offered or

REGULATION Z

§ 226.2

extended to a natural person, in which the
money, property, or service which is the subject
of the transaction is primarily for personal, fam ­
ily, household, or agricultural purposes and for
w hich either a finance charge is or may be im­
posed or which, pursuant to an agreement, is or
m ay be payable in more than 4 instalments.
“C onsum er loan” is one type of “consumer
credit.”

stalments; and (3) a finance charge m ay be com ­
puted by the creditor from time to tim e on an
outstanding unpaid balance. T he term does not
include negotiated advances under an open end
real estate mortgage or a letter of credit.
(s) “Organization” means a corporation, trust,
estate, partnership, cooperative, association, gov­
ernment, or governm ental subdivision, agency, or
instrumentality.
(1)
“Credit” means the right granted by a
(t) “Period” means a day, week, month, or
creditor to a custom er to defer paym ent of debt,
other subdivision o f a year.
incur debt and defer its paym ent, or purchase
*(u) “Periodic rate” m eans a percentage rate
property or services and defer paym ent therefor.
of finance charge which is or m ay be imposed by
(See also paragraph (bb) of this section.)
a creditor against a balance for a period. (See also
(m) “Creditor” m eans a person w ho in the o r­
§ 226.5(a)(3).)
dinary course of business regularly extends or ar­
(v) “Person” means a natural person or an or­
ranges for the extension of consum er credit, or
ganization.
offers to extend o r arrange for the extension of
(w) “Real property” m eans property which is
such credit.
real property under the law o f the State in which
(n) “Credit sale” means any sale with respect
it is located.
to which consum er credit is extended or arranged
(x) “Real property transaction” means an ex­
by the seller. The term includes any contract in
tension of credit in connection with which a se­
the form of a bailment o r lease if the bailee or
curity interest in real property is or will be re­
lessee contracts to pay as com pensation for use a
tained o r acquired.
sum substantially equivalent to or in excess of the
(y) “Residence” means any real property in
aggregate value of the property and services in­
which the custom er resides or expects to reside.
volved and it is agreed that the bailee or lessee
T he term includes a parcel of land on which the
will become, or for no other or for a nominal
custom er resides or expects to reside.
consideration has the option to become, the
(z) “Security interest” and “security” means
owner of the property upon full compliance with
any
interest in property which secures paym ent
his obligations under the contract.
or
perform
ance of an obligation. T he term s in­
(o)
“Customer” means a natural person to
clude,
but
are not limited to, security interests
whom consumer credit is offered or to w hom it is
under
the
U
niform Com mercial Code, real pro p­
o r will be extended, and includes a com aker, en­
erty mortgages, deeds of trust, and other consen­
dorser, guarantor, or surety for such natural per­
sual or confessed liens whether o r not recorded,
son who is or may be obligated to repay the ex­
mechanic’s, m aterialm en’s, artisan’s, and other
tension of consum er credit.
similar liens, vendor’s liens in both real and per­
(p) “D welling” means a residential-type struc­
sonal property, the interest o f a seller in a con­
ture which is real property and contains one
tract for the sale of real property, any lien on
o r m ore family housing units, or a residential
property arising by operation o f law, and any in­
condom inium unit wherever situated.
terest in a lease w hen used to secure paym ent or
(q) “Finance charge” m eans the cost of credit
perform ance of an obligation.
determined in accordance with § 226.4.
(aa) “State” means any State, the District of
(r) “Open end credit” m eans consum er credit
Columbia, the Com m onw ealth of Puerto Rico,
extended on an account pursuant to a plan under
and any territory or possession of the United
w hich (1) the creditor m ay permit the customer
States.
to m ake purchases or obtain loans, from time to
(bb) Unless the context indicates otherwise,
time, directly from the creditor or indirectly by
“credit” shall be construed to m ean “consumer
use o f a credit card, check, o r other device, as
credit,” “loan” to m ean “consum er loan,” and
the plan m ay provide; (2) the customer has the
privilege of paying the balance in full or in in­

* Amended 11/1/73.

§ 226.3

“transaction” to m ean “consum er credit transac­
tion.”
(cc) A transaction shall be considered consum ­
m ated at the time a contractual relationship is
created between a creditor and a custom er ir­
respective of the time of perform ance of either
party.
(dd) Captions and catchlines are intended
solely as aids to convenient reference, and no in­
ference as to the intent of any provision of this
part may be draw n from them.
SEC T IO N 226.3— E X E M P T E D
T R A N SA C T IO N S
This P art does not apply to the following:
(a) Business or governmental credit. Extensions
of credit to organizations, including governments,
or for business or com mercial purposes, other
than agricultural purposes.
(b) Certain transactions in security or com­
modities accounts. Transactions in securities or
commodities accounts with a broker-dealer regis­
tered with the Securities and Exchange Com m is­
sion.
(c) Non-real property credit over $25,000.
Credit transactions, other than real property
transactions, in which the am ount financed1 ex­
ceeds $25,000, or in which the transaction is pur­
suant to an express written com m itm ent by the
creditor to extend credit in excess of $25,000.
(d) Certain public utility bills. Transactions
under public utility tariffs involving services pro­
vided through pipe, wire, or other connected fa­
cilities, if the charges for such public utility serv­
ices, the charges for delayed paym ent, and any
discount allowed for early paym ent are filed with,
reviewed by, or regulated by an agency of the
Federal G overnm ent, a State, or a political subdi­
vision thereof.
S EC TIO N 226.4— D E T E R M IN A T IO N O F
F IN A N C E C H A R G E
(a)
General rule. Except as otherwise provided
in this section, the am ount of the finance charge
in connection with any transaction shall be deter1 For this purpose, the amount financed is the amount
which is required to be disclosed under § 226.8(c)(7),
or (d ) (1 ) , as applicable, or would be so required if the
transaction were subject to this Part.

REGULATION Z

mined as the sum of all charges, payable directly
or indirectly by the customer, and imposed di­
rectly or indirectly by the creditor as an incident
to or as a condition of the extension of credit,
whether paid or payable by the customer, the
seller, o r any other person on behalf of the cus­
tom er to the creditor or to a third party, includ­
ing any of the following types of charges:
(1) Interest, time price differential, and any
am ount payable under a discount or other system
of additional charges.
(2) Service, transaction, activity, or carrying
charge.2
(3) Loan fee, points, finder’s fee, or similar
charge.
(4) Fee for an appraisal, investigation, or
credit report.
(5) Charges or prem ium s for credit life, acci­
dent, health, or loss of income insurance, written
in connection with3 any credit transaction unless
(i) the insurance coverage is n ot required by
the creditor and this fact is clearly and con­
spicuously disclosed in writing to the customer;
and
(ii) any custom er desiring such insurance
coverage gives specifically dated and separately
signed affirmative written indication of such
desire after receiving written disclosure to him
of the cost of such insurance.
(6) Charges or premiums for insurance, written
in connection with4 any credit transaction, against
loss of o r dam age to property or against liability
arising out of the ownership or use of property,
unless a clear, conspicuous, and specific statement
in writing is furnished by the creditor to the cus­
tom er setting forth the cost o f the insurance if
2 These charges include any charges imposed by the
creditor in connection with a checking account to the ex­
tent that such charges exceed any charges the customer
is required to pay in connection with such an account
when it is not being used to extend credit.
3 A policy of insurance owned by the customer, which
is assigned to the creditor or otherwise made payable to
the creditor to satisfy a requirement imposed by the
creditor, is not insurance “written in connection with” a
credit transaction if the policy was not purchased by the
customer for the purpose of being used in connection
with that extension of credit.
4 A policy of insurance owned by the customer, which
is assigned to the creditor or otherwise made payable to
the creditor to satisfy a requirement imposed by the
creditor, is not insurance “written in connection with” a
credit transaction if the policy was not purchased by the
customer for the purpose of being used in connection
with that extension of credit.

REGULATION Z

obtained from or through the creditor and stating
that the custom er may choose the person through
which the insurance is to be obtained.5
(7) Prem ium or other charge for any other
guarantee or insurance protecting the creditor
against the custom er’s default or other credit loss.
(8) A ny charge imposed by a creditor upon
another creditor for purchasing or accepting an
obligation of a custom er if the customer is re­
quired to pay any part of that charge in cash, as
an addition to the obligation, or as a deduction
from the proceeds of the obligation.
(b) Itemized charges excludable. If itemized
and disclosed to the customer, any charges of the
following types need not be included in the
finance charge:
(1) Fees and charges prescribed by law which
actually are or will be paid to public officials for
determining the existence of or for perfecting or
releasing or satisfying any security related to the
credit transaction.
(2) The premium payable for any insurance in
lieu of perfecting any security interest otherwise
required by the creditor in connection with the
transaction, if the prem ium does not exceed the
fees and charges described in subparagraph (1) of
this paragraph which would otherwise be payable.
(3) Taxes not included in the cash price.
(4) License, certificate of title, and registration
fees imposed by law.
(c) Late payment, delinquency, default, and
reinstatement charges. A late paym ent, delin­
quency, default, reinstatement, or other such
charge is not a finance charge if imposed for ac­
tual unanticipated late paym ent, delinquency, de­
fault or other such occurrence.
(d) Overdraft charges. A charge imposed by a
bank for paying checks which overdraw or in­
crease an overdraft in a checking account is not
a finance charge unless the paym ent of such
checks and the imposition of such finance charge
were previously agreed upon in writing.
(e) Excludable charges, real property transac­
tions. T he following charges in connection with
any real property transaction, provided they are
bona fide, reasonable in am ount, and not for the
purpose of circumvention or evasion of this Part,
5 A creditor’s reservation or exercise of the right to re­
fuse to accept an insurer offered by the customer, for
reasonable cause, does not require inclusion of the pre­
mium in the finance charge.

§ 226.5

shall not be included in the finance charge with
respect to that transaction:
(1) Fees or prem ium s for title examination, ab­
stract of title, title insurance, or similar purposes
and for required related property surveys.
(2) Fees for preparation of deeds, settlement
statements, or other documents.
(3) A m ounts required to be placed or paid into
an escrow or trustee account for future payments
of taxes, insurance, and water, sewer, and land
rents.
(4) Fees for notarizing deeds and other docu­
ments.
(5) Appraisal fees.
(6) Credit reports.
(f) Prohibited offsets. Interest, dividends, or
other income received or to be received by the
custom er on deposits or on investments in real or
personal property in which a creditor holds a se­
curity interest shall not be deducted from the
am ount of the finance charge or taken into con­
sideration in com puting the annual percentage
rate.
(g) Demand obligations. Obligations other than
those debited to an open end credit account
which are payable on dem and shall be considered
to have a m aturity of one-half year for the p u r­
pose of com puting the am ount of the finance
charge and the annual percentage rate, except
that where such an obligation is alternatively pay­
able upon a stated m aturity, the stated maturity
shall be used for the purpose o f such com puta­
tions.
(h) Computation of insurance premiums. If
any insurance premium is required to be included
as a part of the finance charge, the am ount to be
included shall be the premium for coverage ex­
tending over the period of time the creditor will
require the customer to m aintain such insurance.
For this purpose, rates and classifications applica­
ble at the time the credit is extended shall be ap­
plied over the full time during which coverage is
required, unless the creditor knows or has reason
to know that other rates or classifications will be
applicable, in which case such other rates or clas­
sifications shall be used to the extent appropriate.
SEC TIO N 2 2 6 .5 --D E T E R M IN A T IO N O F
AN NU A L PERCEN TAG E RATE
(a) General rule— open end credit accounts.
T he annual percentage rates for open end credit

REGULATION Z

§ 226.5

accounts shall be com puted so as to perm it dis­
closure with an accuracy at least to the nearest
quarter of 1 per cent. Such rate or rates shall be
determined in accordance with § 226.7(a)(4) for
purposes of disclosure before opening an account,
§ 226.10(c)(4) for purposes of advertising, and in
the following m anner for purposes of disclosure
on periodic statements:
(1) W here the finance charge is exclusively the
product of the application of one or more pe­
riodic rates
(i) by multiplying each periodic rate by the
num ber of periods in a year; or
(ii) at the creditor’s option, if the finance
charge is the result of the application of two
or m ore periodic rates, by dividing the total
finance charge for the billing cycle by the sum
of the balances to which the periodic rates
were applied and multiplying the quotient (ex­
pressed as a percentage) by the num ber of bill­
ing cycles in a year.
(2) W here the creditor imposes all periodic
finance charges in am ounts based on specified
ranges or brackets of balances, the periodic rate
shall be determined by dividing the am ount of
the finance charge for the period by the am ount
of the median balance within the range or
bracket of balances to which it is applicable, and
the annual percentage rate shall be determined by
multiplying that periodic rate (expressed as a per­
centage) by the num ber of periods in a year.
Such ranges or brackets of balances shall be sub­
ject to the limitations prescribed in subdivision
(iv) of paragraph (c)(2) of this section.
*(3) W here the finance charge imposed during
the billing cycle is or includes
(i) any minimum, fixed, or other charge not
due to the application of a periodic rate, other
than a charge with respect to any specific
transaction during the billing cycle, by dividing
the total finance charge for the billing cycle by
the am ount of the balance(s) to which applica­
ble and multiplying the quotient (expressed as
a percentage) by the num ber of billing cycles
in a year; or
(ii) any charge with respect to any specific
transaction during the billing cycle (even if the
total finance charge also includes any other
minimum, fixed, or other charge not due to the
application of a periodic rate), by dividing the
* Amended 6/1/73.

total finance charge imposed during the billing
cycle by the total of all balances and other
am ounts on which any finance charge was im­
posed during the billing cycle w ithout duplica­
tion and multiplying the quotient (expressed as
a percentage) by the num ber of billing cycles
in a year,™ except that the annual percentage
rate shall not be less than the largest rate de­
termined by multiplying each periodic rate im­
posed during the billing cycle by the number
of periods in a year; or
(iii)
any minimum, fixed, or other charge
not due to the application of a periodic rate
and the total finance charge imposed during
the billing cycle 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
monthly, at the creditor’s option, by multiply­
ing each applicable periodic rate by the num ­
ber of periods in a year, notwithstanding the
provisions of subdivisions (i) and (ii) of this
subparagraph.
(b)
General rule— other credit. Except as oth­
erwise provided in this section, the annual per­
centage rate applicable to any extension of credit,
other than open end credit, shall be that nominal
annual percentage rate determined as follows:
(1) In accordance with the actuarial method of
com putation so that it may be disclosed with an
accuracy at least to the nearest quarter of 1 per
cent. The mathematical equation and technical
instructions for determining the annual percent­
age rate in accordance with the requirem ents of
this paragraph are set forth in Supplement I to
Regulation Z which is incorporated in this Part
by reference. Supplement I to Regulation Z may
be obtained from any Federal Reserve Bank or
from the Board in Washington, D.C., 20551,
upon written request.
(2) A t the option of the creditor, by applica­
tion of the United States Rule so that it m ay be
disclosed with an accuracy at least to the nearest
quarter of 1 per cent. U n d er this rule, the finance
charge is com puted on the unpaid balance for the
actual time the balance remains unpaid and if the
am ount of a paym ent is insufficient to pay the
accum ulated finance charge, the unpaid accum u­
lated finance charge continues to accum ulate to
be paid from the proceeds of subsequent pay­
ments and is not added to the am ount financed.
See p. 11 for footnote 5a.

REGULATION Z

§ 226.5

(c) Charts and tables. (1) T h e Regulation Z
A nnual Percentage R ate Tables produced by the
Board m ay be used to determ ine the annual per­
centage rate, and any such rate determined from
these tables in accordance with instructions con­
tained therein will com ply with the requirem ents
of this section. V olum e I contains table FR B —
100-M covering 1 to 60 m onthly payments, table
FRB— 200-M covering 61 to 120 m onthly pay­
ments, table F R B — 300-M covering 121 to 480
m onthly payments, and table FR B — 100-W cov­
ering 1 to 104 weekly payments. V olum e I also
contains instructions for use of the tables in regu­
lar transactions and most irregular transactions
which involve only odd first and final paym ents
and odd first paym ent periods. V olume II con­
tains factor tables and instructions for their use
in connection with the tables in V olume I in the
com putation of annual percentage rates in any
type of irregular paym ent or paym ent period
transaction and in transactions involving multiple
advances. E ach volume is available from the
Board in W ashington, D.C., 20551, and the F ed­
eral Reserve Banks.
(2) A ny chart or table other than the B oard’s

Regulation Z A nnual Percentage R ate Tables also
m ay be utilized for the purpose of determining
the annual percentage rate provided:
(i) It is prepared in accordance with the
general rule set forth in paragraph (b) (1) or
(2)o f this section;
(ii) It bears the nam e and address o f the
person responsible for its production, an identi­
fication n um ber assigned to it by that person
which shall be the same for each chart o r table
so produced with like numerical content and
configuration and, if prepared for use in
connection with irregular transactions, an iden­
tification of the m ethod o f com putation (“A c­
tuarial” o r “U.S. Rule”);
(iii) Except as provided in subdivision (iv) of
this subparagraph, it perm its determ ination of
the annual percentage rate to the nearest onequarter o f 1 per cent for the range of rates
covered by the chart or table; and
(iv) If applicable to ranges or brackets of
balances, it discloses the am ount o f the
finance charge and the annual percentage rate
on the median balance w ithin each range or
bracket o f balances w here a creditor imposes

5‘ In determining the denominator of the fraction
under §226.5(a) (3) (ii) no amount will be used more
than once when adding the sum of the balances to which
periodic rates apply to the sum of the amounts financed
to which specific transaction charges apply. In every case
the full amount of transactions to which specific transac­
tion charges apply shall be included in the denominator.
Other balances or parts of balances shall be included ac­
cording to the manner of determining the balance to
which a periodic rate is applied, as illustrated in the fol­
lowing examples of accounts on monthly billing cycles:
1. Previous balance—none.
A specific transaction of $100 occurs on first day of
the billing cycle. The average daily balance is $100. A
specific transaction charge of 3% is applicable to the
specific transctions. The periodic rate is 1
applicable
to the average daily balance. The numerator is the
amount of the finance charge, which is $4.50. The de­
nominator is the amount of the transaction (which is
$100), plus the amount by which the balance to which
the periodic rate applies exceeds the amount of specific
transactions (such excess in this case is 0 ), totaling $100.
The annual percentage rate is ,the quotient (which is
4.5% ) multiplied by 12 (the number of months in a
year), i.e., 54%.
2. Previous balance— $100.
A specific transaction of $100 occurs at midpoint of
the billing cycle. The average daily balance is $150. A
specific transaction charge of 3% is applicable to the
specific transaction. The periodic rate is W i% applicable
to the average daily balance. The numerator is the
amount of finance charge which is $5.25. The denomina­
tor is the amount of the transaction (which is $100),
plus the amount by which the balance to which the pe-

riodic rate applies exceeds the amounts of specific trans­
actions (such excess in this case is $50), totaling $150.
As explained in example 1, the annual percentage rate
is 3.5% X 12 = 42%.
3. If, in example 2, the periodic rate applies only to
the previous balance, the num erator is $4.50 and the de­
nominator is $200 (the amount of the transaction, $100,
plus the balance to which only the periodic rate is appli­
cable, the $100 previous balance). As explained in exam­
ple 1, the annual percentage rate is 2.25% 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 customer made a payment of $50 at
midpoint of billing cycle, the numerator is $3.75 and the
denominator is $150 (the amount of the transaction,
$100, plus the balance to which only the periodic rate is
applicable, the $50 adjusted balance). As explained in
example 1, the annual percentage rate is 2.5% X 12 =
30%.
5. Previous balance— $100.
A specific transaction (check) of $100 occurs at the
midpoint of the billing cycle. The average daily balance
is $150. The specific transaction charge is 25 cents per
check. The periodic rate is 1V4% applied to the average
daily balance. The num erator is the amount of the
finance charge, which is $2.50 and includes the 25 cents
check charge and the $2.25 resulting from the applica­
tion of the periodic rate. The denominator is the full
amount of the specific transaction (which is $100) plus
the amount by which the average daily balance exceeds
the amount of the specific transaction (which in this case
is $50), totaling $150. As explained in example 1, the
annual percentage rate would be \% % X 12 = 20%.

REGULATION Z

§ 226.6

the same finance charge for all balances within
a specified range or bracket of balances, and
provided further that if the annual percentage
rate determined on the median balance under­
states the annual percentage rate determined
on the lowest balance in th at range or bracket
by m ore than 8 per cent of the rate on the
lowest balance, then the annual percentage rate
for that range or bracket shall be com puted
upon any balance lower than the median bal­
ance within that range so that any understate­
m ent will not exceed 8 per cent of the rate on
the lowest balance within that range or bracket
of balances.
(3)
In the event an error in disclosure of the
am ount of a finance charge or an annual percent­
age rate occurs because of a corresponding error
in a chart or table acquired or produced in good
faith by the creditor, that error in disclosure shall
not, in itself, be considered a violation of this
Part provided that upon discovery of the error,
that creditor makes no further disclosure based
on that chart or table and prom ptly notifies the
Board or a Federal Reserve Bank in writing of
the erro r and identifies the inaccurate chart or
table by giving the nam e and address of the per­
son responsible for its production and its identifi­
cation number.

weekly instalments, not less than 10 days for
an obligation otherwise payable in biweekly or
semimonthly instalments, or not less than 20
days for an obligation otherwise payable in
monthly instalments.
(2)
If the period from the date on which the
finance charge begins to accrue and the date the
final paym ent is due is less than 3 m onths in the
case of weekly payments, 6 m onths in the case of
biweekly or semimonthly payments, or 1 year in
the case of monthly payments, either or both of
the following:
(i) The am ount of 1 paym ent other than any
dow npaym ent is not m ore th a n 25 per cent
greater n o r 25 per cent less than the am ount
o f a regular payment; or
(ii) The interval between the date on which
the finance charge begins to accrue and the
date the first paym ent is due is n o t less than 6
days for an obligation otherwise payable in
weekly instalments, not less th a n 12 days for
an obligation otherwise payable in biweekly or
semimonthly instalments, or not less than 25
days for an obligation otherwise payable in
monthly instalments.

(e)
Approximation o f annual percentage rate
— other credit. In an exceptional instance when
circumstances m ay leave a creditor with no alter­
(d)
Minor irregularities. In determining the an ­
native but to determine an annual percentage rate
nual percentage rate a creditor may, at his
applicable to an extension of credit other than
option, consider the paym ent irregularities set
open end credit by a method other than those
forth in this paragraph as if they were regular in
prescribed in paragraphs (b) or (c) of this section,
am ount or time, as applicable, provided that the
the creditor may utilize the constant ratio method
transaction to which they relate is otherwise pay­
of com putation provided such use is limited to
able in equal instalments scheduled at equal inter­
the exceptional instance and is not fo r the p u r­
vals.
pose of circumvention or evasion of the require­
(1)
If the period from the date on which the ments of this Part. A ny provision of State law
finance charge begins to accrue and the date the
authorizing or requiring the use of the constant
final paym ent is due is not less than 3 months in
ratio m ethod or any m ethod of com puting a per­
the case of weekly payments, 6 months in the
centage rate other than those prescribed in p ara­
case of biweekly or semimonthly payments, or 1
graphs (b) and (c) of this section does not justify
year in the case of monthly payments, either or
failure of the creditor to com ply with the provi­
both of the following:
sions of those paragraphs, as applicable.
(i) T he am ount o f 1 paym ent other than any
dow npaym ent is not more than 50 per cent
S EC TIO N 226.6— G E N E R A L D ISC L O SU R E
greater no r 50 per cent less than the am ount
R E Q U IR E M E N T S
of a regular payment; or
(ii) The interval between the date on which
the finance charge begins to accrue and the
date the first paym ent is due is not less than 5
days for an obligation otherwise payable in

*(a) Disclosures; general rule. T he disclosures
required to be given by this P art shall be m ade
* Amended 11/1/73.

REGULATION Z

clearly, conspicuously, in meaningful sequence, in
accordance with the further requirem ents of this
section, and at the time and in the terminology
prescribed in applicable sections. Except with re­
spect to the requirem ents of § 226.10, where the
term s “finance charge” and “annual percentage
rate” are required to be used, they shall be
printed more conspicuously than other term inol­
ogy required by this P art and 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 com puter type,
or elite size typewritten numerals, o r shall be leg­
ibly handwritten.
(b) Inconsistent State requirements. With re­
spect to disclosures required by this Part, State
law is inconsistent with the requirem ents of the
A ct and this Part, w ithin the meaning of section
111 (a) of the Act, to the extent that it
(1) Requires a creditor to make disclosures dif­
ferent from the requirem ents of this P art with re­
spect to form, content, terminology, or time of
delivery;
(2) Requires disclosure of the am ount of the
finance charge determined in any m anner other
than th at prescribed in § 226.4; or
(3) Requires disclosure of the annual percent­
age rate of the finance charge determined in any
m anner other than that prescribed in § 226.5.
(c) Additional information. A t the creditor’s
option, additional inform ation or explanations
m ay be supplied with any disclosure required by
this Part, but none shall be stated, utilized, or
placed so as to mislead or confuse the customer
or contradict, obscure, or detract attention from
the inform ation required by this P art to be dis­
closed. A ny creditor who elects to m ake disclo­
sures specified in any provision of State law
which, under paragraph (b) of this section, is in­
consistent with the requirem ents of the Act and
this Part m ay
(1) M ake such inconsistent disclosures on a
separate paper apart from the disclosures made
pursuant to this Part, or
(2) Make such inconsistent disclosures on the
same statement on which disclosures required by
this Part are made; provided:

§ 226.6

(ii) Disclosures required by this P art are
identified by a clear and conspicuous heading
indicating that they are m ade in compliance
with Federal law, and
(iii) All inconsistent disclosures appear sepa­
rately and below a conspicuous dem arcation
line, and are identified by a clear and conspic­
uous heading indicating th at the statements
m ade thereafter are inconsistent with the dis­
closure requirem ents of the Federal T ruth in
Lending Act.
(d) Multiple creditors; joint disclosure. If there
is m ore than one creditor in a transaction, each
creditor shall be clearly identified and shall be re­
sponsible for m aking only those disclosures re­
quired by this P art which are within his knowl­
edge and the purview of his relationship with the
customer. If two or m ore creditors m ake a joint
disclosure, each creditor shall be clearly identi­
fied. The disclosures required under paragraphs
(b) and (c) of § 226.8 shall be made by the seller
if he extends or arranges for the extension of
credit. Otherwise disclosures shall be made as re­
quired under paragraphs (b) and (d) o f § 226.8.
(e) Multiple customers; disclosure to one. In
any transaction other th an a transaction which
may be rescinded under the provisions of § 226.9,
if there is m ore than one customer, the creditor
need furnish a statement of disclosures required
by this P art to only one of them other th an an
endorser, com aker, guarantor, or a similar party.
(f) Unknown information estimate. If at the
time disclosures must be made, an am ount or
other item of inform ation required to be dis­
closed, or needed to determ ine a required disclo­
sure, is unknow n or not available to the creditor,
and the creditor has m ade a reasonable effort to
ascertain it, the creditor m ay use an estimated
am ount or an approxim ation of the inform ation,
provided the estimate o r approxim ation is clearly
identified as such, is reasonable, is based on the
best inform ation available to the creditor, and is
not used for the purpose of circumventing or
evading the disclosure requirem ents of this Part.

(g) Effect o f subsequent occurrence. If infor­
m ation disclosed in accordance with this P art is
(i)
All disclosures required by this P art ap­ subsequently rendered inaccurate as the result of
any act, occurrence, o r agreement subsequent to
pear separately and above any other disclo­
sures,
the delivery of the required disclosures, the inac­

§ 226.7

REGULATION Z

curacy resulting therefrom does not constitute a
violation of this P art.8
(h) Overstatement. T he
disclosure of the
am ount of the finance charge or a percentage
which is greater than the am ount of the finance
charge or percentage required to be disclosed
under this P art does not in itself constitute a vio­
lation of this Part: Provided, T hat the overstate­
m ent is not for the purpose of circumvention or
evasion of disclosure requirements.
(i) Preservation and inspection of evidence of
compliance. Evidence of compliance with the re­
quirem ents imposed under this Part, other than
advertising requirem ents under § 226.10, shall be
preserved by the creditor for a period of not less
than 2 years after the date each disclosure is re­
quired to be made. Each creditor shall, when di­
rected by the appropriate administrative enforce­
m ent authority designated in section 108 of the
Act, perm it that authority or its duly authorized
representative to inspect its relevant records and
evidence of compliance with this Part.
*(j) Leap year. A ny variance in the am ount of
any finance charge, paym ent, percentage rate, or
other term required un der this P art to be dis­
closed, or stated in any advertisement, which oc­
curs by reason o f the addition of February 29 in
each leap year, m ay be disregarded, and such
term m ay be disclosed or stated w ithout regard to
such variance.

