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FED ER A L RESERVE BANK O F NEW YORK r C ircu lar L No. 6 9 6 J u ly 5, 1972 91 J REGULATION Z Proposed Amendments; Interpretations To A ll State M em ber Banks, and O thers Concerned, in the Second Federal Reserve D istrict: Follow ing is the te x t of a statem en t issued Ju n e 26 by the B oard of G overnors of the F ederal R eserve S ystem : T h e B o a rd of G o v ern o rs of th e F e d e ra l R e serv e S y stem to d ay an n o u n c ed th a t it p ro p o ses to am en d its R e g u la tio n Z ( T r u th in L e n d in g ) in tw o resp ects, d ealin g w ith d isclo su res on o p en -en d c re d it b illin g s ta te m ents, such as tho se issu ed in connection w ith b an k cre d it ca rd s an d rev o lv in g ch arg e accounts. T h e a m en d m e n ts w o u ld : — R e q u ire d isclo su re of a p ro sp ectiv e no m in al a n n u a l p erc en ta g e ra te on billing sta te m en ts alth o u g h no finance ch a rg es a re im posed fo r th e billing p e rio d re p re se n te d by th e statem en t. — R e q u ire d isclo su re of m in im u m finance ch a rg es on b illing statem en ts. In te re s te d p erso n s a re in v ited to su b m it w ritte n view s o r in fo rm a tio n to th e S e c re ta ry of th e B o a rd , a t W a sh in g to n , D. C. 20551, o r to an y F e d e ra l R e serv e B a n k fo r tra n s m itta l to th e B o a rd , n o t la te r th a n J u ly 31, 1972. A t the sam e time, the B oard of G overnors also published tw o in terp retatio n s of its R egulation Z, concerning the determ ination of the balance th a t m ay be used as the basis fo r a finance ch arge on open-end credit accounts and the allocation of paym ents in such accounts. P rin te d below are the te x ts of the proposed am endm ents and of the interp retatio n s. Com m ents on the proposed am endm ents should be subm itted by July 31 and m ay be sent to ou r R egulations and B ank A nalysis D epartm ent. A lfred H a y e s, President. [Reg. Z] TRUTH IN LENDING Proposed Amendments on Open End Credit 1. P u rs u a n t to th e a u th o rity co n tain e d in th e T ru th in L e n d in g A c t (1 5 U .S .C . 1601 et se q .) th e B o a rd of G o v ern o rs p ro p o ses to am en d P a r t 226 (R e g u la tio n Z ) , in th e m a n n e r a n d fo r th e rea so n s set fo rth b e lo w : § 2 2 6 .5 (a ) ( 3 ) w ould be am en d ed to rea d as follow s: § 226.5— D E T E R M I N A T I O N O F A N NUA L PERCEN TAG E RATE ( a ) G e n e ra l R u le — o p e n e n d c r e d it a c c o u n ts * * * * * * (3 ) W h e re th e finance ch a rg e im p o sed d u rin g th e b illing cycle is o r inclu d es ( i) an y m in im u m , fixed, o r o th e r c h a rg e n o t d ue to th e ap p licatio n of a p erio d ic ra te , o th e r th a n a ch a rg e w ith resp e ct to an y specific tra n sa c tio n d u rin g th e billing cycle, by d iv id in g th e to ta l finance ch a rg e fo r th e b illin g cycle by th e a m o u n t of th e b a la n c e (s ) to w hich applicable an d m u ltip ly in g th e q u o tie n t ( e x p resse d as a p e rc e n ta g e ) by th e n u m b e r of b illin g cycles in a y e a r ; o r ( ii) an y ch a rg e w ith resp e ct to an y specific tr a n s actio n d u rin g th e b illin g cycle (e v e n if th e to ta l finance ch arg e also in clu d es an y o th e r m in im u m , fixed, o r o th e r c h a rg e n o t d u e to th e ap p licatio n of a p erio d ic r a te ) , by d iv id in g th e to ta l finance ch a rg e im p o sed d