(1) T he conditions under w hich a finance
charge may be imposed, including an explanation
o f the time period, if any, within which any
■credit extended may be paid without incurring a
finance charge.
(2) T he method of determining the balance
upon which a finance charge m ay be imposed.
(3) T he m ethod of determining the am ount of
the finance charge, including the method of de­
term ining any minimum, fixed, check service,
transaction, activity, or similar charge, which
may be imposed as a finance charge.
*(4) W here one o r m ore periodic rates may
be used to compute the finance charge, each such
rate, the range of balances to which it is applica­
ble, and the corresponding annual percentage rate
determined by multiplying the periodic rate by
the num ber of periods in a year.oa
(5) If the creditor so elects, the Com parative
Index of Credit Cost in accordance with § 226.11.
(6) The conditions under w hich any other
charges m ay be imposed, and the method by
which they will be determined.
(7) The conditions under which the creditor
may retain or acquire any security interest in any
property to secure the paym ent of any credit ex­
tended on the account, and a description or iden­
tification of the type of the interest or interests
which m ay be so retained or acquired.
(8) T he m inim um periodic paym ent required.
(b) Periodic statements required. Except in the
SEC T IO N 226.7— O P E N E N D C R E D IT
case of an account which the creditor deems to
A C C O U N T S— S PE C IF IC
be uncollectable or with respect to which delin­
D ISCLO SU R ES
quency collection procedures have been insti­
tuted,
the creditor of any open end credit ac­
(a)
Opening new account. Before the first
count shall mail or deliver to the customer, for
transaction is m ade on any open end credit ac­
each billing cycle at the end of which there is an
count, the creditor shall disclose to the customer
outstanding
debit balance in excess of $1 in that
in a single written statement, which the customer
account
o
f
with
respect to which a finance charge
m ay retain, in terminology consistent with the re­
is
imposed,
a
statement
or statements which the
quirem ents of paragraph (b) of this section, each
custom er may retain, setting forth in accordance
of the following items, to the extent applicable:
with paragraph (c) of this section each of the fol­
6 Such acts, occurrences, or agreements include the
lowing items to the extent applicable:
failure of the customer to perform his obligations under
the contract and such actions by the creditor as may be
proper to protect his interests in such circumstances.
Such failure may result in the liability of the customer to
pay delinquency charges, collection costs, or expenses of
the creditor for perfection or acquisition of any security
interest or amounts advanced by the creditor on behalf
of the customer in connection with insurance, repairs to
or preservation of collateral.
* Added as § 226.6(1) 12/31/71, redesignated 226.6(j)
3/1/74. (Sections 226.6(j) and 226.6(k) effective July 1,
1969, deleted effective 3 /1/74 ).

* Amended 6/1/73.
Sa A creditor imposing minimum charges is not re­
quired to adjust the disclosure of the range of balances
to which each periodic rate would apply in order to re­
flect the range of the balances below which the minimum
charge applies. If a creditor does not impose a finance
charge when the outstanding balance is less than a cer­
tain amount, the creditor is not required to disclose that
fact or the balance below which no such charge will be
imposed.

REGULATION Z

(1) T he outstanding balance in the account at
the beginning of the billing cycle, using the term
“previous balance.”
(2) T he am ount and date of each extension of
credit or the date such extension o f credit is deb­
ited to the account during the billing cycle and,
unless previously furnished, a brief identification 7
of any goods or services purchased or other ex­
tension of credit.
(3) T he am ounts credited to the account d u r­
ing the billing cycle for payments, using the term
“paym ents,” and for other credits including re­
turns, rebates of finance charges, and adjust­
ments, using the term “credits,” and unless
previously furnished a brief identification8 of
each of the items included in such other credits.
(4) T he am ount of any finance charge, using
the term “finance charge,” debited to the account
during the billing cycle, itemized and identified to
show the am ounts, if any, due to the application
o f periodic rates and the am ount of any other
charge included in the finance charge, such as a
m inimum, fixed, check service, transaction, activ­
ity, or similar charge,9 using appropriate descrip­
tive terminology.
*(5) Each periodic rate, using the term “p e­
riodic rate” (or “rates”), that may be used to
com pute the finance charge (whether or not ap ­
plied during the billing cycle), the range of bal­
ances to which it is applicable, and the corre­
sponding annual percentage rate determined by
multiplying the periodic rate by the num ber of
periods in a year. The words “corresponding an­
nual percentage rate,” “corresponding nominal
annual percentage rate,” “nom inal annual per­
centage rate” o r “annual percentage rate” (or
“rates”) m ay be used to describe the correspond­
ing annual percentage rate. The requirem ents of
§ 226.6(a) of this P art with respect to disclosing
the term “annual percentage rate” m ore conspicu­
1 Identification may be made on an accompanying slip
or by symbol relating to an identification list printed on
the statement.
8 Identification may be made on an accompanying slip
or by symbol relating to an identification list printed on
the statement.
“ These charges include any charges imposed by the
creditor for the issuance, payment, or handling of
checks, for account maintenance or otherwise, to the ex­
tent that such charges exceed any similar charges the
customer is required to pay when an account is not
being used to extend credit.
* Amended 6/1/73.

§ 226.7

ously than other required term inology shall not
be applicable to the disclosure m ade under this
subparagraph, although such term (or words in­
corporating such term) may, at the creditor’s op­
tion, be shown as conspicuously as the term inol­
ogy required under subparagraph 6 of this
paragraph. W here a m inim um charge m ay be a p ­
plicable to the account, the am ount o f such mini­
mum charge shall be disclosed.9a
*(6) W hen a finance charge is imposed during
the billing cycle, the annual percentage rate or
rates determined under § 226.5(a) using the term
“annual percentage rate” (or “rates”).
(7) If the creditor so elects, the Com parative
Index of Credit Cost in accordance with § 226.11.
(8) The balance on which the finance charge
was computed, and a statement of how that bal­
ance was determined. If the balance is deter­
mined w ithout first deducting all credits during
the billing cycle, that fact and the am ount of
such credits shall also be disclosed.
(9) The closing date of the billing cycle and
the outstanding balance in the account on that
date, using the term “new balance,” accom panied
by the statement of the date by which, or the pe­
riod, if any, within which, paym ent must be
made to avoid additional finance charges.
*(c) Location of disclosures. T he disclosures
required by paragraph (b) of this section shall be
m ade on the face of the periodic statement, ex­
cept that, at the creditor’s option:
(1)
Itemization of the am ount and date of
each extension of credit (or the date such exten­
sion of credit was debited to the account) re­
quired to be disclosed under paragraph (b)(2) of
this section and itemization o f the am ount of the
“credits” disclosed under paragraph (b)(3) of this
section, and of the am ount of any finance charge
required to be disclosed under paragraph (b)(4)
o f this section, m ay be m ade on the reverse
side of the periodic statement or on a separate
accom panying statement(s), provided that the toA creditor imposing minimum charges is not re­
quired to adjust the disclosure of the range of balances
to which each periodic rate would apply in order to re­
flect the range of the balances below which the minimum
charge applies. If a creditor does not impose a finance
charge when the outstanding balance is less than a cer­
tain amount, the creditor is not required to disclose that
fact or the balance below which no such charge will be
imposed.
* Amended 6/1/73.

§ 226.8

tals of such respective am ounts are disclosed on
the face o f the periodic statement; and
(2) T he disclosures required under paragraph
(b)(5) and (b)(8) of this section, except the bal­
ance on which the finance charge was computed,
m ay be m ade on the reverse side of the periodic
statement or on the face of a single supplemental
statement which shall accom pany the periodic
statement.
(3) If the creditor exercises any of the options
provided under this paragraph, the face of the
periodic statement shall contain one of the fol­
lowing notices, as applicable: “N O T IC E : See
reverse side for im portant inform ation” or
“N O T IC E : See accom panying statement(s) for
im portant inform ation” or “N O T IC E : See reverse
side and accom panying statement(s) for important
inform ation,” and the disclosures shall not be
separated so as to confuse or mislead the cus­
tom er or obscure or detract attention from the
inform ation required to be disclosed.
(d)
Finance charge imposed at time of transac­
tion, A ny creditor, other th an the creditor of the
open end credit account, w ho imposes a finance
charge at the tim e of honoring a custom er’s
credit card, any other device, o r form o f identifi­
cation for a purchase of property or services or
for a cash advance to be debited to the custom ­
er’s open end credit account shall m ake the dis­
closures required under paragraphs (b)(2) and (d)
of § 226.8, Credit other than open end— specific
disclosures, at the time of that transaction, and
the annual percentage rate to be disclosed shall
be determined by dividing the am ount of the
finance charge by the am ount financed and multi­
plying the quotient (expressed as a percentage) by
12. If disclosure is m ade under this paragraph,
the creditor of the open end credit account need
m ake no fu rther disclosure with respect to the
finance charge on that transaction.
*(e) Change in terms. N o t later than 15 days
prior to the beginning date of the billing cycle in
w hich any change is to be made in the term s p re ­
viously disclosed to the custom er of an open end
credit account, the creditor shall mail or deliver a
written disclosure of such change to each cus­
tom er required to be furnished a statement under
paragraph (b) of this section. Such disclosure
shall be mailed or delivered to each other cus­
tom er who subsequently activates his account not
* Amended 10/23/70 and to its present form 4/5/71.

REGULATION Z

later than the date o f mailing or delivery of the
next required billing statement on his account.
However, if the periodic rate or rates, or any
minimum, fixed, check service, transaction, activ­
ity, o r similar charge is increased, the creditor
shall mail or deliver a written disclosure of such
increase to each customer at least 15 days prior
to the beginning date of the billing cycle in
which the increase is imposed on his account. N o
notice is necessary if the only change is a reduc­
tion in the m inim um periodic paym ent, periodic
rate or rates, or in any m inimum, fixed, check
service, transaction, activity, or similar charge ap­
plicable to the account.
(Section 226.7(f) effective 7 /1 /6 9 , deleted effec­
tive 3 /1 / 7 4 )
SEC T IO N 226.8— C R E D IT O T H E R T H A N
O P E N E N D — S P E C IF IC D ISCLO SU R ES
(a) General rule. A ny creditor w hen extending
credit other than open end credit shall, in accord­
ance with § 226.6 and to the extent applicable,
m ake the disclosures required by this section with
respect to any transaction consum m ated on or
after July 1, 1969. Except as provided in para­
graphs (g) and (h) of this section, such disclosures
shall be m ade before the transaction is consum­
mated. A t the tim e disclosures are made, the
creditor shall furnish the customer w ith a dupli­
cate of the instrum ent o r a statement by which
the required disclosures are made and on which
the creditor is identified. All of the disclosures
shall be made together on either
(1) T he note or other instrum ent evidencing
the obligation on the same side of the page and
above or adjacent to the place for the custom er’s
signature; or
(2) One side of a separate statement which
identifies the transaction.
(b) Disclosures in sale and nonsale credit. In
any transaction subject to this section, the follow­
ing items, as applicable, shall be disclosed:
(1) The date on which the finance charge be­
gins to accrue if different from the date of the
transaction.
(2) T he finance charge expressed as an annual
percentage rate, using the term “annual percent­
age rate,” except in the case o f a finance charge
(i)
which does not exceed $5 and is applica­
ble to an am ount financed not exceeding $75,
or

REGULATION Z

(ii)
which does not exceed $7.50 and is ap­
plicable to an am ount financed exceeding $75.
A creditor may not divide an extension of
credit into two or more transactions to avoid
the disclosure of an annual percentage rate,
nor may any other percentage rate be disclosed
if none is stated in reliance upon subdivisions
(i) or (ii) of this subparagraph.
(3) T he number, am ount, and due dates or pe­
riods of paym ents scheduled to repay the indebt­
edness and, except in the case of a loan secured
by a first lien or equivalent security interest on a
dwelling m ade to finance the purchase of that
dwelling and except in the case of a sale of a
dwelling, the sum of such payments using the
term, “total of paym ents.” 10 If any paym ent is
more than twice the am ount of an otherwise reg­
ularly scheduled equal payment, the creditor shall
identify the am ount of such paym ent by the term
“balloon paym ent” and shall state the conditions
if any, under which that paym ent may be refi­
nanced if not paid when due.
(4) The am ount, or method of com puting the
am ount, of any default, delinquency, or similar
charges payable in the event of late payments.
(5) A description or identification of the type
o f any security interest held or to be retained or
acquired by the creditor in connection with the
extension of credit, and a clear identification of
the property to which the security interest relates
or, if such property is not identifiable, an expla­
nation of the m anner in which the creditor retains
or m ay acquire a security interest in such prop­
erty which the creditor is unable to identify. In
any such case where a clear identification of such
property cannot properly be m ade on the disclo­
sure statement due to the length of such identifi­
cation, the note, other instrum ent evidencing the
obligation, or separate disclosure statement shall
contain reference to a separate pledge agreement,
or a financing statement, mortgage, deed of trust,
o r similar docum ent evidencing the security inter­
est, a copy of which shall be furnished to the
custom er by the creditor as prom ptly as practic­
able. If after-acquired property will be subject to
the security interest, o r if other or future indebted­
ness is or m ay be secured by any such property,
10 The disclosures required by this sentence need not be
made with respect to interim student loans made pur­
suant to federally insured student loan programs under
Public Law 89-329, Title IV Part B of the Higher Edu­
cation Act of 1965, as amended.

§ 226.8

this fact shall be clearly set forth in conjunction
with the description or identification of the type
of security interest held, retained o r acquired.
(6)
A description of any penalty charge that
may be imposed by the creditor or his assignee
for prepaym ent of the principal of the obligation
(such as a real estate mortgage) with an explana­
tion of the m ethod of com putation of such pen­
alty and the conditions under which it m ay be
imposed.
*(7) Identification of the method of computing
any unearned portion of the finance charge in the
event of prepaym ent in full of an obligation
which includes precom puted finance charges and
a statement of the am ount or method of com pu­
tation of any charge that m ay be deducted from
the am ount of any rebate of such unearned
finance charge th at will be credited to an obliga­
tion or refunded to the customer. If the credit
contract does not provide for any rebate of un­
earned finance charges upon prepaym ent in full,
this fact shall be disclosed.
(c)
Credit sales. In the case of a credit sale, in
addition to the items required to be disclosed
under paragraph (b) o f this section, the following
items, as applicable, shall be disclosed:
(1) The cash price of the property or service
purchased, using the term “cash price.”
(2) The am ount of the downpayment itemized,
as applicable, as dow npaym ent in money, using
the term “cash dow npaym ent,” dow npaym ent in
property, using the term “trade-in” and the sum,
using the term “total dow npaym ent.”
(3) T he difference between the am ounts de­
scribed in subparagraphs (1) and (2) of this para­
graph, using the term “unpaid balance of cash
price.”
(4) All other charges, individually itemized,
which are included in the am ount financed but
which are not p art of the finance charge.
(5) T he sum of the am ounts determined under
subparagraphs (3) and (4) of this paragraph,
using the term “unpaid balance.”
(6) A ny am ounts required to be deducted
under paragraph (e) of this section using as appli­
cable, the terms “prepaid finance charge” and
“required deposit balance,” and, if both are ap ­
plicable, the total of such items using the term
“total prepaid finance charge and required de­
posit balance.”
* Amended 1/1/74.

§ 226.8

(7) T he difference between the am ounts deter­
mined under subparagraphs (5) and (6) of this
paragraph, using the term “am ount financed.”
(8) Except in the case of a sale of a dwelling:
(i) T he total am ount o f the finance charge,
with description of each am ount included,
using the term “finance charge,” and
(ii) The sum o f the am ounts determined
under subparagraphs (1), (4), and (8)(i) of this
paragraph, using the term “deferred paym ent
price.”
(d) Loans and other nonsale credit. In the case
of a loan or extension of credit which is not a
credit sale, in addition to the items required to be
disclosed under paragraph (b) of this section, the
following items, as applicable, shall be disclosed:
(1) T he am ount of credit, excluding items set
forth in paragraph (e) of this section, which will
be paid to the custom er or for his account o r to
another person on his behalf, including all
charges, individually itemized, which are included
in the am ount of credit extended but which are
not p art of the finance charge, using the term
“am ount financed.”
(2) A ny am ount referred to in paragraph (e) of
this section required to be excluded from the
am ount in subparagraph (1) of this paragraph,
using, as applicable, the term s “prepaid finance
charge” and “required deposit balance,” and, if
both are applicable, the total of such items using
the term, “total prepaid finance charge and re­
quired deposit balance.”
(3) Except in the case of a loan secured by a
first lien or equivalent security interest on a
dwelling and made to finance the purchase of
that dwelling, the total am ount of finance
charge,11 with description of each am ount in­
cluded, using the term “finance charge.”
(e) Finance charge payable separately or with­
held; required deposit balances. The following
am ounts shall be disclosed and deducted in a
credit sale in accordance with paragraph (c)(6) of
this section, and in other extensions of credit
shall be excluded from the am ount disclosed
under paragraph (d)(1) of this section, and shall
be disclosed in accordance with paragraph (d)(2)
of this section:
11 The disclosure required by this subparagraph need
not be made with respect to interim student loans made
pursuant to federally insured student loan programs
under Public Law 89-329, Title IV Part B of the Higher
Education Act of 1965, as amended.

REGULATION Z

(1) A ny finance charge paid separately, in cash
or otherwise, directly or indirectly to the creditor
or with the creditor’s knowledge to another per­
son, or withheld by the creditor from the p ro ­
ceeds of the credit extended.12
(2) A ny deposit balance or any investment
which the creditor requires the custom er to make,
maintain, or increase in a specified am ount or
proportion as a condition to the extension of
credit except:
(i) A n escrow account under paragraph
(e)(3) of § 226.4,
(ii) A deposit balance which will be wholly
applied tow ard satisfaction of the custom er’s
obligation in the transaction,
(iii) A deposit balance or investment which
was in existence prior to the extension of
credit and which is offered by the custom er as
security for that extension of credit, and
(iv) A deposit balance or investment which
was acquired or established from the proceeds
of an extension of credit made for that p u r­
pose upon written request of the customer.
(f) First lien to finance construction o f dwell­
ing. In any case w here a first lien or equivalent
security interest in real property is retained or ac­
quired by a creditor in connection with the
financing of the initial construction o f a dwelling,
or in connection with a loan to satisfy that con­
struction loan and provide perm anent financing,
of that dwelling, w hether or not the customer
previously owned the land on which that dwelling
is to be constructed, such security interest shall
be considered a first lien against that dwelling to
finance the purchase of that dwelling.
(g) Orders by mail or telephone. If a creditor
receives a purchase order or a request for an ex­
tension of credit by mail, telephone, or written
com munication w ithout personal solicitation, the
disclosures required under this section may be
made any tim e not later than the date the first
paym ent is due, provided:
(1)
In the case of credit sales, the cash price,
the downpayment, the finance charge, the de­
ferred paym ent price, the annual percentage rate,
and the number, frequency, and am ount of pay­
ments are set forth in or are determinable from
the creditor’s catalog or other printed material
distributed to the public; or
12 Finance charges deducted or excluded as provided by
this paragraph shall, nevertheless, be included in deter­
mining the finance charge under § 226.4.

REGULATION Z

(2)
In the case of loans o r other extensions of
credit, the am ount of the loan, the finance
charge, the total scheduled payments, the num ­
ber, frequency, and am ount of payments, and the
annual percentage rate for representative am ounts
or ranges of credit are set forth in or are deter­
minable from the creditor’s printed m aterial dis­
tributed to the public, in the contract of loan, or
in other printed m aterial delivered or made avail­
able to the customer.
(h) Series of sales. If a credit sale is one of a
series of transactions m ade pursuant to a n agree­
m ent providing for the addition of the am ount
financed plus the finance charge for the current
sale to an existing outstanding balance, then the
disclosures required un der this section for the
current sale may be m ade at any tim e not later
than the date the first paym ent for that sale is
due, provided:
(1) T h e customer has approved in writing both
the annual percentage rate o r rates and the
m ethod of treating any unearned finance charge
o n an existing outstanding balance in com puting
the finance charge or charges; and
(2) The creditor retains no security interest in
any property as to which he has received pay­
m ents aggregating the am ount of the sale price
including any finance charges attributable thereto.
F o r the purposes of this subparagraph, in the
case of items purchased on different dates, the
first purchased shall be deemed first paid for, and
in the case of items purchased on the same date,
the lowest priced shall be deemed first paid for.
(i) Advances under loan commitments. If a
loan is one of a series of advances m ade p u r­
suant to a w ritten agreement under which a cred­
itor is or m ay be com m itted to extend credit to a
customer up to a specified am ount, and the cus­
tom er has approved in writing the annual per­
centage rate or rates, the method of computing
the finance charge o r charges, and any other
terms, the agreement shall be considered a single
transaction, and the disclosures required under
this section at the creditor’s option need be made
only at the time the agreement is executed.
(j) Refinancing, consolidating, or increasing. If
any existing extension of credit is refinanced, or
two or m ore existing extensions of credit are con­
solidated, o r an existing obligation is increased,
such transaction shall be considered a new trans­

§ 226.8

action subject to the disclosure requirem ents of
this Part. F o r the purpose of such disclosure, any
unearned portion of the finance charge which is
not credited to the existing obligation shall be
added to the new finance charge and shall not be
included in the new am ount financed. A ny in­
crease in an existing obligation to reim burse the
creditor for undertaking the custom er’s obligation
in perfecting, protecting o r preserving the security
shall not be considered a new transaction subject
to this Part. A ny advance for agricultural p u r­
poses made under an open end real estate m ort­
gage or similar lien shall not be considered a new
transaction subject to the disclosure requirem ents
of this section, provided:
(1) T he m aturity of the advance does not ex­
ceed 2 years;
(2) N o increase is made in the annual per­
centage rate previously disclosed; and
(3) All disclosures required by this P art were
m ade at the time the security interest was ac­
quired by the creditor or at any tim e prior to the
first advance m ade on or following the effective
date of this part.
(k) Assumption of an obligation. A ny creditor
who accepts a subsequent custom er as an obligor
under an existing obligation shall m ake the dis­
closures required by this P a rt to that customer
before he becomes so obligated. If the obligation
so assumed is secured by a first lien or equivalent
security interest on a dwelling, and the assum p­
tion is made for the subsequent customer to ac­
quire that dwelling, that obligation shall be con­
sidered a loan made to finance the purchase of
that dwelling.
(1)
Deferrals or extensions. In the case of an
obligation other than an obligation upon which
the am ount of the finance charge is determined
by the application of a percentage rate to the un­
paid balance, if the creditor imposes a charge or
fee for deferral or extension, the creditor shall
disclose to the customer
(1) The am ount deferred or extended;
(2) T he date to which, or the time period for
which paym ent is deferred or extended; and
(3) T he am ount of the charge or fee for the
deferral or extension.
(m) Series o f single payment obligations. Any
extension o f credit involving a series of single
paym ent obligations shall be considered a single

§ 226.8

transaction subject to the disclosure requirem ents
of this Part.
(n) Permissible periodic statements. If a credi­
tor transm its a periodic billing s ta te m e n t13 other
than a delinquency notice, paym ent coupon book,
o r paym ent passbook, or a statement, billing, or
advice relating exclusively to am ounts to be paid
by the custom er as escrows for paym ent of taxes,
insurance, and water, sewer, and land rents, it
shall be in a form which the custom er m ay retain
and shall set forth
(1) The annual percentage rate or rates; and
(2) T he date by which, or the period, if any,
w ithin which paym ent must be m ade in order to
avoid late paym ent or delinquency charges.
*(o) Discount for prompt payment o f sales
transactions. (I) F o r the purposes o f this para­
graph, a “transaction subject to § 226.8(o)” is a
credit sale transaction which is not exempt under
§ 226.3 and which is subject to a discount for
paym ent on or before a specified date (e.g. 2%
discount if paid within 10 days) or to a charge
for delaying paym ent after a specified date (e.g.
$98 cash, $100 if paid in 30 days). Both such a
discount and such a charge are referred to in this
p aragraph as a “discount.” In the case of any
transaction subject to § 226.8(o), notw ithstanding
the provisions of the last sentence of paragraph
(a) of this section, the creditor shall disclose on
the invoice or other evidence of such sale, as ap­
plicable:
(i) T he date of the sale or invoice.
(ii) T he rate of discount, the date by which or
period within which the discount m ay be taken,
and the date by which or period within which the
full am ount of the obligation is due and payable.
(For example, “2 % / 1 0 days, net 30 days” ; or
“$1 per t o n / 10 days, net 30 days.”)
(iii) T he inform ation required under § 226.8
(b)(4) and (5).
(iv) T he am ount of the discount, designated as
a “finance charge,” using that term.
(v) If the discount shown for prom pt paym ent
exceeds 5% of the obligation to which the dis­
13 Any statement, notice, or reminder of payment due
on any transaction payable in instalments which is
mailed or delivered periodically to the customer in ad­
vance of the due date of the instalment shall be a pe­
riodic billing statement for the purpose of this para­
graph.
* Amended 8/11/69.

REGULATION Z

count relates, the “annual percentage rate,” using
that term , com puted in accordance with subpara­
graph (2) of this paragraph, but subject to the ex­
ceptions provided under § 226.8(b)(2).
(2) F o r the purposes o f subparagraph (l)(v) of
this paragraph, the annual percentage rate shall
be determ ined by dividing the am ount of the
finance charge by the least am ount payable in
satisfaction of the obligation and multiplying the
quotient (expressed as a percentage) by a fraction
in which the num erator is 12, and the denom ina­
tor is the num ber of whole m onths (but not less
than 1) between the first day of the m onthly bill­
ing cycle in w hich the transaction is consum­
m ated and the first day of the m onthly billing
cycle in which the obligation becomes d u e . 13a
(3) In a transaction with multiple discount
rates (for example 6 % /1 0 days, 4 % / 2 0 days, net
30 days), the largest discount shall be used for
purposes of disclosing the am ount of the finance
charge under subparagraph (l)(iv) of this para­
graph and the annual percentage rate under sub­
paragraph (l)(v) of this paragraph.13b
(4) In order to determine the applicability of
subparagraph (l)(v) of this paragraph and to fa­
cilitate disclosure o f an annual percentage rate, if
the am ount of the discount for prom pt paym ent
is related, pursuant to usual business practice, to
weight, quantity, or other physical m easure (e.g.
$1 per ton or 10 per gallon) rather th an ex­
pressed as a percentage o f discount, that discount
m ay be converted to an approxim ate discount
rate and, under subparagraph (2) of this p ara­
graph, a reasonably accurate approxim ation of
the annual percentage rate by using approxim ate
or projected prices per physical unit determined
“ “F o r example, a $1,000 purchase of feed subject to
terms of 6 % /1 0 days, net 30 days (or 6 % /1 0 days, net
E.O.M.; or 6% /10 days, net 10th of the following
month; or 6 % /2 0 days, net 30 days; or 6 % /30 days, net
30 days; or 6% discount for cash, net 30 days) results
in a finance charge of $60, a least amount payable of
$940, and an annual percentage rate of 76.56%, which
may be rounded to 76.50% o r 76Vi%. Terms of 6% /20
days, net September 29 applied to an April purchase, as­
suming a calendar month billing cycle, result in an an­
nual percentage rate of 15.31% (i.e. 6/94 X 12/5) which
may be rounded to 15.25% or 1514%. In this example
the 29 days in September are ignored and the denomi­
nator (5) is determined by the number of whole months
in the period.
13b F or example, terms of 6% /10 days, 4 % /2 0 days, net
30 days would be treated like terms of 6 % /1 0 days, net
30 days, which would represent an annual percentage
rate of 76Vi% .

REGULATION Z

on the basis of past experience, current inform a­
tion, or projected analysis.130
(5) If by its terms a transaction subject to
§ 226.8(o) is payable in a single paym ent and no
finance charge other than a discount is or may be
imposed, and such discount is not utilized for the
purpose of circumvention or evasion o f disclosure
requirements, the disclosure required by subpara­
graph (1) of this paragraph shall constitute com ­
pliance with the requirem ents of § 226.8 and
under § 226.9(a) shall constitute “all other m ate­
rial disclosures required under this P art.”
(6) If a transaction subject to § 226.8 (o ) is
debited to an open end credit account, disclosures
shall be made as specified in subparagraph (1) of
this paragraph and also as specified in § 226.7.
T he full am ount of the obligation including the
am ount of the discount may be debited to the
open end credit account, under § 226.7(b)(2), and
the am ount of any finance charge representing
the discount need not be added to any other
finance charge for the purpose of com puting and
disclosing the total am ount of finance charge and
the annual percentage rate under § 226.5(a) and
§ 226.7.13d
(7) If a transaction subject to § 226.8(o) is not
debited to an open end credit account, but either
is subject to an additional finance charge or is
payable by its term s in m ore than one payment,
disclosures shall be made as specified in subpara­
graph (1) of this paragraph and also as specified
in paragraphs (b) and (c) of this section. In such
a case, if the transaction is payable in m ore than
one payment, the am ount of the discount shall be
deducted for the purpose of com puting and dis­
closing the cash price under paragraph (c)(1) of
this section and shall be added to any other
finance charge for the purpose of com puting and
disclosing the am ount of the finance charge under
paragraph (c)(8)(i) of this section and the annual
percentage rate under paragraph (b)(2) o f this
I3C For example, if terms of $3 discount per ton/10
days, net 30 days are offered on fertilizer that is ex­
pected to sell in a range of about $48 to $52 per ton,
the annual percentage rate could be approximated for
preprinting as if it were 6% (i.e. $3 on $50)/10 days,
net 30 days, that is, 76Vi%.
13,1 F or example, if a $1,000 sale on terms of 2 % /10
days, net 30 days, is debited to an open end account on
which 1% per month is charged, the periodic statement
under § 226.7(b) (assuming no other transactions in the
account) would show a previous balance of $1,000, a
finance charge of $10, and an annual percentage rate of
1 2 %.