u rin g th e billing cycle by the to ta l of all balances a n d o th e r am o u n ts on w hich any finance ch a rg e w as im posed d u rin g the billing cycle w ith o u t d u p licatio n a n d m u lti p ly in g the q u o tie n t (e x p re sse d as th e p e rc e n ta g e ) by th e n u m b e r of billing cycles in a y e a r ;53 ex c ep t th a t the an n u a l p erc en ta g e ra te shall n o t be less th a n th e la rg e st ra te d eterm in e d by m u ltip ly in g each p erio d ic ra te im posed d u rin g the billing cycle by th e n u m b e r o f p erio d s in a year. ( iii) an y m inim um , fixed, o r o th e r ch a rg e n o t due to the ap plication of a perio d ic ra te a n d th e to ta l finance ch arg e im posed d u rin g th e billing cycle does n o t ex ceed 50^ for a m o n th ly o r lo n g er billing cycle, o r th e p ro ra ta p a rt of 50^ fo r a billing cycle sh o rte r th a n m o n th ly , by m u ltip ly in g each applicable perio d ic ra te by th e n u m b e r of p erio d s in a y ear, n o tw ith s ta n d in g th e p r o visions of subdivisions ( i) an d ( ii) of th is su b p a ra g ra p h . Sa 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 transaction charges apply shall be included in the denominator. O ther balances or parts of balances shall be in cluded according to the manner of determining the balance to which a periodic rate is applied, as illustrated in the following 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 tran s action charge of 3% is applicable to the specific transactions. The periodic rate is 1 ^ % applicable to the average daily bal ance. The num erator is the am ount of the finance charge, which is $4.50. The denominator is the amount of the transaction (which is $ ), 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 ), totaling $ . The annual percentage rate is the quotient (which is 4.5%) multiplied by 12 (the number of months in a y ea r), 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 tran s action charge of 3% is applicable to the specific transaction. The periodic rate is V /2% applicable to the average daily balance. The num erator is the amount of finance charge which is $5.25. The denominator is the amount of the transaction (which is $ ), plus the amount by which the balance to which the periodic rate applies exceeds the amounts of specific transactions (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 pre vious balance, the num erator is $4.50 and the denominator is (the amount of the transaction, $ , plus the balance to which only the periodic rate is applicable, the previous bal ance). As explained in example 1, the annual percentage rate is 2.25% x 12 = 27%. 4. If, in example 2, the periodic rate applies only to an ad justed balance (previous balance less payments and credits) and the customer made a payment of $50 at midpoint of billing cycle, the num erator is $3.75 and the denominator is $150 (the amount of the transaction, $ , plus the balance to which only the periodic rate is applicable, the $50 adjusted balance). As ex plained in example , the annual percentage rate is 2.5% x 12 = 30%. 5. Previous balance—$100 A specific transaction (check) of $100 occurs a t the mid point of the billing cycle. The average daily balance is $150. The specific transaction charge is 25 cents per check. The periodic rate is V /2 % applied to the average daily balance. The num era tor is the amount of the finance charge, which is $2.50. and in cludes the 25 cents check charge and the $2.25 resulting from the application of the periodic rate. The denominator is the full amount of the specific transaction (which is $ ) plus the 100 0 100 100 $200 100 $100 1 100 100 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 \Y z% x = %. 12 20 § § 2 2 6 .7 (b ) ( 5 ) , 2 2 6 . 7 ( b ) ( 6 ) , a n d 2 2 6 .7 (c ) w o u ld be am en d ed to rea d as fo llo w s : § 226.7— O P E N E N D C R E D I T A C C O U N T S — S P E C IF IC D IS C L O S U R E S ( b ) P e r io d ic s ta te m e n ts r e q u ir e d . * * * * * * ( 5 ) E a c h p erio d ic rate , u sin g th e te rm “ p erio d ic r a te ” ( o r “ ra te s ” ) , th a t m ay be u sed to co m p u te th e finance ch a rg e (w h e th e r o r n o t ap p lied d u rin g th e b illing c y c le ), th e ra n g e of b alances to w h ich it is applicable, a n d th e co rresp o n d in g an n u a l p erc en ta g e ra te d eterm in e d by m u ltip ly in g th e p erio d ic ra te by th e n u m b e r of p erio d s in a y ear. T h e w o rd s “ co rresp o n d in g an n u a l p erc en ta g e ra te ,” “ co rresp o n d in g n o m in al an n u a l p erc en ta g e r a te ,” “ n o m in al an n u a l p e rc en ta g e r a te ” o r “ an n u a l p erc en ta g e ra te ” ( o r “ ra te s ” ) m ay be u sed to describe th e co rresp o n d in g an n u a l p erc en ta g e ra te . T h e re q u ire m e n ts of § 2 2 6 .6 (a ) of th is P a r t w ith resp ect to disclo sin g th e te rm “ an n u a l p erc en ta g e r a te ” m o re co n sp icu o u sly th a n o th e r re q u ire d term in o lo g y shall n o t be ap plicable to th e d isclo su re m ad e u n d e r th is su b p a ra g ra p h , a lth o u g h such te rm ( o r w o rd s in c o rp o ra tin g such te rm ) m ay, a t th e c re d ito r’s option, be show n as co n sp icu o u sly as th e te rm in o lo g y req u ired u n d e r su b p a ra g ra p h 6 of th is p ara g ra p h . W h e re a m in im u m ch a rg e m ay be applicable to th e acco u n t, th e a m o u n t of such m in im u m ch a rg e shall be disclosed.93 ( 6 ) W h e n a finance ch arg e is im posed d u rin g th e b illin g cycle, th e an n u a l p erc en ta g e ra te o r ra te s d e te r m in ed u n d e r § 2 2 6 .5 (a ) u sin g th e te rm “ an n u a l p e r cen tag e r a te ” ( o r “ ra te s ” ). * * * (c ) L o c a tio n o f d isc lo su res. T h e d isclo su res re q u ire d by p a ra g ra p h ( b ) of th is section shall be m ad e o n th e face o f th e p erio d ic sta te m en t, ex c ep t th a t, a t th e c re d ito r’s o p tio n : ( 1 ) Ite m iz a tio n of th e am o u n ts an d d ates of each ex ten sio n of c re d it ( o r th e d ates such ex ten sio n s of c re d it w ere d eb ited to th e a c co u n t) re q u ire d to be d isclosed u n d e r p a ra g ra p h ( b ) ( 2 ) an d of th e “ c re d its” disclosed u n d e r ( 3 ) of th is section, a n d ite m iz atio n of th e a m o u n t of an y finance ch arg e re q u ire d to be d is closed u n d e r p a ra g ra p h ( b ) ( 4 ) of th is section, m ay be m ade on th e rev e rse side of th e p erio d ic sta te m e n t o r on a se p arate ac co m p an y in g s ta te m e n t( s ) , p ro v id ed th a t th e to ta ls of such resp ectiv e a m o u n ts a re disclosed on th e face of th e p erio d ic s ta te m e n t; an d ( 2 ) T h e d isclo su res re q u ire d u n d e r p a ra g ra p h ( b ) ( 5 ) an d ( b ) ( 8 ) of th is section, e x c ep t th e b alance on w h ich th e finance ch a rg e w as co m p u ted , m ay be m ad e on th e 9a A creditor imposing minimum charges