§ 226.8

section.136 If the transaction is payable in a single
payment, the discount m ay be disregarded in
com puting and disclosing such cash price, finance
charge, and annual percentage rate.13'
(8) N otw ithstanding the provisions of the sec­
ond sentence of paragraph (a) o f this section, the
disclosures required under subparagraph (1) of
this paragraph made on the invoice or other evi­
dence of the sale m ay be delivered subsequent to
consum m ation of the transaction.
(9) A mended paragraph (o) of § 226.8 shall be­
come effective August 11, 1969, but until M arch
1, 1970, any creditor m ay at his option use any
printed form s which were prepared before such
effective date in accordance with paragraph (o) of
§ 226.8 in effect at the time of such preparation.
*(p) Agricultural credit— information not de­
terminable. (1) In any transaction subject to this
section, if the am ount or date of any advance or
paym ent in connection with an extension of
credit for agricultural purposes under a written
agreement is to be determined by production,
seasonal needs, or similar operational factors, and
is not determinable at the tim e of execution of
the agreement, disclosures m ay be made at the
creditor’s option in accordance with this p ara­
graph, provided the use of this paragraph is not
for the purpose of circumvention or evasion of
this Part.
(2)
If a creditor elects to make disclosures
under this paragraph, he shall disclose the follow­
ing items in accordance with § 226.8(a), which
shall constitute compliance with the requirem ents
of § 226.8, and under § 226.9(a) shall constitute
“all other m aterial disclosures required under this
P a rt” :
(i) T he m ethod of com puting the am ount of
the finance charge including an identification
of each com ponent thereof in accordance with
§ 226.4;
(ii) A ny item required to be disclosed under
§ 226.8(b)(3) which is determinable at the time
,,l'F o r example, if a $1,000 sale on terms of 2% /10
days, net 30 days is subject to an add-on finance charge
of $100 and is payable in instalments, the disclosures
under § 226.8(b) and (c) would include a cash price of
$980 and a finance charge of $120.
131 F or example, if a $1,000 sale on August 2 not
under an open end account is subject to terms of 2 % /1 0
days, net 30 days, thereafter 8% per annum until De­
cember 1, the disclosures under § 226.8(b) and (c)
would include a cash price of $1,000, a finance charge of
$19.95, and an annual percentage rate of 8.00%.
♦A dded 11/6/69.

§ 226.9

the disclosures are required to be made under
this paragraph;
(iii) T he disclosures, as applicable, required
under § 226.8(b)(4), (5), (6), and (7) and the
items described in § 226.8(e)(1) and (2);
(iv) The disclosures, as applicable, required
under § 226.8(o)(l), (2), (3), (4), (5), (8), and
(9).
(3) Disclosures m ade pursuant to subparagraph
(2)(i), (ii), and (iii) of this paragraph need be
made only on the agreement or on a separate
statement as specified in § 226.8(a).
(4) If a creditor making disclosures pursuant
to this paragraph transm its a periodic billing
statement of the type described in paragraph (n)
of § 226.8, such statement shall be in a form
which the customer m ay retain and shall set forth
the date by which, or the period, if any, within
which paym ent must be made in order to avoid
late paym ent or delinquency charges.
SEC T IO N 226.9— R IG H T T O R E SC IN D
C E R T A IN T R A N SA C T IO N S
(a)
General rule. Except as otherwise provided
in this section, in the case of any credit transac­
tion in which a security interest is or will be re­
tained or acquired in any real property which is
used or is expected to be used as the principal resi­
dence of the customer, the customer shall have
the right to rescind that transaction until m id­
night of the third business d a y '4 following the
date of consum m ation of that transaction or the
date of delivery of the disclosures required under
this section and all other material disclosures re­
quired under this Part, whichever is later, by no­
tifying the creditor by mail, telegram, or other
writing o f his intention to do so. Notification by
mail shall be considered given at the tim e mailed;
notification by telegram shall be considered given
at the time filed for transmission; and notification
by other writing shall be considered given at the
tim e delivered to the creditor’s designated place
of business.
*(b) N otice o f opportunity to rescind. W hen­
ever a custom er has the right to rescind a trans­
action und er paragraph (a) of this section, the
creditor shall give notice of that fact to the cus­
tom er by furnishing the custom er with two copies
of the notice set out below, one of w hich may be
used by the custom er to cancel the transaction.
♦A m ended 4/5/71.
See page 23 for footnote 14.

REGULATION Z

Such notice shall be printed in capital and lower
case letters of not less than 12 point bold-faced
type on one side of a separate statement which
identifies the transaction to which it relates. Such
statement shall also set forth the entire paragraph
(d) of this section, “Effect of rescission.” If such
paragraph appears on the reverse side of the
statement, the face of the statement shall state:
“See reverse side for im portant inform ation about
your right of rescission.” Before furnishing copies
of the notice to the customer, the creditor shall
complete both copies with the nam e of the credi­
tor, the address of the creditor’s place of busi­
ness, the date of consum m ation of the transac­
tion, and the date, not earlier than the third
business day following the date of the transac­
tion, by which the customer may give notice of
cancellation. W here the real property on which
the security interest may arise does not include a
dwelling, the creditor may substitute the words
“the property you are purchasing” for “your
hom e,” or “lot” for “hom e,” where these words
appear in the notice.
N otice to customer required by Federal law:
You have entered into a transaction on
(date)
which may result in a lien,
mortgage, or other security interest on your home.
You have a legal right under Federal law to can­
cel this'transaction, if you desire to do so, without
any penalty or obligation within three business
days from the above date or any later date on
which all material disclosures required under the
Truth in Lending Act have been given to you.
If you so cancel the transaction, any lien, mort­
gage, or other security interest on your home
arising from this transaction is automatically void.
You are also entitled to receive a refund o f any
downpayment or other consideration if you can­
cel. If you decide to cancel this transaction, you
may do so by notifying
(Name of creditor)
at (Address of creditor’s place of business) by
mail or telegram sent not later than midnight of
(date)
. You may also use any
other form of written notice identifying the trans­
action if it is delivered to the above address not
later than that time. This notice may be used for
that purpose by dating and signing below.
I hereby cancel this transaction.
(date)

(customer’s signature)

REGULATION Z

*(c) Delay of performance. Except as provided
in paragraph (e) of this section, the creditor in
any transaction subject to this section, other than
an extension of credit primarily for agricultural
purposes, shall not perform , o r cause or permit
the perform ance of, any of the following actions
until after the rescission period has expired and
he has reasonably satisfied himself that the cus­
tom er has not exercised his right of rescission:
(1) Disburse any money other than in escrow;
(2) M ake any physical changes in the property
of the customer;
(3) P erform any w ork or service for the cus­
tomer; or
(4) M ake any deliveries to the residence o f the
customer if the creditor has retained or will ac­
quire a security interest other than one arising by
operation of law.
(d)
Effect o f rescission. W hen a customer
exercises his right to rescind under paragraph (a)
of this section, he is not liable for any finance or
other charge, and any security interest becomes
void upon such a rescission. W ithin 10 days after
receipt of a notice of rescission, the creditor shall
return to the custom er any money or property
given as earnest money, downpayment, or other­
wise, and shall take any action necessary or ap ­
propriate to reflect the term ination of any secu­
rity interest created under the transaction. If the
creditor has delivered any property to the cus­
tomer, the customer m ay retain possession o f it.
U p o n the perform ance of the creditor’s obliga­
tions under this section, the customer shall tender
the property to the creditor, except that if return
of the property in kind would be impracticable or
inequitable, the custom er shall tender its reasona­
ble value. T ender shall be made at the location
of the property or at the residence of the cus­
tomer, at the option of the customer. If the credi­
tor does not take possession of the property
w ithin 10 days after tender by the customer,
ownership of the property vests in the customer
w ithout obligation on his p art to pay for it.
* Amended 4/5/71.
“ F or the purpose of this section, a business day is
any calendar day except Sunday and those legal public
holidays specified in Section 6103(a) of Title 5 of the
United States Code (New Year’s Day, Washington’s
Birthday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and
Christmas D ay). Amended 10/1/71.

§ 226.9

(e) Waiver of right o f rescission. A customer
may modify or waive his right to rescind a
transaction subject to the provisions of this sec­
tion provided:
(1) The extension of credit is needed in order
to meet a bona fide imm ediate personal financial
emergency of the customer;
(2) T he custom er has determined that a delay
of 3 business days in perform ance of the credi­
tor’s obligation under the transaction will jeop­
ardize the welfare, health or safety of natural
persons or endanger property which the customer
owns or for which he is responsible; and
(3) The custom er furnishes the creditor with a
separate dated and signed personal statement de­
scribing the situation requiring immediate remedy
and modifying or waiving his right of rescission.
T he use of printed form s for this purpose is p ro ­
hibited.
(f) Joint ownership. F o r the purpose o f this
section, “custom er” shall include two or more
customers w here joint ownership is involved, and
the following shall apply:
(1) The right of rescission of the transaction
may be exercised by any one of them, in which
case the effect of rescission in accordance with
paragraph (d) of this section applies to all of
them; and
(2) A ny waiver of the right of rescission p ro ­
vided in paragraph (e) o f this section is invalid
unless signed by all of them.
(g) Exceptions to general rule. This section
does not apply to:
(1) The creation, retention, or assumption of a
first lien or equivalent security interest to finance
the acquisition of a dwelling in which the cus­
tom er resides or expects to reside.
(2) A security interest which is a first lien re­
tained or acquired by a creditor in connection
with the financing of the initial construction of
the residence of the customer, o r in connection
with a loan com mitted prior to completion of the
construction of that residence to satisfy that con­
struction loan and provide perm anent financing
of that residence, whether or not the customer
previously owned the land on which that resi­
dence is to be constructed.
(3) A ny lien by reason of its subordination at
any time subsequent to its creation, if that lien
was exempt from the provisions of this section
when it was originally created.

§ 226.10

*(4) A ny advance for agricultural purposes
m ade pursuant to either:
(i) P aragraph (j) of § 226.8 under an open
end real estate mortgage or similar lien, pro ­
vided the disclosure required under paragraph
(b) of this section was m ade at the time the se­
curity interest was acquired by the creditor or
at any time prior to the first advance made on
o r following the effective date of this Part, or
(ii) P aragraph (p) of § 226.8 under a written
agreement, provided the disclosure required
under paragraph (b) of this section was made
at the time the written agreement was executed
by the customer.
SEC T IO N 226.10— A D V E R T IS IN G
C R E D IT T E R M S
(a) General rule. N o advertisement to aid, p ro ­
mote, or assist directly or indirectly any extension
of credit m ay state
(1) T h at a specific am ount of credit or instal­
m ent am ount can be arranged unless the creditor
usually and customarily arranges or will arrange
credit am ounts or instalments for th at period and
in that am ount; or
(2) T h at no dow npaym ent or th at a specified
dow npaym ent will be accepted in connection with
any extension of credit, unless the creditor
usually and customarily accepts or will accept
downpayments in that am ount.
(b) Catalogs and multi-page advertisements. If
a catalog or other multiple-page advertisement
sets forth or gives inform ation in sufficient detail
to perm it determination o f the disclosures re­
quired by this section in a table or schedule of
credit terms, such catalog or multiple-page adver­
tisement shall be considered a single advertise­
m ent provided:
(1) T he table or schedule and the disclosures
m ade therein are set forth clearly and conspicu­
ously, and
(2) A ny statement of credit terms appearing in
any place other than in that table o r schedule of
credit term s clearly and conspicuously refers to
the page or pages on which that table or schedule
appears, unless that statem ent discloses all of the
credit term s required to be stated under this sec­
tion. F o r the purpose of this subparagraph, cash
price is not a credit term.
* Amended 11/6/69.

REGULATION Z

*(c) Advertising o f open end credit. N o ad ­
vertisement to aid, promote, or assist directly or
indirectly the extension of open end credit m ay
set forth any o f the term s described in paragraph
(a) of § 226.7, the Com parative Index of Credit
Cost, or that a specified dow npaym ent or p e­
riodic paym ent is required (either in dollars or as
a percentage), the period of repaym ent o r any of
the following items, unless it also clearly and
conspicuously sets forth all the following items in
terminology prescribed under paragraph (b) of
§ 226.7:
(1) An explanation of the time period, if any,
within which any credit extended m ay be paid
w ithout incurring a finance charge.
(2 ) T he method of determ ining the balance
upon which a finance charge may be imposed.
(3) T he m ethod of determining the am ount of
the finance charge, including the determination of
any m inimum, fixed, check service, transaction,
activity, or similar charge, which m ay be imposed
as a finance charge.
(4) W here one or m ore periodic rates m ay be
used to com pute the finance charge, each co rre­
sponding annual percentage rate determ ined by
multiplying the periodic rate by the num ber of
periods in a year and, w here there is m ore than
one corresponding annual percentage rate, the
range of balances to which each is applicable.15
*(d) Advertising of credit other than open end.
N o advertisement to aid, promote, or assist di­
rectly or indirectly any credit sale including the
sale of residential real estate, loan, or other exten­
sion of credit, other than open end credit, sub­
ject to the provisions of this Part, shall state
(1)
The rate of the finance charge except as an
“annual percentage rate;” using that term. N o
other rate of finance charge may be stated, ex­
cept that:
(i)
where the total finance charge includes, as a
com ponent, interest com puted at a simple annual

* Amended 11/1/73.
13 A creditor imposing minimum charges is not required
to adjust the disclosure of the range of balances to
which each rate would apply in order to reflect the
range of the balances below which the minimum charge
applies. If a creditor does not impose a finance charge
when the outstanding balance is less than a certain
amount, the creditor is not required to disclose that fact
or the balance below which no such charge will be im­
posed.

REGULATION Z

rate, the simple annual rate may be stated in con­
junction with, but not m ore conspicuously than,
the annual percentage rate, or
(ii)
where the finance charge is com puted
solely by the application of a periodic rate to an
unpaid balance, the periodic rate may be stated in
conjunction with, but not m ore conspicuously
than, the annual percentage rate.
(2)
T hat no dow npaym ent is required, or the
am ount of the dow npaym ent or of any instalment
paym ent required (either in dollars or as a p er­
centage), the dollar am ount of any finance
charge, the num ber of instalments o r the period
of repayment, o r that there is no charge for
credit, unless it also clearly and conspicuously
sets forth all of the following items in terminology
prescribed under § 226.8:
(i) the cash price or the am ount of the loan, as
applicable.
(ii) in a credit sale, the am ount of the down­
paym ent required or that no dow npaym ent is re­
quired, as applicable.
(iii) the number, am ount, and due dates or pe­
riod of paym ents scheduled to repay the
indebtedness if the credit is extended.
(iv) the am ount of the finance charge ex­
pressed as an annual percentage rate. T he exemp­
tions from disclosure of an annual percentage
rate permitted in paragraph (b)(2) of § 226.8 shall
not apply to this subdivision.
(v) except in the case of the sale o f a dwelling
or a loan secured by a first lien on a dwelling to
purchase that dwelling, the deferred paym ent
price in a credit sale, or the total of paym ents in
a loan or other extension of credit which is not a
credit sale, as applicable.
*(e) Advertising of FH A Section 235 financ­
ing. A ny advertisement to aid, prom ote, or assist
directly or indirectly the sale of residential real
estate under Title II, Section 235, of the N ational
Housing Act (12 U.S.C. 1715z) shall clearly iden­
tify those credit term s which apply to the assist­
ance program and, except as provided in this p ar­
agraph, comply with the provisions of paragraph
(d) of this section. N o such advertisement shall
state:
(1) the am ount of any paym ent scheduled to
repay the indebtedness w ithout stating the family
size and income level applicable to that amount.
(2) any rate of a finance charge, or the am ount
* Added 4/5/71.

§ 226.11

of the finance charge, expressed as an annual per­
centage rate based on the assistance. The annual
percentage rate exclusive of the assistance m ay be
stated, but is not required.
SEC T IO N 226.11— C O M P A R A T IV E IN D E X
O F C R E D IT CO ST F O R O P E N E N D
C R E D IT
(a) General rule. Any creditor who elects to
disclose the Com parative Index of Credit Cost on
open end credit accounts
(1) Shall com pute the Com parative Index of
Credit Cost in accordance with paragraph (b) of
this section.
(2) Shall recom pute the C om parative Index of
Credit Cost in accordance with paragraph (b) of
this section based upon any new open end credit
account terms to be adopted and shall disclose
the new Com parative Index of Credit Cost in ac­
cordance with paragraph (c)(2) of this section
concurrently with the notice required under p ara­
graph (e) of §226.7.
(3) Shall, when making such disclosure under
the provisions of subparagraphs (a)(5) and (b)(7)
of § 226.7, m ake the disclosure to all open end
credit account customers; and
(4) Shall not utilize such disclosure so as to
mislead, or confuse the customer or contradict,
obscure, or detract attention from the required
disclosures.
(b) Computation of Comparative Index of
Credit Cost. The Com parative Index of Credit
Cost for each open end credit plan shall be com ­
puted by applying the creditor’s term s of that
plan to the following hypothetical factors:
(1) A single transaction in the am ount o f $100
is debited on the first day of a billing cycle to an
open end credit account having no previous bal­
ance.
(2) T he creditor imposes all finance charges in­
cluding periodic, fixed, m inim um or other charges
applicable to such account in am ounts and on
dates consistent with his policy o f imposing such
charges upon open end credit accounts.
(3) The exact am ount of the required mini­
m um periodic paym ent is paid on the last day of
each subsequent and successive billing cycle until
the am ount of the single transaction, together with
applicable finance charges, is paid in full.
(4) T he Com parative Index of Credit Cost
shall be expressed and disclosed as a percentage

REGULATION Z

§ 226.12

accurate to the nearest quarter of 1 per cent and
shall be determined by dividing the total am ount
of the finance charges imposed by the sum of the
daily balances and multiplying the quotient so ob­
tained (expressed as a percentage) by 365.
(c)
Form of disclosure. A ny creditor who
elects to disclose the Com parative Index of Credit
Cost shall:
(1) M ake the disclosure in the form of the fol­
lowing statement: “O ur Com parative Index of
Credit Cost under the term s of o ur open end
credit account plan is __ % per year, computed
on the basis of a single transaction of $100 de­
bited on the first day of a billing cycle to an ac­
count having no previous balance, and paid in re­
quired minimum consecutive instalments on the
last day of each succeeding billing cycle until the
transaction and all finance charges are paid in
full. The actual percentage cost of credit on your
account may be higher or lower depending on
the dates and am ounts o f charges and paym ents.”
(2) Disclose any newly com puted Com parative
Index of Credit Cost in the form of the state­
m ent prescribed in subparagraph (1) of this para­
graph, except that the statem ent shall be preceded
by the w ords “Effective as of
(date)
,”
and the words “will be” shall be substituted for
the w ord “is” in the second line of the statement.
* SEC T IO N 226.12— E X E M P T IO N OF
C E R T A IN STA T E R E G U L A T E D
T R A N SA C T IO N S
(a) Exemption for State regulated transactions.
In accordance with the provisions of Supplements
II and IV to Regulation Z, any State may make
application to the Board for exemption of any
class of transactions within that State from the
requirem ents of C hapter 2 of the A ct and the
corresponding provisions of this Part: Provided,
T hat
(1) U nd er the law of that State, that class of
transactions is subject to requirem ents substan­
tially similar to those imposed under C hapter 2
of the Act and the corresponding provisions of
this Part; and
(2) There is adequate provision for enforce­
ment.
(b) Procedures and criteria. The procedures
and criteria under w hich any State m ay apply for
* Amended 3/12/70 and to its present form 1/25/71.

the determination provided for in paragraph (a)
of this section are set forth in Supplement II to
Regulation Z with respect to disclosure and re­
scission requirem ents (§§ 121-131 of C hapter 2)
and Supplement IV with respect to the prohibi­
tion of the issuance of unsolicited credit cards
and the liability of the cardholder for unauthor­
ized use of a credit card (§§ 132-133 o f Chapter
2 ).

(c) Civil liability. In order to assure that the
concurrent jurisdiction of Federal and State
courts created in section 130(e) of the Act shall
continue to have substantive provisions to which
such jurisdiction shall apply, and generally to aid
in implementing the A ct with respect to any class
of transactions exempted pursuant to paragraph
(a) of this section and Supplement II, the Board
pursuant to sections 105 and 123 hereby pre­
scribes that:
(1) N o such exemptions shall be deemed to ex­
tend to the civil liability provisions of sections
130 and 131; and
(2) A fter an exemption has been granted, the
disclosure requirem ents of the applicable State
law shall constitute the disclosure requirements of
this Act, except to the extent that such State law
imposes disclosure requirem ents not imposed by
this Act. Inform ation required under such State
law with the exception of those provisions which
impose disclosure requirem ents not imposed by
this Act shall, accordingly, constitute the “infor­
mation required under this C h apter” (Chapter 2
of the Act) for the purpose of section 130(a).
(d) Exemptions granted. Exem ptions granted
by the Board to particular classes of credit trans­
actions within specified States are set forth in
Supplement III to Regulation Z.
* SEC T IO N 226.13— C R E D IT CA RDS—
ISSU A N C E A N D L IA B ILITY
(a)
Supplemental definitions applicable to this
section. In addition to the definitions set forth in
§ 226.2, as applicable, the following definitions
apply to this section:
(1)
“Accepted credit card” means any credit
card which the cardholder has requested or ap­
plied for and received, or has signed, or has
used, or has authorized another person to use for
the purpose of obtaining money, property, labor,
or services on credit. A ny credit card issued in
* Added 1/25/71.

REGULATION Z

renewal of, or in substitution for, an accepted
credit card becomes an accepted credit card when
received by the cardholder w hether such card is
issued by the same or a successor card issuer.
(2) “Adequate notice” means a printed notice
to a cardholder w hich sets forth the pertinent
facts clearly and conspicuously so that a person
against w hom it is to operate could reasonably
be expected to have noticed it and understood its
meaning.
(3) “Card issuer” m eans any person who issues
a credit card, o r the agent of such person with
respect to such card.
*(4) “Cardholder” means any person to whom
a credit card is issued for personal, family,
household, agricultural, business, or commercial
purposes, or any person w ho has agreed with the
card issuer to pay obligations arising from the is­
suance of a credit card to another person for
such purposes.
(5) “Credit” means the right to defer paym ent
o f debt, incur debt and defer its paym ent, or to
obtain money, property, labor or services and
defer paym ent therefor.
(6) “Credit card” means any card, plate, cou­
pon book, or other single credit device existing
for the purpose of being used from time to time
upon presentation to obtain money, property,
labor, or services on credit.
(7) “Unauthorized use” m eans the use of a
credit card by a person other th an the cardholder
(i) who does not have actual, implied, or ap­
parent authority for such use, and
(ii) from which the cardholder receives no ben­
efit.
*(b) Issuance o f credit cards. Regardless of
whether a credit card is to be used for personal,
family, household, agricultural, business o r com ­
mercial purposes, no credit card shall be issued
to any person except:
(1) In response to a request or application
therefor, or
(2) As a renewal of, or in substitution for, an
accepted credit card w hether such card is issued
by the same or a successor card issuer.
*(c) Conditions of liability of cardholder. A
cardholder shall be liable for unauthorized use of
each credit card issued only if,
(1) The credit card is an accepted credit card;
(2) Such liability does not exceed the lesser of
* Amended 12/15/72.

§ 226.13

$50 or the am ount of money, property, labor, or
services obtained by such use p rior to notification
of the card issuer pursuant to paragraph (f) of
this section;
(3) T he card issuer has given adequate notice
to the cardholder of his potential liability on the
credit card or within two years preceding the un­
authorized use; and
(4) T he card issuer has provided the card­
holder with an addressed notification requiring no
postage to be paid by the cardholder w hich may
be mailed by the cardholder in the event o f the
loss, theft, or possible unauthorized use of the
credit card.
(d) Other conditions of liability. In addition to
the conditions of liability in paragraph (c) of this
section, no cardholder shall be liable for the un­
authorized use of any credit card which was is­
sued after Jan u ary 24, 1971, and, regardless of
the date of its issuance, after January 24, 1972,
no cardholder shall be liable for the unauthorized
use of any credit card, unless the card issuer has
provided a m ethod whereby the user of such card
can be identified as the person authorized to use
it, such as by signature, photograph, o r finger­
print on the credit card or by electronic or me­
chanical confirmation.
(e) Notice to cardholder. The notice to card­
holder pursuant to paragraph (c)(3) of this
section may be given by printing the notice on
the credit card, or by any other means reasonably
assuring the receipt thereof by the cardholder.
An acceptable form of notice m ust state that lia­
bility shall not exceed $50 (or any lesser
am ount), that notice of loss, theft, or possible u n ­
authorized use may be given orally or in writing,
and the nam e and address of the party to receive
the notice. It m ay include any additional infor­
m ation w hich is not inconsistent with the provi­
sions of this section. A n example of an accepta­
ble notice is as follows:
“Y ou m ay be liable for the unauthorized use of
y our credit card [or other term which describes
the credit device]. Y ou will n o t be liable for
unauthorized use which occurs after you notify
[name o f card issuer or his designee] at [address]
orally or in writing of loss, theft, or possible u n ­
authorized use. In any case liability shall n ot ex­
ceed [insert $50 or any lesser am ount under other
applicable law or under any agreem ent with the
cardholder].”

§ 226.13

(f)
N otice to card issuer. F o r the purposes of
this section, a cardholder notifies a card issuer by
taking such steps as m ay be reasonably required
in the ordinary course of business to provide the
card issuer with the pertinent inform ation with
respect to loss, theft, or possible unauthorized use
of any credit card, whether or not any particular
officer, employee, or agent of the card issuer
does, in fact, receive such notice or information.
Irrespective of the form of notice provided under
paragraph (c)(4) of this section, at the option of
the cardholder, notice m ay be given to the card
issuer or his designee in person or by telephone
or by letter, telegram, radiogram, cablegram, or,
other written com munication which sets forth the
pertinent information. N otice by mail, telegram,
radiogram , cablegram, or other written com m uni­
cation shall be considered given at the time of re­

REGULATION Z

ceipt or, whether or not received, at the expira­
tion of the time ordinarily required for
transmission, whichever is earlier.
(g) Action to enforce liability. In any action by
a card issuer to enforce liability for the use of a
credit card, the burden o f proof is upon the card
issuer to show th a t the use was authorized or, if
the use was unauthorized, then the burden of
proof is upon the card issuer to show that the
conditions of liability for the unauthorized use of
a credit card, as set forth in paragraphs (c) and
(d) of this section, have been met.
(h) Effect on other applicable law or agree­
ment. N othing in this section imposes liability
upon a cardholder for the unauthorized use of a
credit card in excess of his liability for such use
under other applicable law or under any agree­
ment with the card issuer.

STATUTORY APPENDIX

§ 101

STATUTORY APPENDIX

would be strengthened by the informed use of
credit. T he informed use of credit results from an
awareness of the cost thereof by consumers. It is
the purpose of this title to assure a meaningful
disclosure of credit terms so that the consumer
will be able to com pare more readily the various
credit terms available to him and avoid the unin­
formed use of credit.

Titles I and V of Act of M ay 29, 1968,
as am ended October 26, 1970
§ 1. Short title of entire Act
This Act m ay be cited as the Consumer Credit
Protection Act.

§ 103. Definitions and rules o f construction
(a) The definitions and rules of construction
set forth in this section are applicable for the
purposes of this title.
(b) The term “Board” refers to the Board of
G overnors of the Federal Reserve System.
(c) The term “organization” means a corpora­
tion, government or governmental subdivision or
agency, trust, estate, partnership, cooperative, or
association.
(d) The term “person” means a natural person
or an organization.
(e) The term “credit” means the right granted
by a creditor to a debtor to defer paym ent of
debt or to incur debt and defer its payment.
(f) The term “creditor” refers only to creditors
who regularly extend, or arrange for the exten­
sion of, credit for which the paym ent of a
finance charge is required, whether in connection
with loans, sales of property or services, or other­
wise. The provisions of this title apply to any
such creditor, irrespective of his or its status as a
natural person or any type of organization.
(g) The term “credit sale” refers to any sale
with respect to which credit is extended or ar­
ranged by the seller. The term includes any con­
tract in the form of a bailment or lease if the
bailee or lessee contracts to pay as compensation
for use a sum substantially equivalent to or in ex­
cess of the aggregate value of the property and
services involved and it is agreed that the bailee
or lessee will become, or for no other or a nom i­
nal consideration has the option to become, the
owner of the property upon full compliance with
his obligations under the contract.
(h) T he adjective “consum er” , used with refer­
ence to a credit transaction, characterizes the
transaction as one in which the party to whom
credit is offered or extended is a natural person,
and the money, property, or services which are
the subject of the transaction are primarily for
personal, family, household, or agricultural pur­
poses.

TITLE I— CONSUM ER CREDIT COST
DISCLOSURE
[15 U .S .C . §§ 1601 et seq.]

C hapter
1.
2.
3.

Section

G e n e r a l P r o v i s i o n s .......................................
C r e d it
T r a n s a c t i o n s ......................
C r e d it
A d v e r t i s i n g ..........................

101
121
141

CHAPTER 1— GENERAL PROVISIONS
Sec.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.

Short title.
Findings and declaration of purpose.
Definitions and rules of construction.
Exem pted transactions.
Regulations.
D eterm ination of finance charge.
D eterm ination of annual percentage rate.
Administrative enforcement.
Views of other agencies.
Advisory committee.
Effect on other laws.
Criminal liability for willful and knowing
violation.
113. Penalties inapplicable to governmental agen­
cies.
114. Reports by Board and Attorney General.

§ 101. Short title
This title may be cited as the T ruth in Lending
Act.
§ 102. Findings and declaration of purpose
The Congress finds that economic stabilization
would be enhanced and the competition among
the various financial institutions and other firms
engaged in the extension of consumer credit

29

§ 104

STATUTORY APPENDIX

(i)
T he term “open end credit plan” refers to a
*(r) The disclosure of an am ount or percent­
plan prescribing the term s of credit transactions
age which is greater than the am ount or percent­
which may be made thereunder from time to
age required to be disclosed under this title does
time and under the term s of which a finance
not in itself constitute a violation of this title.
charge m ay be com puted on the outstanding un­
§ 104. Exempted transactions
paid balance from tim e to tim e thereunder.
This title does not apply to the following:
*(j) T he term “adequate notice” , as used in
(1) Credit transactions involving extensions of
section 133, means a printed notice to a card­
credit
for business or commercial purposes, or to
holder which sets forth the pertinent facts clearly
government
or governmental agencies or instru­
and conspicuously so that a person against w hom
mentalities,
or
to organizations.
it is to operate could reasonably be expected to
(2) Transactions in securities or commodities
have noticed it and understood its meaning. Such
accounts by a broker-dealer registered with the
notice may be given to a cardholder by printing
Securities
and Exchange Commission.
the notice on any credit card, or on each periodic
(3)
Credit
transactions, other than real p rop­
statement of account, issued to the cardholder, or
erty
transactions,
in which the total am ount to be
by any other means reasonably assuring the re­
financed exceeds $25,000.
ceipt thereof by the cardholder.
(4) Transactions under public utility tariffs, if
*(k) T he term “credit card” means any card,
the
Board determines that a State regulatory body
plate, coupon book or other credit device existing
regulates
the charges for the public utility serv­
for the purpose of obtaining money, property,
ices
involved,
the charges for delayed payment,
labor, or services on credit.
and
any
discount
allowed for early payment.
*(1) T he term “accepted credit card ” means
any credit card which the cardholder has re­
§ 105. Regulations
quested and received or has signed or has used,
The Board shall prescribe regulations to carry
or authorized another to use, for the purpose of
out the purposes of this title. These regulations
obtaining money, property, labor, or services on
may contain such classifications, differentiations,
credit.
or other provisions, and may provide for such
*(m) T he term “cardholder” means any person
adjustments and exceptions for any class of trans­
to w hom a credit card is issued or any person
actions, as in the judgm ent of the Board are nec­
who has agreed with the card issuer to pay obli­
essary or proper to effectuate the purposes of this
gations arising from the issuance of a credit card
title, to prevent circumvention or evasion thereof,
to another person.
or to facilitate compliance therewith.
*(n) T he term “card issuer” means any person
who issues a credit card, or the agent of such
§ 106. Determination of finance charge
person with respect to such card.
(a)
Except as otherwise provided in this sec­
*(o) T he term “unauthorized use”, as used in
tion, the am ount o f the finance charge in
section 133, means a use of a credit card by a
connection with any consum er credit transaction
person other than the cardholder who does not
shall be determined as the sum of all charges,
have actual, implied, or apparent authority for
payable directly or indirectly by the person to
such use and from which the cardholder receives
whom the credit is extended, and imposed di­
no benefit.
rectly or indirectly by the creditor as an incident
**(p) T he term “State” refers to any State, the
to the extension of credit, including any of the
Com m onw ealth of P uerto Rico, the District of
following types of charges which are applicable:
Columbia, and any territory or possession of the
(1) Interest, time price differential, and any
U nited States.
am ount payable under a point, discount, or other
**(q) A ny reference to any requirem ent im­
system of additional charges.
posed under this title or any provision thereof in­
(2) Service or carrying charge.
cludes reference to the regulations of the Board
(3) Loan fee, finder’s fee, or similar charge.
under this title or the provision thereof in ques­
(4) Fee for an investigation or credit report.
tion.
(5) Prem ium or other charge for any guaran* Added 10/26/70.
** Redesignated 10/26/70.

* Redesignated 10/26/70.

STATUTORY APPENDIX

tee or insurance protecting the creditor against
the obligor’s default or other credit loss.
(b) Charges or premiums for credit life, acci­
dent, or health insurance written in connection
with any consum er credit transaction shall be in­
cluded in the finance charge unless
(1) the coverage of the debtor by the insur­
ance is not a factor in the approval by the credi­
tor of the extension of credit, and this fact is
clearly disclosed in writing to the person applying
for or obtaining the extension of credit; and
(2) in order to obtain the insurance in connec­
tion with the extension of credit, the person to
whom the credit is extended must give specific
affirmative written indication of his desire to do
so after written disclosure to him of the cost
thereof.
(c) Charges or prem ium s for insurance, written
in connection with any consumer credit transac­
tion, against loss of or dam age to property or
against liability arising out of the ownership or
use o f property, shall be included in the finance
charge unless a clear and specific statement in
writing is furnished by the creditor to the person
to w hom the credit is extended, setting forth the
cost of the insurance if obtained from or through
the creditor, and stating that the person to whom
the credit is extended m ay choose the person
through which the insurance is to be obtained.
(d) If any of the following items is itemized
and disclosed in accordance with the regulations
of the Board in connection with any transaction,
then the creditor need not include that item in
the com putation of the finance c h a rg ; with re­
spect to that transaction:
(1) Fees and charges prescribed by law which
actually are or will be paid to public officials for
determining the existence of or for perfecting or
releasing or satisfying any security related to the
credit transaction.
(2) The prem ium payable for any insurance in
lieu of perfecting any security interest otherwise
required by the creditor in connection with the
transaction, if the prem ium does not exceed the
fees and charges described in paragraph (1)
which would otherwise be payable.
(3) Taxes.
(4) Any other type of charge which is not for
credit and the exclusion of which from the
finance charge is approved by the Board by regu­
lation.

§ 107

(e)
The following items, w hen charged in
connection with any extension of credit secured
by an interest in real property, shall not be in­
cluded in the com putation of the finance charge
with respect to that transaction:
(1) Fees or prem ium s for title examination,
title insurance, or similar purposes.
(2) Fees for preparation of a deed, settlement
statement, or other documents.
(3) Escrows for future paym ents of taxes and
insurance.
(4) Fees for notarizing deeds and other docu­
ments.
(5) Appraisal fees.
(6) Credit reports.
§ 107. Determination of annual percentage rate
(a) T he annual percentage rate applicable to
any extension of consum er credit shall be deter­
mined, in accordance with the regulations of the
Board,
(1) in the case of any extension of credit other
than under an open end credit plan, as
(A) that nominal annual percentage rate which
will yield a sum equal to the am ount of the
finance charge w hen it is applied to the unpaid
balances of the am ount financed, calculated ac­
cording to the actuarial m ethod of allocating pay­
ments made on a debt between the am ount
financed and the am ount of the finance charge,
pursuant to which a paym ent is applied first to
the accum ulated finance charge and the balance
is applied to the unpaid am ount financed; or
(B) the rate determ ined by any m ethod pre­
scribed by the Board as a method which m ate­
rially simplifies com putation while retaining rea­
sonable accuracy as com pared with the rate
determined under subparagraph (A).
(2) in the case of any extension o f credit
under an open end credit plan, as the quotient
(expressed as a percentage) of the total finance
charge for the period to w hich it relates divided
by the am ount upon which the finance charge for
that period is based, multiplied by the num ber of
such periods in a year.
(b) W here a creditor imposes the same finance
charge for balances within a specified range, the
annual percentage rate shall be com puted on the
median balance within the range, except that if
the Board determines that a rate so com puted
would not be meaningful, or would be materially
misleading, the annual percentage rate shall be

§ 108

STATUTORY APPENDIX

(3) the Federal Credit U nion Act, by the
D irector of the Bureau of Federal Credit Unions
with respect to any Federal credit union.
(4) the Acts to regulate commerce, by the In ­
terstate Com m erce Commission with respect to
any com m on carrier subject to those Acts.
(5) the Federal Aviation Act o f 1958, by the
Civil A eronautics Board with respect to any air
carrier or foreign air carrier subject to that Act.
(6) the Packers and Stockyards Act, 1921 (ex­
cept as provided in section 406 of that Act), by
the Secretary of Agriculture with respect to any
activities subject to that Act.
(b) F o r the purpose of the exercise by any
agency referred to in subsection (a) of its powers
under any A ct referred to in that subsection, a
violation of any requirem ent imposed under this
title shall be deemed to be a violation of a re­
quirem ent imposed under that Act. In addition to
its powers under any provision of law specifically
referred to in subsection (a), each of the agencies
referred to in that subsection m ay exercise, for
the purpose of enforcing compliance with any re­
quirem ent imposed under this title, any other a u ­
thority conferred on it by law.
(c) Except to the extent that enforcem ent of
the requirem ents imposed under this title is spe­
cifically committed to some other G overnm ent
agency under subsection (a), the Federal Trade
Commission shall enforce such requirements. F or
§ 108. Administrative enforcement
(a)
Com pliance with the requirem ents imposed the purpose of the exercise by the Federal Trade
Commission o f its functions and powers under
under this title shall be enforced under
the Federal T rade Commission Act, a violation
(1) section 8 of the Federal Deposit Insurance
of any requirem ent imposed under this title shall
Act, in the case of
be deemed a violation of a requirem ent imposed
(A) national banks, by the C om ptroller o f the
under that Act. All of the functions and powers
Currency.
of
the Federal T rade Commission u n der the F ed ­
(B) m em ber banks of the Federal Reserve Sys­
eral
T rade Commission A ct are available to the
tem (other than national banks), by the Board.
Commission to enforce compliance by any person
(C) banks insured by the Federal Deposit In ­
with the requirem ents imposed u nd er this title, ir­
surance Corporation (other than members of the
respective of w hether that person is engaged in
Federal Reserve System), by the Board of D irec­
com m erce or meets any other jurisdictional tests
tors of the Federal Deposit Insurance C orpora­
in the Federal T rade Commission Act.
tion.
(d) The authority of the Board to issue regula­
(2) section 5(d) of the H om e Owners’ Loan
tions under this title does not im pair the author­
A ct of 1933, section 407 of the N ational H ous­
ity of any other agency designated in this section
ing Act, and sections 6(i) and 17 of the Federal
to make rules respecting its own procedures in
H om e L oarw B ank Act, by the Federal H om e
enforcing com pliance with requirem ents imposed
Loan Bank Board (acting directly or through the
under this title.
Federal Savings and Loan Insurance C orpora­
§ 109. Views of other agencies
tion), in the case of any institution subject to any
In the exercise of its functions under this title,
of those provisions.

com puted on such other basis as the Board may
by regulation require.
(c) The annual percentage rate m ay be
rounded to the nearest quarter of 1 per centum
for credit transactions payable in substantially
equal installments when a creditor determines the
total finance charge on the basis of a single add­
on, discount, periodic, or other rate, and the rate
is converted into an annual percentage rate under
procedures prescribed by the Board.
(d) T he Board m ay authorize the use of rate
tables or charts which m ay provide for the dis­
closure of annual percentage rates which vary
from the rate determined in accordance with
subsection (a)(1)(A) by not m ore than such toler­
ances as the Board m ay allow. The Board may
not allow a tolerance greater than 8 per centum
of th at rate except to simplify com pliance where
irregular paym ents are involved.
(e) In the case o f creditors determining the an ­
nual percentage rate in a m anner other than as
described in subsection (c) o r (d), the Board may
authorize other reasonable tolerances.
(f) P rior to Janu ary 1, 1971, any rate required
under this title to be disclosed as a percentage
rate may, at the option of the creditor, be ex­
pressed in the form of the corresponding ratio of
dollars per hundred dollars.

STATUTORY APPENDIX

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 o f creditors
subject to this title.
§ 1 1 0 . Advisory committee
T he Board shall establish an advisory com m it­
tee to advise and consult with it in the exercise
of its functions under this title. In appointing the
members of the committee, the Board shall seek
to achieve a fair representation of the interests of
sellers of merchandise on credit, lenders, and the
public. T he com mittee shall meet from time to
time at the call of the Board, and members
thereof shall be paid transportation expenses and
not to exceed $100 per diem.
§ 111. Effect on other laws
(a) This title does not annul, alter, or affect, or
exempt any creditor from complying with, the
laws of any State relating to the disclosure of in­
form ation in connection with credit transactions,
except to the extent that those laws are inconsist­
ent with the provisions of this title or regulations
thereunder, and then only to the extent of the in­
consistency.
(b) This title does not otherwise annul, alter or
affect in any m anner the meaning, scope or appli­
cability of the laws of any State, including, but
not limited to, laws relating to the types, amounts
o r rates of charges, or any element or elements
o f charges, permissible under such laws in
connection with the extension or use of credit,
nor does this title extend the applicability of
those laws to any class of persons or transactions
to which they would not otherwise apply.
(c) In any action or proceeding in any court
involving a consum er credit sale, the disclosure
of the annual percentage rate as required under
this title in connection with that sale m ay not be
received as evidence that the sale was a loan or
any type of transaction other than a credit sale.
(d) Except as specified in sections 125 and
130, this title and the regulations issued thereun­
der do not affect the validity or enforceability of
any contract or obligation under State or Federal
law.
§ 1 1 2 . Criminal liability for willful and knowing
violation
W hoever willfully and knowingly

§ 110

(1) gives false or inaccurate inform ation or
fails to provide inform ation which he is required
to disclose under the provisions of this title or
any regulation issued thereunder,
(2) uses any chart o r table authorized by the
Board under section 107 in such a m ann er as to
consistently understate the annual percentage rate
determined under section 107 (a)(1)(A), or
(3) otherwise fails to com ply with any require­
ment imposed under this title,
shall be fined not m ore than $5,000 o r impris­
oned not more than one year, or both.
§ 113. Penalties inapplicable to governmental
agencies
N o civil or criminal penalty provided under
this title for any violation thereof m ay be im­
posed upon the U nited States or any agency
thereof, or upon any State or political subdivision
thereof, or any agency of any State or political
subdivision.
§ 114. Reports by Board and Attorney General
N ot later than Janu ary 3 of each year after
1969, the Board and the A ttorney G eneral shall,
respectively, m ake reports to the Congress con­
cerning the adm inistration of their functions
under this title, including such recommendations
as the Board and the A ttorney General, respec­
tively, deem necessary or appropriate. In addi­
tion, each report o f the Board shall include its as­
sessment of the extent to which compliance with
the requirem ents imposed u n der this title is being
achieved.

CHAPTER 2— CREDIT TRANSACTIONS
Sec.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.

G eneral requirem ent o f disclosure.
F o rm of disclosure; additional information.
Exem ption for State-regulated transactions.
Effect of subsequent occurrence.
Right of rescission as to certain transactions.
C ontent of periodic statements.
O pen end consum er credit plans.
Sales not un der open end credit plans.
C onsum er loans not under open end credit
plans.
Civil liability.
W ritten acknowledgm ent as proof of receipt.
Issuance of credit cards.
Liability o f holder of credit card.
F raud ulen t use of credit card.

§ 121

§ 121. General requirement of disclosure
(a) Each creditor shall disclose clearly and
conspicuously, in accordance with the regulations
of the Board, to each person to whom consumer
credit is extended and upon w hom a finance
charge is or may be imposed, the inform ation re­
quired under this chapter.
(b) If there is more than one obligor, a credi­
tor need not furnish a statement of inform ation
required under this chapter to m ore than one of
them.
§ 122. Form of disclosure; additional information
(a) Regulations of the Board need not require
that disclosures pursuant to this chapter be m ade
in the order set forth in this chapter, and may
perm it the use of term inology different from that
employed in this chapter if it conveys substan­
tially the same meaning.
(b) A ny creditor may supply additional infor­
m ation or explanations with any disclosures re­
quired under this chapter.
§ 123. Exemption for State-regulated transactions
T he Board shall by regulation exempt from the
requirem ents of this chapter any class of credit
transactions within any State if it determines that
under the law of that State that class of transac­
tions is subject to requirem ents substantially simi­
lar to those imposed under this chapter, and that
there is adequate provision for enforcement.
§ 124. Effect of subsequent occurrence
If inform ation disclosed in accordance with
this chapter is subsequently rendered inaccurate
as the result of any act, occurrence, or agreement
subsequent to the delivery of the required disclo­
sures, the inaccuracy resulting therefrom does not
constitute a violation of this chapter.

STATUTORY APPENDIX

creditor, in accordance with regulations of the
Board, of his intention to do so. T he creditor
shall clearly and conspicuously disclose, in ac­
cordance with regulations of the Board, to any
obligor in a transaction subject to this section the
rights of the obligor under this section. The cred­
itor shall also provide, in accordance with regula­
tions o f the Board, an adequate opportunity to
the obligor to exercise his right to rescind any
transaction subject to this section.
(b) W hen an obligor exercises his right to res­
cind under subsection (a), he is not liable for any
finance or other charge, and any security interest
given by the obligor becomes void upon such a
rescission. Within ten days after receipt of a n o ­
tice of rescission, the creditor shall return to the
obligor any money or property given as earnest
money, downpayment, or otherwise, and shall
take any action necessary or appropriate to re­
flect the term ination of any security interest cre­
ated under the transaction. If the creditor has de­
livered any property to the obligor, the obligor
may retain possession of it. U pon the p e rfo rm ­
ance of the creditor’s obligations under this sec­
tion, 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 m ade 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 posses­
sion of the property within ten days after tender
by the obligor, ownership of the property vests in
the obligor w ithout obligation on his p art to pay
for it.

(c) Notwithstanding any rule of evidence, writ­
ten acknowledgment of receipt of any disclosures
required under this title by a person to whom a
§ 125. Right of rescission as to certain transac­
statement is required to be given pursuant to this
tions
(a)
Except as otherwise provided in this sec­ section does no m ore than create a rebuttable
presum ption of delivery thereof.
tion, in the case of any consum er credit
(d) The Board may, if it finds that such action
transaction in which a security interest is retained
is
necessary in order to perm it homeowners to
or acquired in any real property which is used or
meet
bona fide personal financial emergencies,
is expected to be used as the residence of the
prescribe
regulations authorizing the modification
person to w hom credit is extended, the obligor
or waiver of any rights created under this section
shall have the right to rescind the transaction
to the extent and under the circumstances set
until midnight of the third business day following
forth in those regulations.
the consum m ation of the transaction or the deliv­
(e) This section does not apply to the creation
ery of the disclosures required under this section
or retention of a first lien against a dwelling to
and all other material disclosures required under
finance the acquisition of that dwelling.
this chapter, whichever is later, by notifying the

STATUTORY APPENDIX

§ 126

§ 1 2 6 . Content o f periodic statements
If a creditor transm its periodic statements in
connection with any extension of consum er credit
other than under an open end consum er credit
plan, then each of those statements shall set forth
each of the following items:
(1) T he annual percentage rate of the total
finance charge.
(2) The date by which, or the period (if any)
within which, paym ent m ust be made in order to
avoid additional finance charges or other charges.
(3) Such of the items set forth in section
127(b) as the Board m ay by regulation require as
appropriate to the terms and conditions under
which the extension of credit in question is made.

charges m ay be imposed, and the m ethod by
which they will be determined.
(7)
The conditions under which the creditor
may retain or acquire any security interest n any
property to secure the paym ent of any credit ex­
tended under the plan, and a description of the
interest or interests which m ay be so retained or
acquired.
(b)
T he creditor of any account under an open
end consum er credit plan shall transm it 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 finance charge is im­
posed, a statement setting forth each of the fol­
lowing items to the extent applicable:
(1) T he outstanding balance in the account at
the beginning of the statement period.
(2) T he am ount and date of each extension of
credit during the period, and, if a purchase was
involved, a brief identification (unless previously
furnished) of the goods o r services purchased.
(3) T he total am ou n t credited to the account
during the period.
(4) T he am ount of any finance charge added
to the account during the period, itemized to
show the amounts, if any, due to the application
of percentage rates and the am ount, if any, im ­
posed as a m inimum or fixed charge.
(5) W here one o r more periodic rates m ay be
used to com pute the finance charge, each such
rate, the range of balances to which it is applica­
ble, and, unless the annual percentage rate (deter­
mined under section 107(a)(2)) is required to be
disclosed pursuan t to paragraph (6), the corre­
sponding nom inal annual percentage rate deter­
mined by multiplying the periodic rate by the
num ber o f periods in a year.
(6) W here the total finance charge exceeds 50
cents for a monthly or longer billing cycle, or the
pro rata p art o f 50 cents fo r a billing cycle
shorter than monthly, the total finance charge ex­
pressed as an annual percentage rate (determined
under section 107(a)(2)), except that if the
finance charge is the sum of two or m ore prod­
ucts of a rate times a portion of the balance, the
creditor may, in lieu o f disclosing a single rate
for the total charge, disclose each such rate ex­
pressed as an annual percentage rate, and the
p art of the balance to which it is applicable.
(7) A t the election of the creditor, the average
effective annual percentage rate of return (or the

§ 127. Open end consumer credit plans
(а) Before opening any account under an open
end consum er credit plan, the creditor shall dis­
close to the person to w hom credit is to be ex­
tended each o f the following items, to the extent
applicable:
(1) T he conditions under which a finance
charge may be imposed, including the tim e p e­
riod, if any, w ithin which any credit extended
m ay be repaid w ithout incurring a finance charge.
(2) T he m ethod of determining the balance
upon which a finance charge will be imposed.
(3) T he m ethod of determining the am ount of
the finance charge, including any m inim um or
fixed am ount imposed as a finance charge.
(4) W here one or m ore periodic rates m ay be
used to com pute the finance charge, each such
rate, the range of balances to which it is applica­
ble, and the corresponding nominal annual per­
centage rate determined by multiplying the pe­
riodic rate by the num ber of periods in a year.
(5) If the creditor so elects,
(A) the average effective annual percentage
rate of return received from accounts under the
plan for a representative period of time; or
(B) whenever circumstances are such th at the
com putation of a rate under subparagraph (A)
would not be feasible or practical, or would be
misleading o r meaningless, a projected rate o f re­
tu rn to be received from accounts under the plan.
T he Board shall prescribe regulations, consistent
with com monly accepted standards for account­
ing or statistical procedures, to carry out the p u r­
poses of this paragraph.
(б) The conditions und er w hich any other

35

STATUTORY APPENDIX

§ 128

projected rate) under the plan as prescribed in
subsection (a)(5).
(8) The balance on which the finance charge
was com puted and a statement of how the bal­
ance was determined. If th e balance is deter­
mined w ithout first deducting all credits during
the period, that fact and the am ount of such pay­
m ents shall also be disclosed.
(9) T he outstanding balance in the account at
the end of the period.
(10) T h e date by which, or the period (if any)
within which, paym ent must be m ade to avoid
additional finance charges.
(c)
In the case of any open end consumer
credit plan in existence on the effective date of
this subsection, the items described in subsection
(a), to the extent applicable, shall be disclosed in
a notice mailed or delivered to the obligor not
later than thirty days after that date.
§ 128. Sales not under open end credit plans
(а) In connection with each consum er credit
sale not under an open end credit plan, the credi­
to r shall disclose each of the following items
which is applicable:
(1) T he cash price of the property or service
purchased.
(2) T h e sum of any am ounts credited as down­
paym ent (including any trade-in).
(3) The difference between the am ount re­
ferred to in paragraph (1) and the am ount re­
ferred to in paragraph (2).
(4) All other charges, individually itemized,
which are included in the am ount of the credit
extended but w hich are not p art of the finance
charge.
(5) The total am ount to be financed (the sum
of the am ount described in paragraph (3) plus the
am ount described in paragraph (4)).
(б) Except in the case of a sale of a dwelling,
the am ount o f the finance charge, which may in
whole or in part be designated as a time-price
differential or any similar term to the extent ap­
plicable.
(7)
The finance charge expressed as an annual
percentage rate except in the case of a finance
charge
(A) which does not exceed $5 and is applica­
ble to an am ount financed not exceeding $75, o r
(B) which does not exceed $7.50 and is appli­
cable to an am ount financed exceeding $75.

36

A creditor m ay not divide a consumer credit sale
into two or m ore sales to avoid the disclosure of
an annual percentage rate pursuant to this p ara­
graph.
(8) The number, am ount, and due dates or pe­
riods of paym ents scheduled to repay the indebt­
edness.
(9) The default, delinquency, or similar
charges payable in the event of late payments.
(10) A description of any security interest held
or to be retained or acquired by the creditor in
connection with the extension of credit, and a
clear identification of the property to w hich the
security interest relates.
(b) Except as otherwise provided in this chap­
ter, the disclosures required under subsection (a)
shall be m ade before the credit is extended, and
may be m ade by disclosing the inform ation in the
contract or other evidence of indebtedness to be
signed by the purchaser.
(c) If a creditor receives a purchase order by
mail or telephone w ithout personal solicitation,
and the cash price and the deferred paym ent
price and the term s of financing, including the
annual percentage rate, are set forth in the credi­
tor’s catalog or other printed m aterial distributed
to the public, then the disclosures required under
subsection (a) m ay be made at any tim e not later
than the date the first paym ent is due.
(d) If a consumer credit sale is one of a series
of consum er credit sales transactions m ade p u r­
suant to an agreement providing for the addition
of the deferred paym ent price of th at sale to an
existing outstanding balance, and the person to
w hom the credit is extended has approved in
writing both the annual percentage rate or rates
and the method of com puting the finance charge
or charges, and the creditor retains n o security
interest in any property as to which he has re­
ceived payments aggregating the am ount of the
sales price including any finance charges attribut­
able thereto, then the disclosure required under
subsection (a) fo r the particular sale m ay be
made at any time not later than the date the first
paym ent for that sale is due. F o r the purposes of
this subsection, in the case o f 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.

STATUTORY APPENDIX

§ 129. Consumer loans not under open end
credit plans
(a) A ny creditor making a consum er loan or
otherwise extending consum er credit in a transac­
tion which is neither a consumer credit sale nor
under an open end consum er credit plan shall
disclose each of the following items, to the extent
applicable:
(1) The am ount of credit of which the obligor
will have the actual use, or which is or will be
paid to him or for his account or to another per­
son on his behalf.
(2) All charges, individually itemized, which
are included in the am ount of credit extended but
which are not part of the finance charge.
(3) The total am ount to be financed (the sum
of the am ounts referred to in paragraph (1) plus
the am ounts referred to in paragraph (2)).
(4) Except in the case o f a loan secured by a
first lien on a dwelling and m ade to finance the
purchase of that dwelling, the am ount of the
finance charge.
(5) The finance charge expressed as an annual
percentage rate except in the case of a finance
charge
(A) which does not exceed $5 and is applica­
ble to an extension of consumer credit not ex­
ceeding $75, or
(B) which does not exceed $7.50 and is appli­
cable to an extension of consumer credit
exceeding $75.
A creditor m ay not divide an extension of credit
into two or m ore transactions to avoid the disclo­
sure of an annual percentage rate pursuant to
this paragraph.
(6) T h e num ber, am ount, and the due dates or
periods of paym ents scheduled to repay the in­
debtedness.
(7) T he default, delinquency, or similar charges
payable in the event of late payments.
(8) A description of any security interest held
or to be retained or acquired by the creditor in
connection with the extension of credit, and a
clear identification of the property to which the
security interest relates.
(b) Except as otherwise provided in this chap­
ter, the disclosures required by subsection (a)
shall be m ade before the credit is extended, and
may be m ade by disclosing the inform ation in the
note o r other evidence o f indebtedness to be
signed by the obligor.