is not required to adjust the disclosure of the range of balances to which each periodic rate would apply in order to reflect the range of the balances below which the minimum charge applies. If a creditor does not impose a finance charge when the outstanding balance is less than a certain amount, the creditor is not required to disclose that fact or the balance below which no such charge will be imposed. rev erse side of th e perio d ic sta te m e n t o r on th e face of a single su p p lem en tal sta te m e n t w hich shall acco m pan y th e p erio d ic sta te m en t. (3 ) If th e c re d ito r ex ercises an y of th e o p tio n s p ro v ided u n d e r th is p a ra g ra p h , th e face of th e perio d ic sta te m en t shall co n tain one of th e follow ing notices, as ap p lica b le : “ N O T I C E : See re v e rse side fo r im p o rta n t in fo rm a tio n ” o r “ N O T I C E : See accom pan y in g s ta te m e n t( s ) fo r im p o rta n t in fo rm a tio n ” o r “ N O T I C E : See rev e rse side an d ac co m panying s ta te m e n t( s ) fo r im p o rta n t in fo rm a tio n ,” an d the disclo su res shall n o t be se p a ra te d so as to confuse o r m islead th e cu sto m er or o b scure o r d e tra c t a tte n tio n fro m th e in fo rm atio n req u ired to be disclosed. 2. T h e se p ro p o sals, in p a rt, a re a rep u b licatio n of ce rtain pro p o sals issued fo r public com m ent on A u g u st 6, 1971. T h e y have been m odified on th e basis of co m m en ts received on th e m a n d fu rth e r study. 3. T h e am en d m e n t to § 2 2 6 .5 (a ) ( 3 ) relocates th e fo rm u la fo r co m p u tin g a n n u a l p erc en ta g e ra te s in th e case of finance ch a rg es im posed w ith resp ect to specific tran sa ctio n s d u rin g the b illing cycle— fo r exam ple, one tim e fees on cash ad v an ces— to th e section d ealing w ith an n u al p erc en ta g e ra te co m p u tatio n . T h e fo rm u la w as p rev io usly co n tain ed in § 2 2 6 .7 (b ) ( 6 ) an d B o a rd in te rp re ta tio n § 226.704. T h is am en d m e n t w ould also clarify th e fact th a t th e R e g u la tio n does n o t re q u ire co m p u tatio n of th e an n u a l p erc en ta g e ra te by th e q u o tien t m e th o d w hen th e to ta l finance charge, inclu d in g ch arg es w ith respect to specific tra n sa c tio n s, does n o t exceed 50^. 4. A re q u ire m e n t has been ad d e d to § 2 2 6 .7 (b ) ( 5 ) th a t the co rresp o n d in g an n u a l p erc en ta g e ra te fo r each p erio d ic ra te applicable to th e ac co u n t be show n on each p erio d ic sta te m en t, w h e th e r o r n o t a finance ch arg e is im posed d u rin g th e b illing cycle. M an y c re d ito rs have p rev io u sly m ade th is disclosure, w hich w as p e r m issible, a lth o u g h n o t req u ired , u n d e r R e g u la tio n Z. A v arie ty of specified w o rd in g m ay be u sed to describe these ra te s u n d e r the new p roposal. T h e p e rm itte d use of o p tio n al w o rd in g is to allow c re d ito rs m ax im u m freed o m to choose w o rd in g to d istin g u ish betw een ra te s w hich w ere ac tu a lly applied d u rin g th e billing cycle (re q u ire d to be disclosed u n d e r § 2 2 6 .7 (b ) ( 6 ) ) an d the p rosp ectiv e no m in al ra te s re q u ire d to be disclosed by th is s u b p a ra g ra p h , w h ere those ra te s differ. T h e optional w o rd in g w ill also m inim ize the need fo r rep fin tin g perio d ic sta te m e n ts w h ere nom inal ra te d is clo su res