§ 129

(c)
If a creditor receives a request for an ex­
tension of credit by mail or telephone without
personal solicitation and the term s of financing,
including the annual percentage rate for repre­
sentative am ounts of credit, are set forth in the
creditor’s printed material distributed to the pub­
lic, or in the contract of loan or other printed
m aterial delivered to the obligor, then the disclo­
sures required under subsection (a) m ay be made
at any time not later than the date the first pay­
ment is due.
§ 130. Civil liability
(a) Except as otherwise provided in this sec­
tion, any creditor who fails in connection with
any consum er credit transaction to disclose to
any person any inform ation required under this
chapter to be disclosed to that person is liable to
that person in an am ount equal to the sum of
(1) twice the am ount of the finance charge in
connection with the transaction, except that the
liability under this paragraph shall not be less
than $100 nor greater th an $1,000; and
(2) in the case of any successful action to en­
force the foregoing liability, the cost o f the ac­
tion together with a reasonable attorney’s fee as
determined by the court.
(b) A creditor has no liability under this sec­
tion if within fifteen days after discovering an
error, and p rior to the institution of an action
under this section or the receipt of written notice
of the error, the creditor notifies the person con­
cerned of the error and makes whatever adjust­
ments in the appropriate account are necessary to
insure that the person will not be required to pay
a finance charge in excess of the am ount or per­
centage rate actually disclosed.
(c) A creditor m ay not be held liable in any
action brought under this section for a violation
of this chapter if the creditor shows by a prepon­
derance of evidence th at the violation was not
intentional and resulted from a bona fide error
notwithstanding the m aintenance of procedures
reasonably adapted to avoid any such error.
(d) A ny action which m ay be brought under
this section against the original creditor in any
credit transaction involving a security interest in
real property may be maintained against any sub­
sequent assignee of the original creditor where
the assignee, its subsidiaries, or affiliates were in
a continuing business relationship with the origi­
nal creditor either at the tim e the credit was ex­

§ 131

tended o r at the time of the assignment, unless
the assignment was involuntary, or the assignee
shows by a preponderance o f evidence that it did
not have reasonable grounds to believe that the
original creditor was engaged in violations of this
chapter, and that it m aintained procedures rea­
sonably adapted to apprise it of the existence of
any such violations.
(e)
A ny action under this section may be
brought in any United States district court, or in
any other court of com petent jurisdiction, within
one year from the date of the occurrence of the
violation.
§ 131. Written acknowledgment as proof of re­
ceipt
Except as provided in section 125(c) and ex­
cept in the case of actions brought under section
130(d), in any action or proceeding by or against
any subsequent assignee of the original creditor
w ithout knowledge to the contrary by the as­
signee when he acquires the obligation, written
acknowledgment of receipt by a person to whom
a statement is required to be given pursuant to
this title shall be conclusive proof of the delivery
thereof and, unless the violation is apparent on
the face of the statement, o f compliance with this
chapter. This section does not affect the rights of
the obligor in any action against the original
creditor.
*§ 132. Issuance o f credit cards
N o credit card shall be issued except in re­
sponse to a request or application therefor. This
prohibition does not apply to the issuance of a
credit card in renewal of, or in substitution for,
an accepted credit card.
**§ 133. Liability o f holder of credit card
(a)
A cardholder shall be liable for the u n au­
thorized use of a credit card only if the card is
an accepted credit card, the liability is not in ex­
cess o f $50, the card issuer gives adequate notice
to the cardholder of the potential liability, the
card issuer has provided the cardholder with a
self-addressed, prestamped notification to be
mailed by the cardholder in the event of the loss
o r theft of the credit card, and the unauthorized
* Added 10/26/70.
** Added 10/26/70, effective 1/25/71.

STATUTORY APPENDIX

use occurs before the cardholder has notified the
card issuer that an unauthorized use of the credit
card has occurred or m ay occur as the result of
loss, theft, or otherwise. Notwithstanding the
foregoing, no cardholder shall be liable for the
unauthorized use of any credit card which was is­
sued on or after the effective date of this section,
and, after the expiration of twelve months follow­
ing such effective date, no cardholder shall be lia­
ble for the unauthorized use of any credit card
regardless of the date of its issuance, unless (1)
the conditions of liability specified in the preced­
ing sentence are met, and (2) the card issuer has
provided a method whereby the user of such card
can be identified as the person authorized to use
it. F or the purposes of this section, a cardholder
notifies a card issuer by taking such steps as may
be reasonably required in the ordinary course of
business to provide the card issuer with the perti­
nent inform ation whether or not any particular
officer, employee, or agent of the card issuer does
in fact receive such information.
(b) In any action by a card issuer to enforce
liability for the use of a credit card, the burden
of proof is upon the card issuer to show that the
use was authorized or, if the use was unauthor­
ized, then the burden of proof is upon the card
issuer to show that the conditions of liability for
the unauthorized use of a credit card, as set forth
in subsection (a), have been met.
(c) N othing in this section imposes liability
upon a cardholder for the unauthorized use o f a
credit card in excess of his liability for such use
under other applicable law or under any agree­
ment with the card issuer.
(d) Except as provided in this section, a card­
holder incurs no liability from the unauthorized
use of a credit card.
*§ 134. Fraudulent use of credit card
Whoever, in a transaction affecting interstate
or foreign commerce, uses any counterfeit, ficti­
tious, altered, forged, lost, stolen, o r fraudulently
obtained credit card to obtain goods or services,
or both, having a retail value aggregating $5,000
or more, shall be fined not m ore than $10,000 or
imprisoned not more than five years, or both.
* Added 10/26/70.

STATUTORY APPENDIX

CHAPTER 3— CREDIT ADVERTISING
Sec.
141. Catalogs and multiple-page advertisements.
142. Advertising of downpayments and install­
ments.
143. Advertising of open end credit plans.
144. Advertising of credit other than open end
plans.
145. N onliability of media.
§ 141. Catalogs and multiple-page advertisements
F o r the purposes of this chapter, a catalog or
other multiple-page advertisement shall be consid­
ered a single advertisement if it clearly and con­
spicuously displays a credit terms table on which
the inform ation required to be stated under this
chapter is clearly set forth.
§ 142. Advertising of downpayments and install­
ments
N o advertisement to aid, promote, or assist di­
rectly or indirectly any extension of consumer
credit m ay state
(1) that a specific periodic consumer credit
am ount or installment am ount can be arranged,
unless the creditor usually and customarily ar­
ranges credit payments or installments for that
period and in that amount.
(2) that a specified dow npaym ent is required in
connection with any extension of consumer
credit, unless the creditor usually and customarily
arranges downpayments in that amount.
§ 143. Advertising of open end credit plans
N o advertisement to aid, promote, o r assist di­
rectly o r indirectly the extension of consumer
credit und er an open end credit plan m ay set
forth any of the specific term s of that plan or the
appropriate rate
determ ined under section
127(a)(5) unless it also clearly and conspicuously
sets forth all of the following items:
(1) The tim e period, if any, within which any
credit extended may be repaid w ithout incurring
a finance charge.
(2) T he m ethod of determ ining the balance
upon which a finance charge will be imposed.
(3) T h e method of determ ining the am ount of
the finance charge, including any m inim um or
fixed am ount imposed as a finance charge.

§ 141

•

(4) W here periodic rates m ay be used to com ­
pute the finance charge, the periodic rates ex­
pressed as annual percentage rates.
(5)
Such other or additional inform ation for
the advertising of open end credit plans as the
Board may by regulation require to provide for
adequate com parison of credit costs as between
different types of open end credit plans.

§ 144. Advertising of credit other than open end
plans
(a) Except as provided in subsection (b), this
section applies to any advertisement to aid, p ro ­
mote, or assist directly or indirectly any con­
sumer credit sale, loan, or other extension of
credit subject to the provisions of this title, other
than an open end credit plan.
(b) The provisions o f this section do not apply
to advertisements of residential real estate except
to the extent that the Board m ay by regulation
require.
(c) If any advertisement to which this section
applies states the rate of a finance charge, the ad­
vertisement shall state the rate of th a t charge ex­
pressed as an annual percentage rate.
(d) I f any advertisement to which this section
applies states the am ount of the dow npaym ent, if
any, the am ount of any installment paym ent, the
dollar am ount of any finance charge, or the num ­
ber of installments or the period o f repayment,
then the advertisement shall state all of the fol­
lowing items:
(1) The cash price or the am ount of the loan
as applicable.
(2) T he dow npaym ent, if any.
(3) The num ber, am ount, and due dates or p e­
riod of paym ents scheduled to repay the indebt­
edness if the credit is extended.
(4) T he rate of the finance charge expressed as
an annual percentage rate.

§ 145. Nonliability o f media
There is no liability under this chapter on the
p art of any ow ner or personnel, as such, of any
medium in which an advertisement appears or
through which it is disseminated.

STATUTORY APPENDIX

§ 501

TITLE V — G ENER AL PROVISIONS
Sec.
501.
502.
503.
504.

• § 503. Grammatical usages
In this Act:
(1) T he word “m ay” is used to indicate that an
action either is authorized or is permitted.
(2) The word “shall” is used to indicate that
an action is both authorized and required.
(3) T he phrase “m ay n o t” is used to indicate
that an action is both unauthorized and forbid­
den.
(4) Rules of law are stated in the indicative
mood.

Severability.
Captions and catchlines for reference only.
G ram m atical usages.
Effective dates.

§ 501. Severability
If a provision enacted by this A ct is held in­
valid, all valid provisions that are severable from
the invalid provision rem ain in effect. If a provi­
sion enacted by this A ct is held invalid in one or
m ore of its applications, the provision remains in
effect in all valid applications th at are severable
from the invalid application or applications.

§ 504. Effective dates
(a) Except as otherwise specified, the provi­
sions of this A ct take effect upon enactment.
(b) Chapters 2 and 3 o f title I take effect on
July 1, 1969.
(c) Title III takes effect on July 1, 1970.

§ 502. Captions and catchlines for reference only
Captions and catchlines are intended solely as
aids to convenient reference, and no inference as
to the legislative intent with respect to any provi­
sion enacted by this A ct m ay be draw n from
them.

40

§ 226.101

REGULATION Z— INTERPRETATIONS

TRUTH IN LENDING
INTERPRETATIONS OF REGULATION Z

SECTION 226.1

SEC T IO N 226.101— U SE O F “A N N U A L
P E R C E N T A G E R A T E ” IN O R A L
C O M M U N IC A T IO N S

U nder § 226.1(a)(2), a stated purpose of the
T ru th in Lending Act and Regulation Z is to as­
sure that every custom er w ho has need for con­
sumer credit is given meaningful inform ation
with respect to the cost of that credit so that he
may readily com pare the various credit term s
available to him from different sources and avoid
the uninform ed use of credit. U nder § 226.6(a), a
creditor is required to m ake disclosures using cer­
tain prescribed terminology, including the “an ­
nual percentage rate.” T he question arises as to
the propriety of a creditor quoting annual rates
other than “annual percentage rate” in response
to consum er inquiries about the cost of credit,
where such other rates could not be used in an
advertisement under the proscriptions of § 226.10.
The T ru th in Lending A ct and Regulation Z
are intended to facilitate “shopping” between
competitive credit plans. If a custom er inquires
about the cost of credit and the creditor responds
by quoting an add-on or discount rate, he may
mislead the customer since the use of such rates
is prohibited in consum er credit advertising and
such rates are significantly lower than the annual
percentage rate which must be shown on the
creditor’s disclosure statement. T he quotation of
these rates can frustrate the stated purpose of the
A ct and prevent the custom er from making an
inform ed use of credit.
In response to any oral inquiry by a customer
about the cost of credit, a creditor when quoting
annual rates should use only those rates perm it­
ted to be used in advertisements under § 226.10.
Irrespective of the m ethod used by the creditor to
com pute finance charges, the annual rate of the
creditor’s total finance charges should be quoted
only in term s of the “annual percentage rate.”
6/29/73

SECTION 226.2
SEC T IO N 226.201— L A Y -A W A Y PLA N S AS
E X T E N S IO N S O F C R E D IT
M any vendors offer Lay-Away Plans under
which they retain the merchandise for a customer
until the cash price is paid in full and the cus­
tom er has no contractual obligation to m ake pay­
ments and may, at his option, revoke a purchase
m ade under the plan and request and receive
prom pt refund of any am ounts paid tow ard the
cash price of the merchandise.
A purchase under such a Lay-Away Plan shall
not be considered an extension of credit subject
to the provisions of Regulation Z.
5 /5 / 6 9

SEC T IO N 226.202— S E C U R IT Y IN T E R E S T —
C O N FESSIO N S O F JU D G M E N T —
C O G N O V IT N O TE S
U nder § 226.2(z) “security interest” is defined
to include confessed liens w hether o r not re­
corded and, in general, to include any interest in
property which secures paym ent or perform ance
of an obligation. In certain transactions involving
a security interest, under § 226.9 the customer
has a right of rescission.
In some o f the States, confession of judgm ent
clauses or cognovit provisions are lawful and
make it possible for the holder o f an obligation
containing such clause or provision to record a
lien on property of the obligor simply by recor­
dation entry of judgment; the obligor is afforded
no opportunity to enter a defense against such
action prior to entry of the judgment.
Since confession of judgm ent clauses and cog­
novit provisions in such States have the effect of
depriving the obligor o f the right to be notified of
a pending action and to enter a defense in a judi­
cial proceeding before judgm ent m ay be entered
or recorded against him, such clauses and provi­
sions in those States are security interests under
§ 226.2(z) and for the purposes o f § 226.7(a)(7),
§ 226.8(b)(5), and § 226.9. This is the case even
if the judgm ent cannot be entered until after a
default by the obligor.

§ 226.203

REGULATION Z— INTERPRETATIONS

Confession of judgm ent clauses and cognovit
provisions which, by their terms, exclude a lien
on all real property which is used o r is expected
to be used as the principal residence of the cus­
tomer, would not bring a transaction under the
provisions of § 226.9.
5 /2 6 /6 9

SEC T IO N 226.203— O P E N E N D C R E D IT
D IS T IN G U IS H E D F R O M O T H E R
C R E D IT
T he fundam ental qualification for “open end
credit” under § 226.2(r) is that consum er credit
be extended on an account pursuant to a plan
u nd er which (1) the creditor may perm it the cus­
tom er to make purchases or obtain loans from
time to time directly or indirectly from the credi­
tor, as the plan may provide; (2) the customer
has the privilege of paying the balance in full or
in instalments; and (3) a finance charge may be
com puted by the creditor from tim e to time on
an outstanding unpaid balance. U nder an open
end credit account plan, it is contemplated that
there will o r m ay be repetitive transactions on a
revolving basis.
In certain cases, a form of contract or note re­
lating to a single transaction provides that the
finance charge be com puted from time to time by
application of a rate to the unpaid balance and
stipulates required m inim um periodic payments.
However, the obligor has the privilege of making
larger and more frequent paym ents than stipu­
lated or paying the obligation in full at any time
w ithout penalty. T he question arises as to
w hether the creditor should m ake disclosures in
such circumstances under § 226.7 for open end
credit accounts or under § 226.8 for credit other
than open end.
Although the term s of such a contract or note
meet the second and third requirem ents for such
a plan, they do not m eet the first of such require­
ments n o r the basic qualification that consumer
credit be extended on an account pursuant to a
plan. Therefore, disclosures in this case are re­
quired to be m ade under § 226.8.
5 /2 6 /6 9

SECTION 226.3
S E C T IO N 2 2 6 .3 0 1 — A G R I C U L T U R A L
PURPO SES— W H E N E X E M P T FR O M
T H E R E G U L A T IO N
U nder § 226.3(a), the Regulation does not
apply to “Extensions of credit to organizations,
including governments, o r for business or com ­
mercial purposes, other than agricultural pu r­
poses.” The definition of “organization” in
§ 226.2(s) includes a corporation, trust, estate,
partnership, cooperative, o r association as well as
governmental entities. The question arises as to
w hether the Regulation applies to extensions of
credit to organizations, including governments,
for agricultural purposes.
Extensions of credit to organizations, including
governments, for agricultural purposes are ex­
empt from the Regulation.
5 /2 6 /6 9

SEC TIO N 226.302— C R E D IT F O R BUSINESS
O R C O M M E R C IA L P U R PO SES— M O R E
T H A N 4 F A M IL Y U N IT S
U nder § 226.3(a), extensions of credit for busi­
ness o r com mercial purposes, other th an agricul­
tural purposes, are not subject to Regulation Z.
The question arises as to whether an extension
of credit relating to a dwelling (as defined in
§ 226.2(p)) which contains m ore than 4 family
housing units is an extension of credit fo r business
or com mercial purposes.
Credit extended to an owner of a dwelling con­
taining m ore than 4 family housing units for the
purpose of acquiring, financing, refinancing, im­
proving, or maintaining th at dwelling is an exten­
sion of credit for business or com mercial p u r­
poses.
1 /2 8 /7 0
SECTION 226.4
SEC T IO N 226.401— SER V IC E C H A R G E S ON
A C C O U N T S N O T P A ID W IT H IN A G IV E N
P E R IO D O F T IM E
Some vendors bill their customers for property
or services purchased under the term s of a credit
plan which requires that the full am o un t of each
billing be paid w ithin a stipulated period after

§ 226.402

REGULATION Z— INTERPRETATIONS

billing, with no privilege o f paying in instalments.
If a bill is not paid within that stipulated period
of time, the vendor imposes a service charge pe­
riodically on the unpaid balance until the account
is paid in full. T he question arises as to whether
Regulation Z applies to such transactions.
W hen in the ordinary course o f business a ven­
d or’s billings are not paid in full within th at stip­
ulated period of time, and under such circum ­
stances the vendor does not, in fact, regard such
accounts in default, but continues or will con­
tinue to extend credit and imposes charges pe­
riodically for delaying paym ent of such accounts
from time to time until paid, the charge so im­
posed comes within the definitions of a “finance
charge” (§ 226.2 ( q ) ) applicable in each case to
the am ount of the unpaid balance of the account.
U nder such circumstances the credit so extended
comes w ithin the “open end credit” in § 226.2(r),
the vendor is a creditor as defined in § 226.2(m),
and the disclosures required for open end credit
accounts under § 226.7 shall be made.
4 /2 2 /6 9
SEC T IO N 226.402— T E R M O F IN S U R A N C E
COVERAGE
U nd er § 226.4(a)(5) and (6) certain disclosures
of insurance prem ium costs, if applicable, are re­
quired. T he question arises as to w hether such
am ounts of cost disclosed m ust include the cost
of insurance for the full term of the transaction.
U nd er § 226.4(h) the cost of insurance for the
full period of insurance coverage w hich the credi­
tor will require shall be disclosed if the cost of
the insurance prem ium is required to be included
in the finance charge. However, if the cost of in­
surance is not required to be included in the
finance charge, the cost to be disclosed need only
be the cost of prem ium s for the term of the ini­
tial policy or policies written in connection with
the transaction, accom panied by a statement of
the type of insurance and the term thereof.
5 /5 / 6 9
SEC T IO N 226.403— D ISC L O SU R E O F COST
O F P R O P E R T Y IN S U R A N C E W H E N
N O T O B T A IN A B L E F R O M O R
T H R O U G H T H E C R E D IT O R
In m any cases a creditor requires insurance

against loss o r dam age to property or liability
arising out of its use but such insurance is not
obtainable from o r through him. T he question
arises under § 226.4(a)(6) as to w hether such a
creditor must m ake any disclosures to avoid hav­
ing to include the insurance prem ium in the
finance charge.
Irrespective of w hether such insurance m ay be
obtained from o r through the creditor, if the
creditor requires property insurance and wishes
to exclude the cost from the finance charge, he is
required to state clearly and conspicuously to the
customer that he m ay choose the person through
which the insurance is to be obtained. However,
if the insurance is not obtainable from or
through the creditor, he is not required to dis­
close the cost of th at insurance, unless, of course,
the prem ium s are included in the “am ount
financed,” in w hich case it would have to be dis­
closed u n der § 226.8(c)(4) or (d)(1), as the case
m ay be.
5 /2 6 /6 9
SEC T IO N 226.404— P R E M IU M S F O R
V E N D O R ’S S IN G L E IN T E R E S T
IN S U R A N C E R E Q U IR E D
BY C R E D IT O R
T he question arises w hether charges or prem i­
ums for single interest insurance (Vendor’s Single
Interest Insurance) written in connection with a
credit transaction m ay be excluded from the
finance charge under § 226.4(a)(6) if the insurer
waives subrogation.
If the insurer waives all right of subrogation
against the custom er in a single interest policy of
insurance against loss o f or dam age to property
(which m ay include coverage for skip, conceal­
ment, conversion, and embezzlement) w ritten in
connection with a credit transaction, and the
creditor complies with the requirem ents of
§ 226.4(a)(6), charges or prem ium s for such insur­
ance may be excluded from the am ount of the
finance charge on th at transaction. However, if
the insurer does not so waive subrogation in such
policy of insurance, the charges or prem ium s
shall be included in the finance charge.
1 /2 8 /7 0 (Supersedes
issued 8 /1 / 6 9 )

interpretation

§ 226.404

§ 226.405

SEC T IO N 226.405— P R O P E R T Y IN S U R A N C E
W R IT T E N IN C O N N E C T IO N W IT H A
T R A N S A C T IO N — O B T A IN E D FR O M
OR T H R O U G H T H E C R E D IT O R
Footnote 4 to § 226.4(a)(6) specifies that a pol­
icy of insurance against loss or dam age to pro p­
erty or liability arising out of its use is not con­
sidered to be “w ritten in connection with” a
transaction w hen it “ . . . was not purchased by
the custom er for the purpose of being used in
connection with th at extension of credit.” T here­
fore, whenever such a policy is purchased by the
custom er for the purpose of being used in
connection with a specific extension of credit, it
is insurance “written in connection w ith” that
transaction.
If the custom er elects to purchase such insur­
ance otherwise than from or through the creditor,
the creditor is not required to disclose the cost of
the insurance or include the prem ium in the
finance charge. However, if the cost of such in­
surance is to be financed through the creditor,
the premiums must be included in the “am ount
financed” and disclosed under § 226.8(c)(4) or
(d)(1), as the case m ay be.
9 /1 1 /6 9
SEC T IO N 226.406— SE L L E R ’S P O IN T S A N D
D IS C O U N TS U N D E R R E G U L A T IO N Z
Section 226.4(a) o f Regulation Z includes in
the finance charge any charge “payable directly
or indirectly by the customer, and imposed di­
rectly or indirectly by the creditor as an inci­
dent to or as a condition of the extension of
credit. . . .” T he question arises as to the proper
treatm ent of discounts paid by the seller, includ­
ing points imposed on the seller by the lender in
connection with a real estate transaction.
U nder the general rule in § 226.4(a), any such
discount, to the extent it is passed on to the
buyer through an increase in the selling price,
m ust be included in the finance charge. However,
as a practical matter, it m ay be difficult to deter­
mine w hether or not a discount paid by the seller
in connection with a real estate transaction has
been, in fact, passed along to the custom er as a
part of the purchase price of the property. The
same situation m ay exist in other cases, for ex­
ample, those in which the creditor sells at a dis­

REGULATION Z— INTERPRETATIONS

count obligations payable in m ore than four in­
stalments.
The Board has concluded that in any such
transaction coming within its administrative en­
forcement authority, w here seller’s points o r dis­
counts were, in fact, passed along to the cus­
tom er o r buyer and the am ount thereof was not
disclosed as a finance charge, the Board will take
such action as may be appropriate in the circum ­
stances. However, it will not attem pt to prescribe
rules creating a presum ption that all discounts or
points are passed on to the custom er or buyer
and hence must be included in the finance charge
in any particular class of transaction. O n the
other hand, the inclusion of seller’s points or dis­
counts in the finance charge will be acceptable to
the Board as a correct disclosure under Regula­
tion Z.
This position relates only to the Board’s adm in­
istrative enforcem ent procedures and it is not
intended in any way to restrict or prejudice the
rights of any customer or buyer to bring an ac­
tion under sections 130 and 131 of the Act
w here he has reason to believe he is or was re­
quired to pay directly or indirectly a finance
charge imposed directly or indirectly by the cred­
itor of the transaction and the am ount of that
finance charge was not disclosed to him.
1 0 /2 3 /7 0
SEC T IO N 226.407— C H A R G E S F O R
M E M B E R SH IP IN O P E N E N D
C R E D IT P L A N
A credit card issuer charges the cardholder an
annual fee for membership in the credit plan and
for issuance of a credit card for use in conjunc­
tion with the plan. The paym ent of the fee is re­
quired as a condition of membership in the plan,
w hether o r not the cardholder uses his card for
the purpose of obtaining credit. T he question
arises w hether these fees are finance charges
under § 226.4(a) of Regulation Z.
Since such fees are imposed as a qualification
of membership in the plan and for the issuance
of a credit card, and not as incident to or as a
condition of any specific extension of credit, they
do not fall within the definition o f a “finance
charge” under § 226.4(a) of Regulation Z.
8 /1 2 / 7 1

REGULATION Z— INTERPRETATIONS

SECTION 226.5
SEC TIO N 226.501— U SE O F R A N G E S OR
B R A C K E TS T O D E T E R M IN E P E R IO D IC
R A T E O F F IN A N C E C H A R G E ON
OPEN EN D ACCOUNTS
Section 226.5(a)(1) of Regulation Z, in effect,
gives a creditor the option in certain circum ­
stances of stating (1) two or more separate an­
nual percentage rates (e.g., the rate on a $700
balance might be stated as 18% on balance to
$500 and 12% on balance over $500), or (2) a
single annual percentage rate determined by the
“quotient m ethod” resulting from applying the
rates to a total balance (e.g., in the example
above, an annual percentage rate of 16V4 % on a
$700 balance).
Section 226.5(a)(2), which relates to the use of
ranges or brackets to com pute periodic finance
charges, does not prevent a creditor w ho uses
such brackets from exercising the options re­
ferred to in § 226.5(a)(1).
4 /2 /6 9
SEC TIO N 226.502— A N N U A L P E R C E N T A G E
R A T E O N S IN G L E A D D -O N R A T E
T R A N SA C T IO N S
T he application of a single add-on rate to
transactions of varying maturities, when converted
to an annual percentage rate determined by the
actuarial method, results in m inor variations.
Such annual percentage rate variations on m atur­
ities up to 60 months are so insignificant that sep­
arate com putations are unwarranted.
T he question arises as to whether a creditor
m ay disclose a single annual percentage rate on
all such transactions based upon the highest rate
w hich will arise from the application of the same
single add-on rate to each of such transactions.
W hen the same add-on rate is applied to all
transactions within a range o f maturities up to 60
months, and provided that all paym ents on each
transaction are equal in am ount and due at equal
intervals o f time within the limits provided by
§ 226.5(d), a single annual percentage rate m ay be
disclosed in which case it shall be the highest a n ­
nual percentage rate th at may be applicable to
any such transactions.
5 /2 6 /6 9

§ 226.501

SEC T IO N 226.503— M IN O R IR R E G U ­
L A R ITIE S — M A X IM U M IR R E G U L A R
P E R IO D L IM ITS
Section 226.5(d) specifies certain minimums in
determining what m inor irregularities in first pay­
m ent periods may be disregarded in determining
the annual percentage rate. The question arises as
to what m axim um limits for such periods would
still perm it the irregular periods to be considered
regular in computing the annual percentage rate.
If the period from the date on which the
finance charge begins to accrue and the date the
final paym ent is due is not less than three months
in the case of weekly payments, six months in
the case of biweekly or semimonthly payments,
or one year in the case of monthly payments, the
m axim um interval of time from the date the
finance charge begins to accrue to the date the
first paym ent is due is as follows:
(1) in the case of weekly payments, 12 days;
(2) in the case of biweekly or semimonthly pay­
ments, 25 days;
(3) in the case o f monthly payments, 50 days.
If the period from the date on which the
finance charge begins to accrue and the date the
final paym ent is due is less than three months in
the case o f weekly payments, six months in the
case of biweekly or semimonthly payments, or
one year in the case of monthly payments, the
m axim um interval o f time from the date the
finance charge begins to accrue to the date the
first paym ent is due is as follows:
(1) in the case of weekly payments, 10 days;
(2) in the case of biweekly or semimonthly pay­
ments, 21 days;
(3) in the case o f monthly payments, 42 days.
6 /1 0 /6 9
SEC T IO N 226.504— T R E A T M E N T O F
“PIC K -U P P A Y M E N T ” IN A N
IN S T A L M E N T C O N T R A C T
In some instances involving an instalment
contract arising from a credit sale, the purchaser
may not pay the full am ount of the required
dow npaym ent at the time he signs the contract or
otherwise enters into the credit transaction. In
such cases, the creditor m ay include in the instal­
m ent contract or accept a separate obligation for
the unpaid portion of the downpayment, com ­

§ 206.505

monly called a “pick-up paym ent,” the am ount
of which usually carries no finance charge and is
to be paid on or before a specified date inde­
pendent of the other scheduled payments.
T he question arises whether the “pick-up pay­
m ent” m ust be treated as part of the “am ount
financed” for purposes of disclosure and determ i­
nation o f the “annual percentage rate” or
w hether it m ay be treated as a deferred portion
o f the downpayment.
In determining the “am ount financed” the
creditor m ay exclude the am ount o f the “pick-up
p aym ent” provided that:
(1) The am ount of the finance charge applica­
ble to the transaction does not exceed the am ount
that would have been imposed had the required
dow npaym ent been paid in full upon consum m a­
tion o f the transaction; and
(2) T he due date o f the “pick-up paym ent” is
n ot later than the due date of the second pay­
m ent otherwise scheduled.
In m aking the disclosures required under
§ 226.8(b)(3), if such “pick-up paym ent” is more
than twice the am ount of an otherwise regularly
scheduled equal paym ent, the creditor siiall state
the conditions, if any, under which such “pick-up
paym ent” m ay be refinanced if not paid when
due; and such “pick-up paym ent” m ay be identi­
fied using th at term o r the term “balloon p ay­
m ent.”
9 /1 1 /6 9
S EC TIO N 226.505— A P P L IC A T IO N O F T H E
M IN O R IR R E G U L A R IT IE S PRO VISIO N S
IN D E T E R M IN IN G T H E A M O U N T
O F T H E F IN A N C E C H A R G E
Some creditors calculate finance charges in a
credit transaction on the basis of predetermined
percentage rate o r rates, e.g., 1 % p er m onth on
the unpaid balances. D eterm ination of the
am ount of the finance charge is fairly routine for
these creditors if the contracts are w ritten for
regular paym ents at regular intervals. However,
m any times the first paym ent m ay be irregular ei­
ther in am ount or paym ent period, or both, espe­
cially in those instances w here creditors require
paym ents to fall due on fixed dates or those who
are paid by means of payroll deductions. The
m inor irregularities provisions of § 226.5(d) of the
Regulation and § 226.503 of the interpretations to

REGULATION Z— INTERPRETATIONS

Regulation Z, which pertain to the determination
of the annual percentage rate, also apply to the
determ ination of the finance charge. F o r con­
venient reference, the applicable provisions of
§ 226.5(d) and § 226.503 as they apply to the
determination of the finance charge are set forth
below.
In determining the finance charge, a creditor
may, at his option, consider the paym ent irregu­
larities set forth below in subparagraphs (1) and
(2) and if they were regular in am ount or time,
as applicable, provided th at the transaction to
which they relate is otherwise payable in equal
instalments scheduled at equal intervals.
(1) If the period from the date on which the
finance charge begins to accrue and the date the
final paym ent is due is not less than 3 months in
the case of weekly payments, 6 months in the
case o f biweekly or semimonthly payments, or 1
year in the case of m onthly payments, either or
both of the following:
(1) T he am ount of 1 paym ent other than any
dow npaym ent is not more than 50 per cent
greater nor 50 per cent less than the am ount of a
regular paym ent; or
(ii)
The interval between the date on which the
finance charge begins to accrue and the date the
first paym ent is due is not less than 5 no r more
than 12 days for an obligation otherwise payable
in weekly instalments, not less than 10 n o r m ore
than 25 days for an obligation otherwise payable
in biweekly or semimonthly instalments, or not
less than 20 nor m ore than 50 days for an obli­
gation otherwise payable in m onthly instalments.
(2) If the period from the date on which the
finance charge begins to accrue and the date the
final paym ent is due is less than 3 months in the
case of weekly payments, 6 months in the case of
biweekly o r semimonthly payments, or 1 year in
the case of m onthly payments, either or both of
the following:
(i) The am ount of 1 paym ent other than any
downpayment is not m ore than 25 per cent
greater nor 25 per cent less than the am ount of a
regular payment; or
(ii) The interval between
the finance charge begins to
the first paym ent is due is
more than 10 days for an

the date on which
accrue and the date
not less than 6 nor
obligation otherwise

REGULATION Z— INTERPRETATIONS

payable in weekly instalments, not less than 12
n or m ore than 21 days for an obligation other­
wise payable in biweekly or semimonthly instal­
ments, or not less than 25 no r m ore than 42 days
for an obligation otherwise payable in monthly
instalments.
F or the purposes of § 226.8(b)(3) in disclosing
the num ber, am ount and due dates or periods of
paym ents scheduled to repay the indebtedness
and the “total of paym ents,” the creditor may
treat such irregular paym ents or paym ent periods,
or both, as if they were regular. If the creditor so
elects, he may indicate the exact am ount of pay­
m ent period involved in the m inor irregularity.
9 /1 1 /6 9

S EC T IO N 226.506— D A IL Y P E R IO D IC
RA T E ;

C O M P U T A T IO N

OF THE

A N N U A L P E R C E N T A G E RA T E
U nder §§ 226.5(a)(l)(ii), (3)(i), and (3)(ii), the
quotient used in com puting the annual percentage
rate in open end credit accounts m ust be multi­
plied “by the num ber of billing cycles in a year” .
T he question arises as to the method which
should be used to com pute the annual percentage
rate under those sections where a daily periodic
rate or rates is used.
In any open end credit account to which the
provisions of §§ 226.5(a)(l)(ii) or 226.5(a)(3)(i)
apply, where all or a portion of the finance
charge is determined by the application of one or
m ore daily periodic rates, the annual percentage
rate may be determined (1) by dividing the total
finance charge by the average of daily balances
and multiplying the quotient by the num ber of
billing cycles in a year, or alternatively (2) by di­
viding the total finance charge by the sum of the
daily balances and multiplying the quotient by
365.

§ 226.506

SECTION 226.6
SEC T IO N 226.601— O V E R S T A T E M E N T
A N N U A L PER CEN TA G E RATE

OF

Section 226.6(h) of Regulation Z provides that
in certain circumstances the disclosure of an an ­
nual percentage rate which is greater than that
required to be disclosed under the Regulation
does not in itself constitute a violation of the Reg­
ulation. U nder this section may a disclosure re­
garding an annual percentage rate (e.g., “the an­
nual percentage rate does not exceed 1 8 % ”) be
preprinted on a contract or periodic statement and
com ply with disclosure requirem ents when the ac­
tual rate will at times be lower (e.g., 15% ) for
some transactions?
Section 226.5 specifies the methods which shall
be employed in determ ining annual percentage
rates. Section 226.6(h) is not intended to provide
an alternative to these requirements, but is
merely to provide appropriate relief to a creditor
who overstates accidentally. A ny disclosure of an
annual percentage rate whether preprinted or oth­
erwise which overstates the annual percentage
rate determined in accordance with § 226.5
o ther than through inadvertence does not comply
with requirements.
4 /2 /6 9

SEC T IO N 226.602— (Rescinded effective 3 /1 /7 4 )
SEC T IO N 226.603— D ISCLO SU R ES IN
TRANSACTION

INVOLVING

M U L T IP L E CU ST O M E R S

In any open end credit account to which the
provisions of § 226.5(a)(3)(ii) apply, where a por­
tion of the finance charge is determined by appli­
cation of one o r more daily periodic rates, the
phrase “sum of the balances” in footnote 5a shall
also m ean the “average of daily balances”.

Section 226.6(e) states the general rule that, ex­
cept in the case of a rescindable transaction
under § 226.9, w here there are multiple customers
in a transaction, the creditor is only required to
make disclosures to one o f them. However, in
determining which customer shall receive disclo­
sures, the creditor m ay not select a custom er who
is secondarily liable, such as an endorser, co­
m aker (when designated as surety), guarantor, or
a similar party. This does not prohibit the credi­
tor from also furnishing disclosures to such per­
sons who are secondarily liable.

6/1/73

4/2/69

§ 226.604

SEC TIO N

REGULATION Z— INTERPRETATIONS

226.604— IN C O N S IS T E N T
R E Q U IR E M E N T S

STA TE

Section 226.6(b) of Regulation Z indicates
types of State law requirem ents that are inconsist­
ent with Regulation Z, and § 226.6(c) indicates
the methods of dealing with such inconsistent re­
quirements of State law.
W hether State laws are inconsistent with R egu­
lation Z necessarily depends on the nature of the
State laws. Section 226.6(b)(1) provides that State
law is inconsistent to the extent that it “requires
a creditor to make disclosures different from the
requirements of this Part with respect to form,
content, terminology, or time of delivery.” This
refers to disclosures of the kinds of information
covered by Regulation Z, and not to other or col­
lateral inform ation such as a statement telling the
customer that he should read the contract care­
fully, or that there should be no blanks in the
contract. Similarly, it does not refer to headings
that State law may require on a contract such as
“Retail Installment C ontract.” Similarly, a specifi­
cation in a State law that certain size type must
be used is not necessarily inconsistent with the
requirem ents of Regulation Z.
4 /2 2 /6 9

SEC T IO N 226.605— (Rescinded effective 3 /1 /7 4 )
SECTION 226.7
SEC TIO N 226.701— P E R IO D IC S TA T E M E N TS
— F IN A N C E C H A R G E R E S U L T IN G
FROM M ORE TH A N ONE
PE R IO D IC R A T E
Section 226.7(b)(4) of Regulation Z requires
that a periodic statem ent for open end credit
show the am ount of any finance charge, and that
the statement also itemize and identify that por­
tion of the finance charge that is due to applica­
tion of one or m ore periodic rates and that po r­
tion due to any other charge such as minimum,
fixed, check service, transaction, activity, or simi­
lar charge.
This does not require the statement to state
separately the portions of a finance charge due to
application of two or m ore periodic rates. F or
example, if a creditor charges V A % per month

on the first $500 of a balance and 1 % per m onth
on am ounts over $500, the m onthly charge on a
$600 balance would be $8.50, which must be
shown. However, it would not be necessary to
itemize the two com ponents ($7.50 and $1.00) of
the $8.50 charge. U nder § 226.7(b)(5), the p e­
riodic rates that may apply to the account, and
the applicable range of balances must, o f course,
be shown, but this could be preprinted.
4 /2 /6 9
SEC TIO N 226.702 is incorporated into section
226.7(c) effective June 1, 1973, and is revoked
effective that date.
SEC T IO N 226.703— F IN A N C E C H A R G E
BASED O N A V E R A G E D A IL Y
B A L A N C E IN O P E N E N D
C R E D IT A C C O U N T S
Section 226.7(b)(8) requires that periodic state­
ments for open end accounts shall disclose,
among other things, “The balance on which the
finance charge was computed, and a statement of
how th at balance was determ ined.” In some in­
stances, creditors com pute a finance charge on
the average daily balance by application of a
m onthly periodic rate. In such case, this inform a­
tion is adequately disclosed if the statem ent gives
the am ount of the average daily balance on
which the finance charge was computed, and also
states how the balance is determined. In other in­
stances, the finance charge is com puted on the
balance each day by application of a daily pe­
riodic rate and such charges are accum ulated and
debited to the account in a single am ount for the
billing cycle. The question arises w hether th e p e­
riodic statement m ust show for each day of the
billing cycle a balance on which a finance charge
was computed.
If a daily periodic rate is used, the balance to
which it is applicable shall be stated as follows:
(1) A balance for each day in the billing cycle;
or
(2) A balance for each day in the billing cycle
on which the balance in the account changes; or
(3) The sum of the daily balances during the
billing cycle; or
(4) The average daily balance during the bill­
ing cycle in which case the creditor shall state on
the face of the periodic statement, its reverse

REGULATION Z— INTERPRETATIONS

side, or on an enclosed supplement wording to
the effect th at the average daily balance is or can
be multiplied by the num ber of days in the bill­
ing cycle and the periodic rate applied to the
product to determine the am ount of the finance
charge.
6 /2 1 /7 2 (Supersedes
issued 5 / 5 / 6 9 )

interpretation

§ 226.703

SEC TIO N 226.704 is incorporated into section
226.5(a)(3) effective June 1, 1973, and is revoked
effective that date.

SEC T IO N 226.705— O P E N E N D C R E D IT —
C H A N G E IN T H E M E T H O D O F
D E T E R M IN IN G T H E B A L A N C E ON
W H IC H F IN A N C E C H A R G E S
ARE COM PUTED
T h e creditor of an open end credit account
plan desires to change his m ethod of determining
the balance on which finance charges are com ­
puted from a m ethod in which paym ents and
credits made during the billing cycle are not de­
ducted in determining such balance to a m ethod
in which such paym ents and credits are deducted
in determining such balance. This change results
in a reduction in finance charges to the customer,
where full paym ent of the account is deferred.
T he question arises w hether notice of such
change is required to be sent to customers of
open end credit accounts under § 226.7(e), since
that section also provides that prior notice is not
required if the only change is a reduction in ihe
“periodic rate o r rates, or in any minimum, fixed,
check service, transaction, activity, or similar
charge applicable to the account.”
W here a creditor changes his m ethod of deter­
mining the balance on which finance charges are
com puted from a m ethod in which payments and
credits m ade during th e billing cycle are not de­
ducted in determ ining such balance, to a method
in which such payments and credits are deducted
in determining such balance, § 226.7(e) requires
no prior notice of such charge in terms, provided
no other changes in terms applicable to the ac­
count are made simultaneously which would re­
quire § 226.7(e) notification.
7/29/71

§ 226.705

SEC T IO N 226.706— O P E N E N D C R E D IT —
A L L O C A T IO N O F P A Y M E N T S
Section 226.7(a)(2) provides th at before the
first transaction is m ade on any open end credit
account, the creditor m ust disclose “the method
of determ ining the balance upon which a finance
charge may be imposed.” Section 226.7(b)(8) re­
quires the creditor to disclose on the periodic
statement “the balance on which the finance
charge was com puted, and a statement of how
that balance was determ ined.” T he question is
raised w hether these provisions require a creditor
to provide a description of the m anner in which
payments o r other credits are applied to various
portions of the balance or balances on which
finance charges are computed.
In disclosing the method of determining the
balance(s) upon which finance charges are com­
puted, it is not necessary to show the m ethod of
allocating paym ents or other credits. F o r exam­
ple, explanation of the m anner in w hich pay­
ments or credits m ay be applied to late charges,
overdue balances, finance charges, insurance pre­
miums or other portions of balances is not re­
quired. Similarly, explanation of the method of
allocating such paym ents between cash advance
and purchase portions of the account is not re­
quired. Such explanations in m any cases involve
lengthy and com plex descriptions which m ay un­
duly complicate disclosures.
Explanation of the allocation m ethod m ay be
m ade by creditors where it can be done in con­
formity with § 226.6(c) which authorizes addi­
tional inform ation or explanations as long as they
are not stated, utilized, o r placed so as to mislead
or confuse the custom er or contradict, obscure,
or detract attention from the required disclosures.
6 /2 1 /7 2

SEC T IO N 226.707— D ISCLO SU R ES—
V A R IA B L E P E R IO D IC RA TES
U nder the term s of some open end credit plans
the periodic rates of finance charges and corre­
sponding annual percentage rates are tied to a
fluctuating base rate, for example, the “prim e
rate.” Consequently, both the periodic rates and
annual percentage rates m ay change from time to
time with changes in the base rate. T he question
arises as to the proper disclosure, if any, which

§ 226.801

REGULATION Z— INTERPRETATIONS

should be made under § 226.7(a)(4), § 226.7(b)(5),
§ 226.7(b)(6), § 226.7(e) and § 226.10(c)(4) in
connection with such plans.
W here any creditor’s open end credit plan pro­
vides that the account is subject to variations in
any periodic rate of finance charge, the creditor
need not comply with § 226.7(e) with respect to
any prospective change in any periodic rate or
corresponding annual percentage rate applicable
to the account, provided that in connection with
the disclosures m ade pursuant to paragraph
226.7(a)(4) the creditor has disclosed that such
rates are subject to change, the conditions under
which such rates m ay be changed, and, if appli­
cable, the m axim um and m inim um limits of such
rates. T he requirem ents of § 226.7(b)(5) and
§ 226.10(c)(4) may be complied with by similarly
disclosing the method of com puting the periodic
or annual percentage rates which are subject to
variation. In disclosing an annual percentage rate
or rates u nd er §226.7(b)(6) where there have
been variations during the billing cycle, the
com putations as specified in § 226.5(a)(l)(ii),
§ 2 2 6 .5 ( a ) ( 2 ) , § 2 2 6.5 (a) (3) (i) o r § 2 2 6.5 (a)
(3 ) ( i i ) , as applicable, should be used.
1 1 /2 /7 2

SECTION 226.8
SEC T IO N 226.801— L O C A T IO N O F D IS­
CLO SUR ES W H E N C O N T R A C T , SE­
C U R IT Y A G R E E M E N T , A N D E V I­
D E N C E O F T R A N SA C T IO N A R E
C O M B IN E D IN A S IN G L E
DOCUM ENT
Some creditors incorporate the term s of a con­
tract, a security agreement, and evidence of a
transaction in a single document. These docu­
ments are designed for processing by mechanical
and electronic equipment. If all of the required
disclosures under § 226.8 should be placed on the
face of such a docum ent, the creditor will be un­
able to utilize conventional accounting and record
keeping equipm ent because of the size of the re­
sulting document. T he question arises as to
whether required disclosures m ay be m ade on the
face and the reverse side of such a document.
W here a creditor elects to com bine disclosures
with the contract, security agreement, and evi­

dence of a transaction in a single document, the
disclosures required under § 226.8 shall, in ac­
cordance with § 226.6, be m ade on the face of
that document, on its reverse side, or on both
sides, provided that the am ount of the finance
charge and the annual percentage rate shall ap­
pear on the face of the document, and, if the re­
verse side is used, the printing on both sides of
the docum ent shall be equally clear and conspicu­
ous, both sides shall contain the statement, “N O ­
TIC E : See other side for im portant inform ation,”
and the place for the custom er’s signature shall
be provided following the full content of the doc­
ument.
4 /2 2 /6 9

SEC T IO N 226.802— D ISCLO SU RES ON M A IL
O R TELEPH O N E ORDERS
U nd er § 226.8(g), disclosures may be m ade at
any time not later than the date the first paym ent
is due under certain conditions. T he question
arises as to when disclosures shall be made on
mail or telephone orders w here the inform ation
outlined in § 226.8(g)(1) and (2) is not available
to the custom er or prospective customer.
U nder the circumstances set forth in the above
question, the creditor shall make the disclosures
required under Regulation Z as follows:
1. W ith respect to credit sales, not later than at
the time o f delivery of the property or first
perform ance of service ordered.
2. W ith respect to loans, not later than at the
time proceeds of the loan are disbursed.
3. Except that if the transaction is subject to the
provisions of § 226.9, the disclosures shall be
made before the transaction is consummated.
5 /5 / 6 9

SEC TIO N 226.803— D ISCLO SU R ES W H E N
D ISC O U N TS A PP L Y F O R P R O M P T
PAYMENT
U nder § 226.8(o), disclosures shall be made on
the billing statem ent whereas under § 226.8(a)
disclosures shall be made before the transaction
is consummated. The question arises as to which
provision prevails.
T he provisions of § 226.8(o) prevail under the
conditions set forth in that paragraph unless the

REGULATION Z— INTERPRETATIONS

transaction is also subject to the provisions of
§ 226.9 in which event the disclosures shall be
m ade before the transaction is consummated.
5 /5 / 6 9
SEC T IO N 226.804— SERIES O F S A L E S CONTENT OF AGREEM ENT
U n d er § 226.8(h), if a credit sale is one o f a
series of transactions m ade under an agreement
providing for the addition of a current sale to an
existing outstanding balance and the customer has
approved in writing the annual percentage rate or
rates and certain other requirem ents are met, dis­
closures may be m ade at any time not later than
the date the first paym ent for that sale is due.
T he question arises as to how the annual per­
centage rate or rates should be shown in an agree­
m ent where, for example, an 18% annual per­
centage rate applies to the first $500 of balance, a
12% annual percentage rate applies to all balances
over $500, and the mix of the two rates on trans­
actions over $500 will produce a gradually de­
creasing annual percentage rate as the am ount
of balance over $500 increases.
In addition to meeting the oth er requirem ents of
§ 226.8(h), if two or m ore annual percentage rates
apply to ranges o f balances, the agreem ent need
only state each annual percentage rate and the
range of balances to which it applies. However, the
disclosures which must be m ade not later th a n the
date the first paym ent is due must include the
actual annual percentage rate applicable to that
sale.
5 /5 / 6 9
SEC T IO N 226.805— SER IES O F SALES AS
D IS T IN G U IS H E D F R O M R E F IN A N C IN G ,
C O N SO L ID A T IN G , OR IN C R E A S IN G
T he question arises as to the distinction be­
tween the provisions o f § 226.8(h), series of sales,
and the provisions of § 226.8(j), refinancing, con­
solidating, or increasing.
Section 226.8(h) is applicable only when a
credit sale is made pursuant to an agreement which
provides for the addition of a current (or new)
sale to an existing outstanding balance. In such
cases, and provided that all of the requirem ents
of § 226.8(h)(1) and (2) are met, the disclosures
m ay be m ade at any time not later than the date
the first paym ent for that sale is due.

§ 226.804

If there is no agreement, o r if the agreement
does not m eet all of the requirem ents of § 226.8
(h), the disclosures required in connection with
any subsequent sale, which is added to a previ­
ously outstanding balance shall be m ade u nd er the
provisions o f § 226.8(j). F o r example, the fact
that an agreement provides a m ethod o f computing
an unearned portion of the finance charge in the
event of prepayment, but does not otherwise meet
the requirem ents of § '226.8(h), will not qualify
transactions made pursuant to that agreement for
disclosure under the term s § 226.8(h).
5 /2 6 /6 9

S EC T IO N 226.806— D E PO SIT BA LA N CES
A P P L IE D T O W A R D SA T ISF A C T IO N
O F C U S T O M E R ’S O B L IG A T IO N
Section 226.8(e)(2) provides that required de­
posit balances m ust be deducted under § 226.8(c)
(6) and excluded under § 226.8(d)(1) in deter­
mining the am ount financed. Subdivision (ii) of
§ 226.8(e)(2) provides an exception in the case
of M orris Plan type transactions in which pay­
ments in the transaction are m ade and accum u­
lated in a deposit account which is then wholly
applied to satisfy the obligation.
Unless the deposit balance account is created
for the sole purpose of accum ulating payments
and then being applied tow ard satisfaction of the
custom er’s obligation in the transaction, such de­
posit balance does not fall within the exception
provided in subdivision (ii).
In any case in which a deposit balance quali­
fies for this exception, each deposit m ade into the
account shall be considered the same as a pay­
m ent on the obligation for the purpose of com pu­
tations and disclosures.
5 /2 6 /6 9
SEC T IO N 226.807— A SSU M PT IO N O F A N
O B L IG A T IO N — D ISCLO SU R ES
T he question arises as to which disclosures are
required to be m ade under § 226.8 ( k ).
F o r the purposes of § 226.8(k), an “assump­
tion” occurs only when, by written agreement
entered into between a subsequent custom er and
the creditor, that subsequent custom er is or will
be accepted by that creditor as an obligor on

§ 226.808

an existing evidence of debt. In such circum ­
stances, disclosures shall be made as follows:
(1) If the finance charge originally imposed on
the existing evidence of debt was an add-on or
discount type finance charge, the creditor need
only disclose:
(1) T he unpaid balance of the obligation as­
sumed;
(ii) T he total am ount of the charges imposed
by the creditor, individually itemized, in connec­
tion with the assumption;
(iii) T he num ber, am ount, and due dates of re­
m aining payments to be made after assumption,
the total of such payments, and any other appli­
cable inform ation required under § 226.8(b)(3);
(iv) Identification of the type of security inter­
est, if any, retained or to be acquired in any
property of the assuming customer and a brief
identification of that property;
(v) The inform ation required to be disclosed
under § 226.8(b)(4), (6) and (7);
(vi) If applicable in connection with the assump­
tion, the disclosures required under § 226.4(a)(5)
and (6); and
(vii) If that obligation was entered into on or
after July 1, 1969, the annual percentage rate
originally disclosed on the existing obligation.
(2) If the existing evidence of debt is subject
to a finance charge com puted from time to time
by application of a percentage rate to an unpaid
balance, the creditor shall m ake the disclosures
required under § 226.8(b) and (d), and, if applica­
ble in connection with the assumption, the disclo­
sures required under § 226.4(a)(5) and (6), ex­
cept that in determining the am ount of the
finance charge and the annual percentage rate to
be disclosed to the custom er who assumes the ob­
ligation, the creditor m ay disregard any prepaid
finance charges paid by the original customer, but
shall include in the finance charge as a “prepaid
finance charge” the total am ount of the charges
imposed by the creditor, individually itemized, in
connection with the assumption.
6 /1 0 /6 9
SEC T IO N 226.808— D ISC L O SU R E OF
A M O UN T OF SCHEDULED
PAYM ENTS
Section 226.8(b)(3) requires the creditor to dis­
close the “am ount . . . of paym ents scheduled to

REGULATION Z— INTERPRETATIONS

repay the indebtedness.” In certain transactions
each paym ent consists of an equal am ount to
apply on principal and a finance charge which is
determined by application of a rate to the de­
creasing unpaid balance. In such cases no two
paym ents are equal in am ount. The question
arises as to whether it is necessary to list the re­
spective dollar am ount of each such paym ent to
comply with this requirem ent of § 226.8(b)(3),or
w hether an optional disclosure is permitted.
In any transaction in which the am ount of
each regularly scheduled paym ent (other than a
first or last payment) includes an equal am ount to
be applied on principal and a finance charge
com puted by application of a rate to the decreas­
ing unpaid balance, at the creditor’s option the
requirem ent of § 226.8(b)(3) with respect to the
am ount of each paym ent may be met by disclos­
ing the following information:
(1) The am ount of each paym ent to be applied
on principal, and an identification of that am ount
as paym ent on principal;
(2) T he respective am ount of finance charge
included in the first and last scheduled payments
so described;
If this option is utilized, the exceptions pro­
vided under paragraphs (b)(3), and (c)(8) and
(d)(3) of § 226.8 shall not apply.
6 /1 0 /6 9
SEC T IO N 226.809— D ISCLO SU R ES F O R
C E R T A IN S T U D E N T LO AN S
Footnotes 10 and 11 to Regulation Z provide
an exception from specified disclosure require­
ments fo r interim student loans under certain
Federally insured student loan programs. These
exceptions are applicable to other student loans
of the same type, including those m ade to stu­
dents under Federally supported loan programs
or program s of loan guarantee, adm inistered by
or under agreement with the U.S. D epartm ent of
Health, Education, and Welfare. In all of such
cases, however, all disclosures m ust be made
prior to the time the final note is executed or re­
paym ent schedule is agreed upon.
6/10/69

REGULATION Z— INTERPRETATIONS

SEC T IO N 226.810— D ISCLO SU R ES—
V A R IA B L E IN T E R E S T RA TES
In some cases a note, contract, or other in­
strum ent evidencing an obligation provides for
prospective changes in the annual percentage rate
or otherwise provides for prospective variation in
the rate. T he question arises as to w hat disclo­
sures must be m ade un der these circumstances
w hen it is not know n at the tim e of consum m a­
tion of the transaction w hether such change will
occur or the date or am ount of change.
In such cases, the creditor shall make all dis­
closures on the basis of the rate in effect at the
time of consum m ation of the transaction and
shall also disclose the variable feature.
If disclosure is made prior to the consum m a­
tion o f the transaction that the annual percentage
rate is prospectively subject to change, the condi­
tions under which such rate m ay be changed,
and, if applicable, the m axim um and minimum
limits of such rate stipulated in the note, con­
tract, or other instrum ent evidencing the obliga­
tion, such subsequent change in the annual per­
centage rate in accordance with the foregoing
disclosures is a subsequent occurrence under
§ 226.6(g) and is not a new transaction.
6 /2 0 /6 9
SEC T IO N 226.811— REN E W A L S
O F N O TE S
A ny renewal o f an extension of credit provid­
ing for paym ent of the full principal sum on a
specified date shall not b e considered a refinanc­
ing under § 226.8(j), and no disclosures need be
m ade in connection with such renewal, provided:
(i) All disclosures required under this Part
were m ade in connection with the original exten­
sion of credit or a prior renewal thereof;
(ii) T h e am ount of the renewal does not ex­
ceed the am ount of the unpaid balance plus any
accrued and unpaid finance charge:
(iii) The annual percentage rate (or rates) pre­
viously disclosed is not increased; and
(iv) T he period for which renewal is m ade does
not exceed by m ore than 4 days the period of the
extension of credit for which disclosures were
made.

§ 226.810

In instances in which disclosures are required
to be m ade and renewal is made by mail, the
creditor may not know w hether the custom er will
reduce his obligation by a paym ent on principal
or, if reduced, the am ount o f that reduction. The
question arises as to w hat disclosures should be
m ade by mail to the custom er in these circum ­
stances.
If the creditor knows the am ount o f the princi­
pal paym ent, all disclosures should be m ade on
the basis of the resulting new am ount financed.
If, however, the creditor does not know whether
the custom er will reduce his original obligation,
or if so, by how much, he should disclose on the
assumption that there will be no reduction. In
such circumstances, at the creditor’s option, he
may m ake one o r m ore additional disclosures
based on one o r m ore examples of graduated
principal reduction. For example, if a single p ay­
ment note for $1,000 at 1 % is proposed to be
renewed for $1,000 at 8% for 3 months, in addi­
tion to the other required disclosures, the creditor
should disclose an am ount financed of $1,000
with a finance charge o f $20, and may, in addi­
tion, disclose that with a principal paym ent of
$300 the am ount financed would be $700 with a
finance charge of $14, and with a principal pay­
ment of $500 the am ount financed would be
$500 with a finance charge of $10.
1 /2 8 /7 0 (Supersedes
issued 8 /1 / 6 9 )

interpretation

§ 226.811

SEC T IO N
226.812 — A D V A N C E S
UNDER
O P E N E N D R E A L E ST A T E M O R T G A G E S
F O R A G R IC U L T U R A L PU R PO SES
U nd er § 226.8(p) disclosures are perm itted in
connection with certain extensions of credit for
agricultural purposes which m ay involve advances
under an open end real estate mortgage o r simi­
lar lien. Section 226.8(j) in p art treats advances
for agricultural purposes und er an open end real
estate mortgage or similar lien. The question
arises as to the respective application of these
paragraphs to such advances.
If an extension of credit involving multiple ad­
vances, whether or not under an open end m ort­
gage, meets the tests of § 226.8(p), disclosures
need only be m ade p rio r to consum m ation of the
credit transaction and need not be m ade at the
tim e o f each individual advance, even though

§ 226.813

REGULATION Z— INTERPRETATIONS

such advance for agricultural purposes may not
meet the tests in § 226.8(j). Conversely, extensions
of credit for agricultural purposes involving ad ­
vances under an open end real estate mortgage or
similar lien which do not meet the tests for dis­
closure under § 226.8(p) are subject to the rele­
vant provisions of § 226.8(j) dealing with such
advances.

(iii)
If interest is com puted on the full am ount
of the com m itm ent without regard for the dates
of disbursements o r actual am ounts disbursed:

SEC T IO N 226.813— D ISCLO SU R ES ON
M U L T IP L E A D V A N C E LOANS
In connection with construction and other m ul­
tiple advance loans under § 226.8(i), which are
payable in a single sum or perm anently financed
by the same creditor at m aturity of the construc­
tion phase with interest only payable up to such
m aturity, and in which either the am ount or date
of an advance is not determinable, the question
arises w hether a method might be utilized to
estimate the inform ation to be disclosed under
§ 226.8(b)(2) and (3) and (d)(3).
In such cases, at the creditor’s option, required
inform ation m ay be estimated and disclosed as
follows:
(1) T he following mathem atical equations
based upon assumed continuous advances m ay be
utilized in estimating the am ount of the interest
com ponent of the finance charge and the annual
percentage rate by substituting the appropriate
numerical am ounts for the following symbols in
the equations:

m
P
B

nrL
m

(i) The am ount o f interest finance charge to be
paid prior to the due date of the first am ortiza­
tion paym ent shall be estimated as prescribed
under subdivisions (ii) o r (iii) of paragraph (1) as
the case m ay be and shall be treated as prepaid
finance charge for com putational purposes; and
(ii) Estimation of the annual percentage rate
shall be made w ithout regard to the num ber of
interest only paym ents to be made, assuming the
first paym ent period to be that interval between
the date the finance charge begins to accrue and
the date the first am ortization paym ent is due.
(4) Disclosures m ade in accordance with this
interpretation, when made along with the other
disclosures required under § 226.8(b) and (d),
shall constitute “all other material disclosures
required under this P a rt” referred to under
§ 226.9(a):

= A m ount of loan commitment,
= Stated annual interest rate expressed
as a decimal figure,
= N um b er of interest paym ents to be
made to maturity,
= N um ber of interest periods (unitperiods) in 1 year.
= Total am ount of any prepaid finance
charge un der § 2 2 6 .8 (e ).
= A m ount of any required deposit bal­
ance u nd er § 2 26 .8 (e ).

Exam ple I
A $20,000 construction loan com m itm ent on
which the precise dates or am ounts of advances
are not determinable. T he obligation bears a stated
6% interest rate and interest is to be paid monthly
on the am ounts advanced, and the total of the
am ounts advanced under the com m itm ent plus
any unpaid interest is due and payable at the end
of nine months from the date the finance charge
begins to accrue. T here is a loan fee of 1%
($200), but there is no required deposit balance.

(ii) If interest is com puted from the date of
each advance on only the am ounts advanced:
Estimated annual percentage rate =

Estimated interest finance charge =

(3) In the case of a combination construction
loan and perm anent financing provided by the
same creditor:

(i) Symbols

n

2nrL + 2mP
n(L - 2P - 2B)

(2) If the equations under subdivision (ii) of
paragraph (1) are utilized, the am ounts of any re-'
quired interest paym ents during the construction
phase m ay be omitted in making the disclosure
required under § 226.8(b)(3); however, if the
equations under subdivision (iii) of paragraph (1)
are utilized, then the am ount of each scheduled
interest paym ent shall be disclosed as required
under § 226.8(b)(3).

1 1 /6 /6 9

L
r

Estimated annual percentage rate =

nrL + 2mP
n(L - 2P - 2B)

nrL
Estimated interest finance charge = 2m

54

I
REGULATION Z— INTERPRETATIONS

§ 226.813

Substituting these terms for the symbols, the equa­
tions become:
(9 X .06 X 20,000) + (2 X 12 X 200)
9 x [20,000 - (2 x 200)]
.0884 or 8.84% or 83A % estimated annual percentage
rate.
9 X .06 X 20,000
2 X 12

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

(2 X 9 X .06 X20,000) + (2 X 12 X 200)
9 x [20,000 (2 x 200)]
.1497 or 14.97% or 15% estimated annual percent­
age rate.

12

900 or $900 estimated interest
finance charge component of
: the finance charge. This inter­
est would be payable in 9
monthly payments of $100
each.

$15,039.60

L oan fee 1 point prepaid finance
charge

$

200.00

F o r com putational purposes con­
sider interest to be paid on con­
struction phase as prepaid (not
to be disclosed as prepaid)

$

450.00

T otal am ount treated as prepaid
finance charge for com putational
purposes

$

650.00

A m ount of loan
D educt total of esti­
m ated finance charge
treated as prepaid

A $20,000 construction loan followed by per­
m anent financing in same am ount. Six per cent
interest. One point loan fee. N ine months to m a­
turity of construction phase. N ine months pay­
ments of interest only during construction phase.
Twenty-year m aturity on perm anent financing to
be am ortized in 240 equal m onthly paym ents in­
cluding interest and principal.

$20,000

$

Estim ated am ount fi­
nanced for com puta­
tional purposes
A m ount financed to
be disclosed

A m ortization of a $20,000 6% 20-year loan in
240 equal monthly paym ents including interest
and principal requires each m onthly paym ent to
be $143.29.

$20,000

650

D educt actual am ount
of prepaid finance
charge

F ro m mortgage am ortization tables:

$

200

$19,350
$19,800

A djust first paym ent period (period of con­
struction loan plus period from m aturity date of
construction loan to due date of first am ortization
paym ent) by dividing the period of the construc­
tion loan by 2 and adding the period of time be­
tween the m aturity date of the construction loan
and the date the first am ortization paym ent is due.

T otal of 240 paym ents =
240 X $143.29 = $34,389.60

Interest finance charge on
perm anent financing

Estim ated finance charge

200.00

C om putational Disclosure
Purposes
Purposes

Exam ple II

Subtract am ount of
loan principal

450.00

(If the interest on the construction phase is
com puted on the full am ount of the com m itm ent
for the full tim e to m aturity w ithout regard for
the dates of disbursements o r actual am ounts dis­
bursed pursuant to subdivision (iii), the estimated
interest finance charge for the construction phase
would be $900.00 which would result in a total
estimated finance charge of $15,489.60.)

If the term s stated in the example were
changed so that interest would be com puted on
the full am ount of the com m itm ent from the date
the finance charge begins to accrue w ithout re­
gard for the dates of disbursements or actual
am ounts of funds disbursed, the equations under
(iii) above become:

9 x .06 x 20,000

phase (pursuant to sub­
division (ii))
A dd: Loan fee 1 point

$20,000.00
$14,389.60

9 months divided by 2 = 4Vi m onths plus
1 m onth = 5Vi months

A dd: Estim ated interest finance
charge on construction

F rom Appendix A (page A2) of V olume I of

55

§ 226.814

the B oard’s A nnual Percentage R ate Tables, read
across to 5 months and on the line below opposite
15 days (Vi month) read + 9 .0 . This adjustm ent
should be added to the num ber of regular am orti­
zation paym ents to determ ine the n um ber of p ay­
ments in utilizing the A nnual Percentage Rate
Tables:
240 m onthly paym ents + adjustm ent 9.0 = 249
Following the directions on page 1 of V olum e I:
Estim ated finance charge $15,039.60 X 100 =
$1,503,960 which should be divided by the
estimated am ount financed for com putational
p urp o ses:
$1,503,960
19,350 = $77.72 estimated fi­
nance charge p er $100 of estimated am ount
financed fo r com putational purposes.
Refer to page 309M of Volume I, read down
num ber o f paym ents colum n to 249; read across
to 78.71 (which is nearest to $77.72 com puted
above), and read up to 6.25% which is the esti­
m ated annual percentage rate to be disclosed.
In the example w here the interest on the con­
struction phase is com puted on the full am ount of
the com m itm ent w ithout regard for the dates of
advances or actual am ounts advanced, the esti­
m ated finance charge per $100 of am ount
financed is $81.96. On page 309M of Volume I,
read down to the 249th paym ent line and across
to 82.39 which is the nearest am ount to $81.96,
and read up to 6.50% which is the estimated a n ­
nual percentage rate to be disclosed.
1 /2 8 /7 0
SEC T IO N 226.814— P R E M IU M S F O R
IN S U R A N C E A D D E D T O A N
E X IS T IN G B A L A N C E
Subsequent to the consummation of a consumer
credit transaction the custom er m ay wish to
purchase optional insurance in connection with
the obligation. Typically, mortgage life and dis­
ability insurance may be offered to the custom er at
some date after consum m ation under a plan in
which the lender will advance the am ount of the
prem ium due and add that am ount to the existing
unpaid balance of the obligation. Generally, each
instalment on the original obligation paid during
the period before the next prem ium is due will be
increased proportionately to liquidate the am ount

REGULATION Z— INTERPRETATIONS

of the additional advance plus any finance
charge. A dditional advances are m ade autom ati­
cally for renewal prem ium s as they become due
unless the borrow er requests discontinuance of
the coverage. The question arises as to the re­
quired disclosures.
In such cases the insurance agreement m ay be
considered a single separate transaction, and the
disclosures required under § 226.8, at the credi­
tor’s option, need be m ade only prior to the time
the agreement is executed and only with respect
to the am ount of the initial advance. F o r exam ­
ple, a mortgage life and disability insurance plan
in which the annual prem ium advanced was $145
repayable in 12 monthly instalments of $12.61
added to the regular monthly mortgage paym ents
would be disclosed as an “am ount financed” of
$145, a “finance charge” of $6.32, and a “total
of paym ents” of $151.32. Additional disclosures
as applicable under § 226.8 would, of course, be
made. If, as in some cases, only a portion of the
advance is liquidated during the prem ium period
with the rem ainder payable at the end o f the
mortgage contract, the creditor would likewise
calculate the am ount of finance charge which
would accrue on the advance until paid in full.
In some cases the advance is secured by a se­
curity interest in real property which is used o r
expected to be used as the principal residence of
the customer. In those cases the prem ium ad­
vance agreement is rescindable u nd er § 226.9,
and notice of the right of rescission provided in
§ 226.9(b) need only be given at the time the
agreement is executed. Subsequent advances for
renewal premiums are not subject to the right of
rescission.
1 /2 8 /7 0
SEC T IO N 226.815— D IS C L O SU R E F O R
D E M A N D LO AN S
Section 226.8(b)(3) requires a creditor to dis­
close the num ber, am ount and due dates or pe­
riods o f paym ents scheduled to repay an exten­
sion of credit other th an open end and, in
appropriate cases, the total of payments. The
question arises as to how these requirem ents
should be met in the case of dem and loans.
Section 226.4(g) provides that for the purpose
of calculating the finance charge and annual p er­
centage rate, dem and loans are considered to

REGULATION Z— INTERPRETATIONS

have a one-half year m aturity unless the obliga­
tion is alternatively payable upon a stated m atu­
rity, in which case the stated m aturity shall be
used.
In order to comply with the requirem ents of
§ 226.8(b)(3), if no alternative maturity date is
specified, the creditor need disclose only the due
dates or periods of payments of all scheduled in­
terest paym ents for the first one-half year. In
such cases, the creditor need not disclose the
number, am ounts or total of paym ents or identify
any balloon paym ent. Effective M ay 1, 1970,
creditors shall disclose the fact that the obligation
is payable on demand.
If an alternative m aturity date is specified, all
disclosures required under § 226.8(b)(3) shall be
made, using that date.
/
1 /2 8 /7 0
SEC T IO N 226.816— M O R T G A G E S W IT H
D EM A ND FEATURES
In some cases real estate mortgages are written
for a stated period, for example one year, with the
provision that they shall be payable on dem and
after expiration of that period, provided that until
such dem and is made the principal and interest
shall be paid in scheduled periodic instalments
until paid in full. T he obligation is thus payable
according to a specified am ortization schedule
subject to the holder’s right to dem and payment
after the stated period.
The question arises w hether the creditor may
m ake disclosures based on the specified am ortiza­
tion schedule or whether disclosures m ust be
m ade on the basis of the m aturity established by
the expiration of the stated period.
In such cases the creditor may m ake disclo­
sures based on the specified am ortization sched­
ule, provided he discloses clearly and conspicu­
ously that the obligation is payable on demand
after the stated period together with the fact that
disclosures are made on the basis of the specified
am ortization schedule. Otherwise, disclosures shall
be based upon the earliest date dem and for pay­
m ent in full may be made under the terms of the
mortgage showing the unpaid balance due at that
time as a “balloon paym ent.”
T h e disclosure requirem ents of this interpreta­
tion shall become effective M ay 1, 1970.
1/28/70

§ 226.816

SEC T IO N 226.817— R E D U C T IO N IN
AN NUAL PERCENTAGE RATE
Section 226.8(j) specifies that if any existing
extension of credit is refinanced, such transaction
shall be considered a new transaction subject to
the disclosure requirem ents of Regulation Z. The
question arises as to whether a reduction in the
annual percentage rate applicable to an existing
extension of credit, when no other credit terms
are changed, constitutes a refinancing under
§ 226.8(j).
W hen no other credit term s are changed, a re­
duction in the annual percentage rate applicable
to an existing extension of credit does not consti­
tute a refinancing under § 226.8(j), and no disclo­
sures are required.
3 /3 1 /7 0
S EC T IO N 226.818— R E F U N D O F U N E A R N E D
F IN A N C E C H A R G E ; P R E P A Y M E N T
PENALTY
U nder § 226.8(b)(7) a creditor must provide an
identification of the m ethod of com puting any
unearned portion of the finance charge in the
event of prepaym ent of an obligation, as well as
a statement of the am ount or m ethod of com pu­
tation of any charge that m ay be deducted from
the am ount of any rebate. Section 226.8(b)(6) re­
quires the creditor to provide “a description of
any penalty charge that m ay be imposed by the
creditor or his assignee for prepaym ent of the
principal of the obligation. . . . ” A question arises
whether the com putation of certain rebates of un­
earned finance charges on contracts with precom ­
puted finance charges involves a “prepaym ent
penalty.” A second question concerns the disclo­
sures required to identify the m ethod of com put­
ing any finance charge rebate.
Section 226.8(b)(6) relates only to charges as­
sessed in connection with obligations which do
not involve precom puted finance charges included
in th e obligation. It applies to transactions in
which the finance charge is com puted from time
to time by application of a rate to the unpaid
principal balance. Prepaym ent penalties w hich re­
quire disclosure under this section (which princi­
pally arise in connection with prepaym ent of real
estate mortgages) occur when the obligor in such
a transaction is required to pay separately an ad-

§ 226.819

ditional am ount for paying all or part of the obli­
gation before maturity. On the other hand,
§ 226.8(b)(7) is designed to encompass the disclo­
sures necessary with regard to the prepaym ent of
an obligation involving precom puted finance
charges which are included in the face am ount of
the obligation. Therefore, although in a precom ­
puted obligation the finance charge rebate to a
custom er may be less when calculated according
to the “Rule of 78’s,” “sum of the digits,” or
other m ethod than if calculated by the actuarial
method, such difference does not constitute a
penalty charge for prepaym ent that must be de­
scribed pursuant to § 226.8(b)(6).
Section 226.8(b)(7) requires “identification” of
the rebate method used on precomputed con­
tracts. M any State statutes provide for rebates of
unearned finance charges under methods known
as the “Rule of 78’s” or “sum of the digits” or
other methods. In view of the fact that such stat­
utory provisions involve complex mathem atical
descriptions which generally cannot be condensed
into simple accurate statements, and which if re­
peated at length on disclosure forms could de­
tract from other im portant disclosures, the re­
quirem ent of rebate “identification” is satisfied
simply by reference by nam e to the “Rule of
78’s” or other method, as applicable.
4 /3 0 /7 3
SEC T IO N 226.819— P R E P A ID F IN A N C E
C H A R G E S; A D D -O N S A N D
D ISC O U N TS
Sections 226.8(c)(6), 226.8(d)(2) and 226.8(e)(1)
require that certain finance charges be disclosed
as “prepaid finance charges.” They also require
that such prepaid finance charges be excluded or
deducted from the credit extended in arriving at
the “am ount financed.” T he question arises
whether add-on, discount or other precom puted
finance charges which are reflected in the face
am ount of the debt instrum ent as part o f the
custom er’s obligation, but which are excluded
from the “am ount financed,” m ust be labeled as
“prepaid” finance charges.
T h e concept of prepaid finance charges was
adopted to insure that the “am ount financed” re­
flected only that credit of which the customer
had the actual use. Precom puted finance charges
which are included in the face am ount of the ob­

REGULATION Z— INTERPRETATIONS

ligation are not the type contemplated by the
“prepaid” finance charge disclosure concept. A l­
though such precomputed finance charges are not
to be included in the “am ount financed,” they
need not be regarded as finance charges “paid
separately” or “withheld by the creditor from the
proceeds of the credit extended” within the m ean­
ing of § 226.8(e) to require labeling “prepaid”
under §§ 226.8(c)(6) and 226.8(d)(2). They are “fi­
nance charges,” of course, to be disclosed under
§§ 226.8(c)(8) and 226.8(d)(3).
8 /2 3 /7 3
SECTION 226.9
SEC TIO N 226.901— W A IV E R O F S E C U R ITY
IN T E R E ST S— E F F E C T ON T H E R IG H T
O F RESCISSION
Section 226.9(a) provides for a right of rescis­
sion “in the case of any [consumer] credit trans­
action in which a security interest is or will be
retained or acquired in any real property which is
used or is expected to be used as the principal
residence of the custom er.” U nder § 226.2(z) se­
curity interests include mechanic’s and m aterial­
m en’s liens. If a creditor effectively waives his
right to retain, or to acquire such a lien, he has
not retained or acquired such security interest.
T he question arises, however, of w hether waiver
of a creditor’s lien rights is effective to remove a
transaction from the scope of rescission when
lien rights which are not waived arise in favor of
subcontractors, workmen, or others w ho are not
creditors in the transaction.
T he fact that the creditor waives his lien rights
does not, in itself, determine whether o r not the
transaction is rescindable. If all security interests
are effectively waived, the transaction is not res­
cindable. On the other hand, if as a result of the
transaction, a security interest is or will be re­
tained or acquired by a subcontractor, workm an,
or other person, the transaction is rescindable. In
the latter case the creditor would be responsible
for delivering the rescission notice as well as
other applicable disclosures, delaying perform ­
ance as provided under § 226.9(c), and identifying
himself as the creditor on the rescission notice.
The subcontractors, workmen, and others would
not be responsible for delivering rescission notices
to the customer.
5/26/69

REGULATION Z— INTERPRETATIONS

§ 226.902

S E C T IO N 226.902— “C U S T O M E R S ” A N D
JO IN T
O W N ERS
OF PROPERTY
U N D E R T H E R IG H T O F
RESCISSION

plus any accrued and unpaid finance charge on
the existing obligation, § 226.9 does not apply to
the transaction.
If, however, such new transaction is for an in­
creased am ount, that is, for an am ount in excess
of the am ount of the unpaid balance plus any ac­
crued and unpaid finance charge on the existing
obligations, § 226.9 applies to the transaction.
However, such right of rescission applies only to
such excess and does pot affect the existing obli­
gation (or related security interest) for the unpaid
balance plus accrued unpaid finance charge.
If a transaction is refinanced by a creditor
other than the creditor of the existing obligation,
the entire transaction is subject to § 226.9.

Section 226.9(f) provides that, for the purpose
of the right of rescission, “custom er” shall in­
clude two or m ore customers w here joint ow ner­
ship is involved. The question arises of whether
this means that all joint owners of record, regard­
less of w hether or not they are parties to the
transaction, are customers for this purpose, and
w hether each of such owners of record (1) must
receive disclosures and a notice of the right of
rescission, (2) m ay exercise the right of rescission,
and (3) m ust join in signing a waiver if one is
appropriately taken by the creditor.

1 /2 8 /7 0 (Supersedes interpretation § 226.903 is­
sued 6 /2 0 /6 9 )

U nder § 226.9(f) w here there are joint owners,
the right to receive disclosures and notice of the
right of rescission, the right to rescind, and the
need to sign a waiver of such right, apply only to
those joint owners w ho are parties to the transac­
tion.

SECTION 226.10
SEC T IO N 226.1001— A D V E R T IS IN G O F
C R E D IT T E R M S IN O T H E R T H A N
O P E N E N D C R E D IT

5 /2 6 /6 9
S EC T IO N 226.903— R E F IN A N C IN G A N D
IN C R E A S IN G — D ISCLO SU R ES A N D
E F F E C T S O N T H E R IG H T
O F RESCISSION

T he statement of certain credit term s in adver­
tisements such as “no dow npaym ent”, the am ount
of any instalment paym ents, dollar am ount of
finance charge, num ber of payments, etc., as pro ­
vided in § 226.10(d)(2), requires that certain other
terms also be stated in the same advertisement.
T h e question arises as to how a creditor m ay ad­
vertise credit term s in a meaningful way when all
of his credit sales or loans are not m ade on the
same basis.

In some cases the creditor of an obligation will
refinance that obligation at the request of a cus­
tom er by permitting the custom er to execute a
new note, contract, or other docum ent evidencing
the transaction under the term s of which one or
m ore of the original credit terms, including the
m aturity date of the obligation, are changed. Ex­
cept as provided in § 226.811, such refinancing
constitutes a new transaction, and all disclosures
required under § 226.8 m ust be made. T he ques­
tion arises as to whether that transaction is sub­
ject to the right of rescission under § 226.9 where
the obligation is already secured by a security in­
terest in real property which is used or expected
to be used as the principal residence of th a t cus­
tomer.

The advertising of credit term s m ay b e made
by giving one or m ore examples of typical exten­
sions of credit and stating all of the term s appli­
cable to each example. In any such case, the ad­
vertiser shall set forth one o r m ore examples
which are, in fact, typical of the type of credit
and term s usually and customarily made availa­
ble by the creditor to present and prospective
customers and each shall be clearly and conspicu­
ously identified as examples o f typical transac­
tions.

If the am ount of such new transaction does
not exceed th e am ount of the unpaid balance

4/22/69

59

§ 226.1002

SEC T IO N 226.1002— C A T A L O G S— TA BLES
OR S C H E D U L E S O F C R E D IT T E R M S

U nd er § 226.10(b) in order th at a catalog may
qualify as a single advertisement, am ong other
things, it m ust include a table or schedule of
credit terms. It has been the practice of catalog
houses to include such tables in catalogs; how ­
ever, such tables generally state am ounts of pu r­
chases, am ounts of finance charges, and num ber
and am ount of paym ents for brackets up to a cer­
tain level and then contain an instruction to in­
clude a specified dollar am ount in computing the
finance charge by application of a percentage rate
on any purchase in excess of that level. Tables to
show the actual term s including annual percent­
age rates for all purchases into thousands of dol­
lars would be unwieldy, present a formidable ap­
pearance, and m ay be more confusing than
helpful to the user. T he question arises as to
w hether a creditor who publishes a catalog is re­
quired to include tables in detailed am ounts from

REGULATION Z— INTERPRETATIONS

the m inim um up to, for example, $5,000, his
highest priced cataloged merchandise.
Tables or schedules of term s in catalogs must
include all am ounts up to a level of the more
com monly sold higher priced property or services
which are offered for sale, but in no event
greater than $1,000 unless the creditor elects to
do so. If the creditor offers property or service
for sale at prices higher than the upperm ost level
covered by his table, he shall state the m ethod by
which the finance charge is com puted on larger
amounts, how the am ount of paym ents and the
num ber and periods of paym ents are determined
and state, for each representative am ount in in­
crements of not m ore than $500 up to the high­
est priced property or service offered, the annual
percentage rate. A ny catalog which contains such
a table or schedule of credit term s will comply
with requirem ents o f § 226.10(b) provided all
other requirem ents are met and such catalog shall
be considered adequate for the purpose of
§ 226.8(g)(1).
4 /2 2 /6 9

APPENDIX A

QUESTIONS AND ANSWERS
If you extend consum er credit or issue credit cards, you m ust become fam iliar with Regulation Z.
You will be responsible fo r complying with the Regulation and this pam phlet tells you how Regula­
tion Z affects your business. T he questions and answers that follow are stated as simply and clearly as
possible. H O W E V E R , F O R E X A C T I N F O R M A T I O N O N W H A T Y O U M U S T D O TO C O M P L Y
W IT H T H E L A W , Y O U M U S T R E A D T H O R O U G H L Y T H E A P P L I C A B L E S E C T IO N S O F R E G U ­
L A T I O N Z.

SOME G ENER AL QUESTIONS A N D ANSW ERS
Q: What is the purpose of Regulation Z?
A: T he purpose is to let borrowers and consumers know the cost of credit so that they can com pare
costs between various credit sources and avoid the uninform ed use of credit. Regulation Z also
regulates issuance of credit cards and sets m axim um liability for the unauthorized use o f credit
cards. T he Regulation does not set m axim um or minimum interest rates o r require any charge for
credit. (Reg. Z / 226.1)
Q: What kinds of businesses are affected?
A: Regulation Z applies to credit card issuers and any individual or organization th at extends or ar­
ranges credit for which a finance charge is or m ay be payable or which is repayable by agreement in
m ore than four instalments. F o r example, the Regulation applies to banks, savings and loan associa­
tions, credit unions, consum er finance companies and residential mortgage brokers. It m ay also
apply to departm ent stores, automobile, furniture and appliance dealers, craftsm en— such as plum b­
ers and electricians, doctors, dentists and other professional people, and hospitals. (Reg. Z /226.2(k)
and (1))
,
Q: What types of credit transactions are covered under Regulation Z?
A: Generally, credit you extend to people for personal, family, household o r agricultural uses, not ex­
ceeding $25,000. (Reg. Z /226.2(k))
But A L L real estate credit transactions for these purposes are covered regardless of the amount.
(Reg. Z / 226.3(c))
Q: What types o f credit transactions are not covered?
A: T he following are not affected by Regulation Z: (Reg. Z / 226.3)
1. Business and com mercial credit— except agricultural credit.
2. Credit to Federal, State and local government. (However, governmental units extending credit to
individuals are affected by this law.)
3. Transactions in securities and commodities accounts with a broker-dealer registered with the Secu­
rities and Exchange Commission.
4. Transactions under certain public utility tariffs.
5. Credit over $25,000— except real estate transactions.
Q: Can a State law be substituted for Regulation Z?
A: Yes, it can, provided the Federal Reserve Board makes that determ ination as provided by law.
Any determination made will be published. (Reg. Z / 226.12)
Q: What happens if I not only follow Regulation Z but also elect to follow inconsistent State law?
A: In these cases the State disclosures may be shown on a separate sheet. They m ay also be shown on

APPENDIX A

the same statement as the Federal disclosures. But in this event they must appear separately and be­
low the Federal disclosure, clearly marked that they are inconsistent with the Federal
disclosures,
and separated by a dividing line. Regulation Z is very specific on these points. (Reg. Z /226.6(c))
Q: Is any special terminology prescribed?
A: Yes, certain terminology is specified that must be used in making disclosures required by the Regu­
lation. (Reg. Z /226.6(a); Reg. Z /22 6.7(b) and (c); Reg. Z /226.8(b), (c) and (d); Reg. Z /226.9(b); Reg.
Z /2 2 6 . 11(c))
Q: D o disclosures have to be made in the order they appear in the Regulation?
A: No, but they must be listed in an order which will be meaningful to your customer. (Reg. Z /226.6(a))
Q: What terms are used to describe credit transactions in the Regulation?
A: The Regulation divides all consumer credit transactions into two broad categories: open end credit,
and credit other than open-end. These are discussed in subsequent sections of these Questions and
Answers.
Q: How long do I have to keep records?
A: You should keep evidence of com pliance for two years. (Reg. Z/226.6(i))
Q: Will anyone inspect my records?
A: If asked by the proper agency you must show your records relating to disclosure and evidence o f com ­
pliance. (Reg. Z /226.6(i))
Q: Are there provisions for enforcement?
A: Specific responsibilities for enforcem ent of Regulation Z are divided am ong nine Federal agencies.
A complete list of these agencies and types of businesses they cover can be found in Appendix D. If
you need additional inform ation, you should contact the appropriate Federal agency. (Reg. Z/226.1(b))
Q: Are there any penalties for violating the Act?
A: If you fail to m ake disclosures as required under the T ru th in Lending Act, you may be sued for
twice the am ount of the finance charge— for a m inim um of $100, up to a m axim um of $1000— plus
court costs and attorney’s fees. A nd if you willfully or knowingly disobey the law or Regulation Z
and are convicted, you could be fined up to $5000, or be imprisoned for one year, o r both. (Reg.
Z /226.1(c))

SOME QUESTIONS A N D ANSW ERS ON THE FIN A N C E CHARGE
A N D A N N U A L PERCENTAGE RATE

Q: What is the finance charge?
A: It is the total of all costs which your customer must pay, directly or indirectly for obtaining credit.
(Reg. Z /2 2 6 .4 )
Q: What costs are included in the finance charge?
A: H ere are some of the m ore com m on items that you m ust include in your finance charge. See Reg. Z /
226.4 for others and for qualifications which apply.
1.
2.
3.
4.

Interest.
Loan fee.
Finders fee o r similar charge.
Time price differential.

62

APPENDIX A

5. A m ount paid as a discount.
6. Service, transaction or carrying charge.
7. Points.
8. Appraisal fee (except in real estate transactions).
9. Prem ium for credit life insurance,
should you make this a condition for giving credit.
10. Investigation or credit report fee
(except in real estate transactions).
Q: Are all costs part o f the finance charge?
A: N o, some costs which would be paid if credit were not employed m ay be excluded. H owever, you
m ust itemize and show them to your customer. (Reg. Z / 226.4 gives you a com plete list.) H ere are a
few examples:
1.
2.
3.
4.
5.

Taxes.
License fees.
Registration fees.
C ertain title fees and other legal fees.
Some real estate closing fees.

Q: In what form is the finance charge to be shown to the customer?
A: It must be clearly typed or written, stating the dollars and cents total and the annual percentage rate.
The w ords “finance charge” and “annual percentage rate” m ust stand out especially clearly. (Reg. Z /
226.6(a)) In the sale of dwellings, the total dollar finance charge need not be stated, although the an­
nual percentage rate m ust be disclosed.
Q: What is the annual percentage rate?
A: Simply put, it is the relative cost of credit in percentage terms. (Reg. Z/226.5(e))
Q: Are maximum or minimum rates specified in Regulation Z?
A: No. Regulation Z does
n o t fix maxim um , minim um , or any charges for
you show whatever annual percentage rate you do charge.

credit. But it requires that

Q: H ow accurate must the
A: It m ust be com puted so
1 % . (Reg. Z / 226.5)

the nearest one-quarter of

annual percentage rate be?
as to perm it disclosure w ith an accuracy at least to

Q: How is the annual percentage rate computed?
A: It depends on w hether the credit is open end (Reg. Z /226.5(a)) or other than open end credit. (Reg.
Z /226.5(b))

SOME QUESTIONS A N D ANSW ERS ABOUT OPEN E N D CREDIT

Q: What is open end credit?
A: Typically it covers most credit cards and revolving charge accounts in retail stores and check over­
draft plans in banks, where finance charges are usually made on unpaid am ounts each m onth. (Reg.
Z /226.2(r); Reg. Z / 226.7)
Q: What must an open end credit customer be told under this law?
A: If it is a new account, then your custom er must receive these specific items in writing to the extent ap­
plicable: (Reg. Z /226.7(a))
1.

T he conditions under which the finance charge m ay be imposed and the period in which pay­
m ent can be m ade w ithout incurring a finance charge.

APPENDIX A

2. T he method used in determining the balance on which the finance charge is to be made.
3. H ow the actual finance charge is calculated.
4. The periodic rates used and the range o f balances to which each applies.
5. The conditions under which additional charges may be m ade along with details of how they
are calculated.
6. Descriptions of any lien which you may acquire on a
custom er’s
property.
7. T he m inim um paym ent that must be made on each billing.
Q: Are periodic statements necessary on open end accounts?
A: Yes, but only where there is an unpaid balance over $1 or where a finance charge is made. (Reg. Z /
226.7(b))
Q: What sort of information must accompany a monthly statement?
A: W here applicable, you must give customers this information: (Reg. Z/226.7(b))
1. The unpaid balance at the start of the billing period.
2. T he am ount and date of each extension of credit and identification of each item bought.
3. Paym ents m ade by a customer and other credits: this includes returns, rebates dnd adjust­
ments.
4. T he finance charge shown in dollars and cents.
5. The rates used in calculating the finance charge plus the range of balances to which they apply,
the corresponding annual percentage rate in each case calculated by multiplying the rate for
the time period by the num ber of periods you use each year, and any minimum charge.
6. T he annual percentage rate, when a finance charge is imposed.
7. T he unpaid balance on which the finance
charge was calculated.
8. T he closing date of the billing cycle and
the unpaid balance at that time.
Q: Where must this information appear?
A: Some items must appear on the actual face of the statement. Others m ay be shown on the reverse
side; or on a separate form enclosed in the same envelope. (Reg. Z /226.7(c))
Q: How is the annual percentage rate determined on open end credit?
A: The finance charge is divided by the unpaid balance to which it applies. This gives the rate per
m onth or whatever time period is used. The result is multiplied by 12 o r the other num ber of time
periods used by you during the year. (Reg. Z /22 6.5(a)) F or example, a typical charge of \V i% is
m ade on an unpaid balance where bills are sent out monthly. The annual percentage rate would be
twelve times \V i% or 18% . O ther methods for calculating the annual percentage rate on open end
credit are detailed in Reg. Z /226.5(a).

SOME QUESTIONS A N D ANSW ERS ABOUT CREDIT OTHER T H A N OPEN EN D

Q: What types of credit are included?
A: Both loans and sales credit— in every case for a specified period of time where the total am ount, n um ­
ber of payments, and due dates are agreed upon by you and your customer. Typically, it is used in
buying or financing the purchase of “big ticket” items. A good example is a loan from a finance
com pany to buy an automobile. A nother example is credit extended by a store to buy a washing
machine, a television set, or other m ajor appliance. It also includes a single paym ent loan. (Reg. Z /
226.8)
Q: What must the credit customer be told in these types of transactions?

APPENDIX A

A: You m ust present to your custom er in writing the following inform ation as applicable, plus addi­
tional inform ation relating to the type of credit extended: (Reg. Z /226.8(b))
1. T he total dollar am ount of the finance charge; except in the case of a credit transaction to fi­
nance the purchase of a dwelling.
2. The date on which the finance charge
begins to apply, if this is different from the date of the
transaction.
3. The annual percentage rate. (For exception, see Reg. Z/226.8(b)(2)(i) and (ii))
4. The number, am ounts and due dates of payments.
5. The total paym ents— except in the case o f first mortgages on dwelling purchases.
6. The am ount you charge for any default, delinquency, etc., or method you use for calculating
that amount.
7. Description of any
security you will hold.
8. Description of any
penalty charge for
prepaym ent of principal.
9. Identification of the method used to com pute the am ount of any finance charge rebate in the
case of prepaym ent of contracts involving precom puted finance charges. Charges deducted from
any rebate must be stated.
Q: Are there any other things customers must be told?
A: T hat depends on the transaction— w hether it is a loan or a credit sale.
Q: In the case of a loan, what do I have to tell my customers?
A: In addition to the inform ation given your customer, as previously indicated, you m ust also provide this
information: (Reg. Z/226.8(d))
1. T he am ount o f credit to be given to your customer. This includes all charges which are p art of
the am ount of credit extended but are not a p art of the finance charge. This inform ation must
be itemized.
2. A m ounts that are deducted as prepaid finance charges and required deposit balances. (Reg. Z /
226.8(e))
Q: Regarding credit sales, what additional information do I give these customers?
A: Again, you must give your customers all the inform ation in the answer to the second question in
this section, and the following additional inform ation as applicable: (Reg. Z /226.8(c))
1.
2.
3.
4.
5.
6.
7.
8.

The cash price.
T he down paym ent, including trade-in.
T he difference between the two.
All other charges, itemized, that are included in the am ount financed but not part of the finance
charge.
The unpaid balance.
A m ounts deducted as prepaid finance charges or required deposit balances.
T he am ount financed.
The deferred paym ent price, which is the total of the cash price, finance and all other charges.
(This does not apply to the sale of a dwelling.)

Q: When must customers receive all this information on loans
A: Before the credit is extended. (Reg. Z /226.8(a))

or creditsales?

Q: Must this information be given to customers in writing?
A: Yes. You m ust include the inform ation on the face o f the note or other instrum ent evidencing the
obligation, or on a separate sheet that identifies the transaction. (Reg. Z /226.8(a))
Q: Are monthly statements required?
A: No. But if you do send out m onthly statements, you must show clearly the annual percentage rate,
and the period in which a paym ent must be m ade to avoid late charges. (Reg. Z /226.8(n))

APPENDIX A

Q: How is the annual percentage rate calculated on loans or credit other than open end?
A: By the actuarial method— paym ents are applied first to interest due and any rem ainder is then applied
to reduce principal. (Reg. Z/226.5(b))
Q: What are examples o f the actuarial method?
A: H ere are tw o simple examples:
1. A bank loan of $100 repayable in equal monthly instalments over one year is made, at a
6 % add-on finance charge. T he annual percentage rate would be 11% . T he borrow er would
repay $106 over one year. He would only have use o f the full $100 until he made his first
paym ent, and less and less each m onth as paym ents are made. The effect is that the actual
annual percentage rate is almost twice the add-on percentage rate.
2. Using the same example as above with the 6 % finance charge discounted in advance, the
annual percentage rate would be 11 Vi % because the custom er would only receive $94 and
have to repay $100. H e would have full use of only $94 of the loan up to the time he
m akes his first payment.
Q: But isn’t the actuarial method very complicated?
A: Yes, it is. Recognizing this, the Federal Reserve Board has prepared tables showing the annual per­
centage rate based on the finance charge and the num ber o f weekly or monthly paym ents to be
made. These tables are available from the Federal Reserve Board and Federal Reserve Banks at
$1.00 per copy. (Reg. Z /226.5(c))
Q:
A:

Must I use the Board’s Annual Percentage Rate tables?
No. Y ou may wish to purchase specially prepared tables for your type of business from one of sev­
eral table o r chart publishers. T rade associations and financial institutions can be helpful also. (Reg.
Z/226.5(c)(2))

Q: Must the creditor always show the annual percentage rate?
A: Generally, yes, except that on credit other than open-end credit, if the finance charge is $5 or less,
and applies to credit of $75 o r less, it need not be shown. T he same exception applies to a finance
charge of $7.50 or less on credit o f m ore than $75. (Reg. Z/226.8(b)(2)(i) and (ii))

SOME QUESTIONS A N D ANSW ERS ABOUT REAL ESTATE

Q: Is real estate credit covered under Regulation Z?
A: Yes. All real estate credit in any am o u n t is covered under this Regulation when it is to an individual
and not for business purposes, unless the business purpose is agricultural.
Q: D oes such real estate credit cover more than mortgages?
A: Yes, very definitely. A ny credit transaction (other than a business credit transaction) that involves any
type o f security interest in real estate o f a consum er is covered. Reg. Z /226.2(w ), (x), (y) and (z))
Q: Are there any special provisions that apply to real estate credit?
A: Tw o basic points:
1. Y ou do not have to show the total dollar am ount of the finance charge on a credit sale or
first mortgage loan to finance the purchase of the custom er’s dwelling. (Reg. Z/226.8(c)(8)
and (d)(3))
2. In m any instances, your custom er has th e right to cancel a credit arrangem ent within three
business days if his residence is used as collateral for credit. (Reg. Z / 226.9)

APPENDIX A

Q: Must a creditor inform his customer of the right to cancel?
A: Yes. H e m ust furnish the N otice prescribed by the Regulation. (Reg. Z/226.9(b))
Q: What must the customer do to cancel a real estate transaction under the Regulation?
A: A custom er m ay cancel a transaction

or
or
or

or

1. by signing and dating the N otice to custom er required by Federal law, which he receives from
the creditor, and either
(a) mailing the Notice to the creditor at the address shown on the Notice,
(b ) delivering the N otice to the creditor at the address shown on the N otice either person­
ally or by messenger (o r by other agents),
2. by sending a telegram to the creditor at the address shown on the Notice. A brief description
of the transaction which the custom er wishes to cancel should be included in the telegram.
3. by preparing a letter (o r other writing) w hich includes a brief description of the transaction
which he wishes to cancel, and either
(a ) mailing the letter (or other writing) to the creditor at the address shown on the Notice,
(b ) delivering the letter (or other writing) to the creditor at the address shown on the Notice
either personally or by messenger (o r by other agents).

Q: What if the customer telephones that he is going to cancel?
A: A telephone call to the creditor may not be used to cancel a transaction; W R I T T E N notice o f can­
cellation is required. If the custom er takes one o f the above steps to cancel w ithin the three day
period, he has effectively cancelled the transaction.
Q: What if I haven’t received the notice o f cancellation in three days?
A: Y ou should allow time for a mailed letter or telegram sent within the three day period
livered, and determ ine that your customer has not cancelled the transaction.

to be

de­

Q: D oes this right o f cancellation apply to a first mortgage?
A: A first m ortgage to finance the purchase of your custom er’s dwelling carries no right to cancel.
However, a first mortgage for any other purpose and a second mortgage on the same dwelling may
be cancelled. (Reg. Z/226.9(g))
Q: What happens regarding cancellation in the case of a mechanic’s lien or similar security interest
acquired by a craftsman who works on credit?
A: T ake a craftsm an, for example, w ho charges his customers a finance charge or agrees to accept
paym ent in m ore than four instalments. His custom er does have a right to cancel, but only within
three business days. Unless there is an em ergency the craftsm an should wait the three days before
starting work. (Reg. Z /226.9(c))
Q: Suppose a customer needs emergency repairs and cannot wait for three days?
A: A custom er m ay waive his right to cancel a credit agreement if credit is needed to meet a bona fide
personal financial em ergency and if failure to start repairs would endanger him, his family, o r his
property. Preprinted waiver form s m ay not be used. (Reg. Z /226.9(e))

SOME QUESTIONS A N D ANSW ERS A BO U T CREDIT CARDS

Q: What is a credit card?
A: A credit card is a single credit device existing fo r the purpose o f being used from time to time upon
presentation to obtain money, property, labor, o r services on credit. (Reg. Z /226.13(a))

APPENDIX A

Q: Are there restrictions on issuance o f credit cards?
A: Yes. A credit card m ay n o t be issued except in response to a request or application or as a renewal
of, o r in substitution for, an accepted credit card. (Reg. Z/226.13(b))
Q: What is an accepted credit card?
A: A n accepted credit card is a credit card which the cardholder has requested or applied for and re­
ceived, o r has signed, o r has used, or has authorized another person to use. A ny credit card issued
in renewal of, o r in substitution for, an acceptedcredit card becomes an accepted credit card w hen re­
ceived by the cardholder. (Reg. Z /226.13(a))
Q: D oes Regulation Z apply to credit cards issued fo r business purposes?
A: Yes. Regulation Z applies to all credit cards w hether issued for personal, family, household, agricul­
tural, business, o r com mercial purposes, regardless of w hether issued to an individual person or to an
organization. (Reg. Z /2 26 .1 3(a) and (b))
Q: Is a cardholder liable for unauthorized use o f a credit card?
A: A cardholder is liable for unauthorized use of a credit card only if
(1 ) the credit card is an accepted credit card;
(2 ) the liability does not exceed the lesser o f
$50 or the am ount o f money,
property, labor, or
services obtained by unauthorized use prio r to notification of the card issuer;
(3 ) the card issuer has given the cardholder adequate notice of his potential liability on the
credit card o r within two years preceding unauthorized use;
(4 ) the card issuer has provided the cardholder with an addressed postage-paid notification to be
mailed in event o f loss, theft, or possible unauthorized use of the credit card, and
(5 ) the card issuer has provided a m ethod w hereby the user of the card can be identified as the
person authorized to use it, such as by signature, photograph, or fingerprint on the card, or
by electronic or mechanical confirmation.

SOME QUESTIONS A N D ANSW ERS ABOUT TH E ADV ERTISING OF CREDIT

Q: D oes Regulation Z affect credit advertising?
A; Yes it does. It affects all advertising to aid o r prom ote any extension of consum er credit regardless
of w ho the advertiser may be. A n association, fo r example, which advertises that its members ex­
tend consum er credit is subject to the advertising provisions o f Regulation Z.
Q: What kinds o f advertising are affected?
A: All types of advertising: television, radio, newspapers, magazines, leaflets, flyers, catalogs, public ad­
dress announcem ents, direct mail literature, window displays, billboards, etc. (Reg. Z /226.2(b))
Q: H ow does Regulation Z affect your advertising as a creditor?
A: Generally, you m ay not advertise th at the down paym ent, instalment plan o r am ount of credit can
be arranged unless you usually arrange term s o f this type. (Reg. Z /226.10(a))
Q: How else is credit advertising affected?
A: If it is open end credit, see Reg. Z /2 2 6 .1 0 (c ). F o r credit other than open end, see Reg. Z /2 2 6 .1 0 (d ) .
If you advertise in catalogs, see Reg. Z /2 2 6 .1 0 (b ). But generally you are not permitted to advertise
any specific credit term unless all other term s involved are stated clearly and can be easily seen.

t

APPENDIX B

NOTICE OF RIGHT OF RESCISSION

T he following form is the form of notice of the right to rescind a transaction required to be given to
customers u n der certain circumstances set forth in Section 226.9 of Regulation Z. W here the property
on which the security interest m ay arise does not include a dwelling, the creditor may substitute the
words “the property you are purchasing” for “y o u r hom e” o r “lot” fo r “h o m e” where these words
appear in the form of notice. This exhibit is set in capitals and lower case letters of 12 point bold
faced type, the m inim um size permissible un d er Regulation Z.

( Id e n t i f ic a t i o n of T r a n s a c t i o n )

Notice To Customer Required By Federal Law:
You have entered into a transaction o n ___________________ which may
(D a t e )

result in a lien, mortgage, or other security interest on your home. You have a
legal right under federal law to cancel this transaction, if you desire to do so,
without any penalty or obligation within three business days from the above
date or any later date on which all material disclosures required under the
Truth in Lending Act have been given to you. If you so cancel the transaction,
any lien, mortgage, or other security interest on your home arising from this
transaction is automatically void. You are also entitled to receive a refund of
any downpayment or other consideration if you cancel. If you decide to cancel
this transaction, you may do so by notifying

( N a m e of C r e d it o r )

at_________________________________________________________________
(A ddres s of C r e d i t o r ’s P la c e of B u sin es s)

by mail or telegram sent not later than midnight o f __________________You
(D a t e )

may also use any other form of written notice identifying the transaction if it is
delivered to the above address not later than that time. This notice may be
used for that purpose by dating and signing below.
I hereby cancel this transaction.

(Date)

(Customer's signature)

69

APPENDIX B

T he following paragraph shall appear on the face o r the reverse side of the notice shown on the opposite
page. If it appears on the reverse side of the notice, the face of the notice shall state, “See reverse side
fo r im portant inform ation about your right of rescission.”

EFFECT OF RESCISSION. When a customer exercises his right to rescind under
paragraph (a) of this section, he is not liable for any finance or other charge, and
any security interest becomes void upon such a rescission. Within 10 days after
receipt of a notice of rescission, the creditor shall return to the customer any
money or property given as earnest money, downpayment, or otherwise, and shall
take any action necessary or appropriate to reflect the termination of any security
interest created under the transaction. If the creditor has delivered any property
to the customer, the customer may retain possession of it. Upon the performance
of the creditor’s obligations under this section, the customer shall tender the
property to the creditor, except that if return of the property in kind would be
impracticable or inequitable, the customer shall tender its reasonable value.
Tender shall be made at the location of the property or at the residence of the
customer, at the option of the customer. If the creditor does not take possession
of the property within 10 days after tender by the customer, ownership of the
property vests in the customer without obligation on his part to pay for it.

70

APPENDIX C
SA M P L E P A G E F R O M T A B L E F O R C O M P U T IN G A N N U A L P E R C E N T A G E R A T E
F O R L E V E L M O N T H L Y P A Y M E N T PLA N S
EXAM PLE
Finance charge = $35.00; Total am ount financed = $200; N u m b er of m onthly p ay m en ts= 2 4 .
SO L U T IO N
Step 1— Divide the finance charge by the total am ount financed and multiply by $100. This gives
the finance charge per $100 of am ount financed. T h at is, $ 3 5 .0 0 -^ $ 2 0 0 = .1 7 5 0 X $ 1 0 0 =
$17.50.
Step 2— Follow dow n the left hand colum n o f the table to the line for 24 months. Follow across
this line until you find the nearest num ber to $17.50. In this example $17.51 is closest
to $17.50. Reading up the column o f figures shows an annual percentage rate of 16% .

NUMBER

OF
PAYMENTS

ANNUAL PERCENTAGE RATE
l*.0 0 l

14.251

14.501

14.751

3
4
5

1.17
1.75
2.3*
2.93
3.53

1.19
1.78
2.38
2.99
3.59

1.21
1.82
2.43
3.04
3.65

1.23
1 . 85
2.47
3.09
3.72

1.25
1.88
2.51
3.14
3.78

1.27
1.91
2.55
3.20
3.84

1.29
1.94
2.59
3.25
3.91

1.31
1.97
2.64
3.30
3.97

1.33
2.00
2.68
3 . 36
4.0*

1.35
2.04
2.72
3.41
4.10

1.37
2.07
2.76
3.46
4.16

6
7
8
9
10

4.12
4.72
5.32
5.92
6.53

4.20
4 . 81
5.42
6.03
6.65

4.27
4.89
5.51
6.14
6.77

4 . 35
4.98
5.61
6. 25
6 . 88

4.42
5.06
5 . 71
6.35
7.00

4.49
5 . 15
5.80
6.46
7.12

4.57
5.23
5.90
6.57
7.2*

4.64
5 . 32
6.00
6.68
7.36

4.72
5.40
6.09
6.78
7.48

4.79
5.49
6.19
6.89
7.60

11
12
13
14
15

7.14
7.74
8.36
8.97
9.59

7.27
7 . 89
8.51
9 . 13
9 . 76

7.40
8.03
8.66
*.30
9.94

7.53
8. 17
8. 81
9.46
1 0. 11

7.66
8.31
8.97
9.63
10.29

7.79
8.45
9.12
9.79
10.47

7.92
8.59
9.27
9.96
10.64

8.05
8 . 7*
9.43
10.12
10.82

8.18
8.88
9.58
1 0 . ?9
11.00

16
17
16
19
20

10.20
10.82
11.45
12.07
12.70

10.39
11.02
11.66
1 2 . 30
12.93

10.58
11.22
11.87
12.52
13.17

1 0 . 77
11.42
1 2 . 08
1 2. 74
13.41

10.95
11.62
12.29
12.97
13.64

11.14
11.82
12.50
13.19
13.88

1 1.33
12.02
12.72
13.41
14.1 1

1 1.52
12.22
12.93
13.64
14.35

21

25

13.33
13.96
14.59
15.23
15.87

1 3. 58
14.22
1 4 . 87
1 5 . 51
1 6 . 17

13.82
14.48
15.14
15.80
16.46

14.07
1 4. 74
15 .41
L6. 0 8
1 6. 76

14.32
15.00
15.68
16.37
17.06

14.57
15.26
15.96
16.65
17.35

26
27
28
29
30

16.51
17.15
17.80
18.*5
19.10

16.82
17.47
1 8 . 13
1 8. 79
19.45

17.13
17.80
18.47
19.14
19.81

17.44
1 8 . 12
18.80
19.49
2 0 . 17

17 . 75
18. 44
1 9 . 14
19.83
20.54

31
32
33
34
35

19.75
20.40
21.06
21.72
22.38

2 0 . 12
20.79
21.46
2 2 . 13
22.80

20.49
21.17
21.85
22.54
23.23

2 0 . 87
21.56
2 2 . 25
22.95
2 3 . 65

21.24
21.95
22.65
23.37
24.08

15.001 15.25*

17.00*

17.25*

17.501

17.751

1.40
2 . 10
2.80
3.51
4.23

1.42
2.13
2.85
3.57
4.29

1.44
2 . 16
2 . 89
3 . 62
4.35

1. *6
2.19
2.93
3.67
*.42

1.48
2.22
2.97
3. 73
4.48

4.87
5.58
6.29
7.00
7.72

4.94
5.66
6.38
7.11
7.84

5.02
5.75
6.48
7.22
7.96

5.09
5 . 83
6.58
7.32
8.08

5 . 17
5.92
6 . 67
7.43
8. 19

5.24
6.00
6.77
7.54
fl. 31

8.31
9.02
9.73
10.45
1 1. 17

8.44
9 . 16
9.89
10.6?
11.35

8.57
9.30
10.04
1 0 . 78
11.53

8.70
9.45
10.20
10.95
11.71

8.83
9.59
10.35
11.11
1 1 . 88

8.96
9.73
10.5 0
11.28
1 2 . 06

9.09
9.87
10.66
11.45
12 .24

11 .71
12.42
13.14
13.86
14.59

11.90
12.62
13.35
14.09
14.82

12.09
12.83
13.57
1* . 3 1
15.06

12.28
13.03
1 3 . 78
14.54
1 5 . 30

12.46
13.23
13.99
14.76
15.5*

12.65
13.43
14.21
14.99
15.77

12.8*
13.63
1*.42
15.22
16.01

13.03
13.83
14.64
15.44
16.25

14.82
15.52
16.23
16.94
17.65

15.06
15.31
15.78
16.04
1 6 . 50
17.22 1
17.95

15.56
16.30
17.05
17.80
18.55

15.81
16.57
17.32
18.09
18.85

16.06
16.83
17.60
1 8 . 37
1 9 . 15

16.31
17.09
17.88
18.66
19.45

16.56
17.36
1 8. 15
18.95
1 9 . 75

16.81
17.62
18 . * 3
19.2*
20.05

17.07
1 7 . 88
18.70
19.53
20.36

1 8.06
18.76
19.47
20.18
20.90

18.37
19.09
19.81
20.53
21.26

18.68
19.41
20.15
20.88
21 . 6 2

18.99
19.74
20.48
21 . 2 3
21.99

19.30
20.06
20.82
21.58
22.35

19.62
20.39
21.16
21.94
22.72

19.93
20.71
21.50
22.29
23.08

20.24
21.0*
21.84
22.64
23.45

20.56
21 . 3 7
22.18
22.99
23.81

20.87
2 1 . 69
22.52
23.35
2 * . 18

21.19
22.02
22.86
23.70
24.55

21.61
22.33
2,3.06
2 * . 78
24.51

21.99
22.72
23.46
24.19
24.94

22.37
2 3 . 11
23.86
24.61
25.36

22.74
23.50
24.26
25.0 3
25.79

23.12
23.89
24.67
25.4*
26.23

23.50
24.28
25.07
25.86
26.66

23.98
24.68
25.48
26.28
27-09

24.26
25.07
25.88
26.70
27.52

24.6*
2 5 . *6
26.29
27.1?
27.96

75.02
25.86
26.70
2 7.5*
28.39

25.40
26.25
27.11
27.97
28.83

15.50*

1 5 . 7 5 * ( L6.001

16.25*

1 6 . 5C1 1 6 * 7 5 *

IF!NANCE CHARGE PER MOO OF AMOUNT FINANCED)
1

2

22

^

23

(This table is one page of the tables compiled by the Federal Reserve Board to assist creditors in figuring
o u t the annual percentage rate of the cost of credit, or the am ount o f the finance charge fo r a given
rate.)

71

APPENDIX D
FED ER A L ENFORCEM ENT AGENCIES
F ro m the list that follows, you will be able to tell which Federal Agency covers your particular busi­
ness. A ny questions you have should be directed to th at agency. These agencies are also responsible
for enforcing Regulation Z.
National Banks
Com ptroller of the Currency
U nited States T reasury D epartm ent
Washington, D. C. 20220
State Member Banks
Federal Reserve Bank serving the area in which the State m em ber bank is located.
Nonmember Insured Banks
Federal Deposit Insurance C orporation Supervising E xam iner for the District in which the nonm em ber
insured bank is located.
Savings Institutions Insured by the FSLIC and Members o f the FHLB System
(except for Savings Banks insured by FDIC)
T he F H L B B ’s Supervisory A gent in the Federal H o m e Loan Bank District in which the institution is
located.
Federal Credit Unions
Regional Office of the N ational Credit Union Administration, serving the area in w hich the Federal
C redit U nion is located.
Creditors Subject to Civil Aeronautics Board

**•

D irector, Bureau of E nforcem ent
Civil Aeronautics Board
1825 Connecticut Avenue, N.W .
Washington, D.C. 20428
Creditors Subject to Interstate Commerce Commission
Office of Proceedings
Interstate Com m erce Commission
W ashington, D.C. 20523
Creditors Subject to Packers and Stockyards Act
N earest Packers and Stockyards Adm inistration area supervisor.
Retail, Department Stores, Consumer Finance Companies, All Other Creditors, and A ll Nonbank Credit
Card Issuers
T ru th in Lending
Federal T rade Commission
W ashington, D.C. 20580