have p rev io u sly been m ade by th e cre d ito r. W h a te v e r w o rd in g is chosen m ay, th o u g h need n o t be, used to satisfy the te rm in o lo g y re q u ire m e n ts fo r th e initial disclo su res u n d e r § 2 2 6 .7 (a ) ( 4 ) a n d a d v e rtisin g u n d e r § 2 2 6 .1 0 (c ) ( 4 ) . A lth o u g h th e “ m o re conspic u o u s” req u irem en t of § 2 2 6 .6 (a ) fo r th e te rm “ an n u a l p erc en ta g e r a te ” w ill n o t be applicable to d isclosu res u n d e r § 2 2 6 .7 (b ) ( 5 ) , it w ill co n tin u e to ap p ly to th e te rm “ an n u a l p erc en ta g e r a te ” in o p en in g d isclosu res u n d e r § 2 2 6 .7 (a ) an d in a d v e rtisin g u n d e r § 2 2 6 .1 0 (c ), even if th e cre d ito r chooses to m ake d isclo su res u n d e r § 2 2 6 . 7 ( a ) ( 4 ) an d § 2 2 6 .1 0 ( c ) ( 4 ) u sin g o p tio n al w o rd in g w hich sim ply in c o rp o rates th is te rm — e.g., “ co rre sp o n d in g A N N U A L P E R C E N T A G E R A T E .” N o a d d itio n a l disclo su res w ill be re q u ire d by th e new p ro v isio n s fo r m a n y o pen en d c re d ito rs su ch a s th o se w ho co m p u te finance c h a rg es sim p ly by th e ap p lica tio n of one o r m o re p erio d ic ra te s a n d w h o a re a lre a d y su p p ly in g th is in fo rm atio n . T h e new p ro v isio n also w o u ld re q u ire d isc lo su re of m in im u m c h a rg es w h ich m ay be im p o sed o n acco u n ts w ith b alances below a c e rta in am o u n t. T h is n ew d is clo su re re q u ire m e n t does n o t com pel c re d ito rs to disclose th e ra n g e of b alances to w h ich th e m in im u m c h a rg e m ay be ap p lica b le ; c re d ito rs m ay co n tin u e to disclose ran g e s of b alances to w h ich p erio d ic ra te s ap p ly u n d e r § 2 2 6 .7 ( b ) ( 5 ) w ith o u t specifically d e sig n a tin g th e p o r tio n of an y such ra n g e to w hich th e m in im u m c h a rg e, in stea d of th e p erio d ic rate , is applicable. F o r ex am p le, d isclo su re could be m ade th a t “a p erio d ic ra te of 1^>% p e r m o n th w hich is a n A N N U A L P E R C E N T A G E R A T E of 18% w ill be ap p lied to b alan ces fro m $ 0 to $500, w ith a m in im u m ch a rg e of 5 0^.” 5. T h e am en d m e n t to § 2 2 6 .7 (b ) ( 6 ) co n sists of th e a d d itio n of th e o p en in g p h ra se “ w h en a finance ch a rg e is im p o sed d u rin g th e b illin g cycle.” I n a d d itio n , th e w o rd s “ an d , w h ere th e re is m o re th a n one ra te , th e am o u n t of th e balance to w h ich each ra te is a p p lica b le” have been d eleted since th e ap plicable re q u ire m e n t is alre ad y co n tain ed in § 2 2 6 .7 (b ) ( 5 ) w h ich re q u ire s disclo su re of th e ran g e of b alan ces to w h ich each r a te is applicable. T h e am en d m e n t is p rim a rily d esig n ed to clarify th e fact th a t th e a n n u a l p e rc e n ta g e ra te d is clo su res u n d e r th is p a ra g ra p h (a s d e te rm in e d by § 2 2 6 .5 ( a ) ) a re only re q u ire d w h en finance ch a rg e s a re im p o sed d u rin g th e b illin g cycle. M a te ria l re la tin g to c o m p u tatio n of th e an n u a l p erc en ta g e ra te w h e re tra n sa c tio n ch a rg es a re im p o sed d u rin g th e b illin g cycle h as been rem o v ed fro m th e p ro v isio n a n d in c o rp o ra te d in to th e new § 2 2 6 .5 (a ) ( 3 ) ( i i ) . 6. T h e am en d m e n t of § 2 2 6 .7 ( c ) , w h ich d eals w ith th e lo catio n of re q u ire d d isclo su res on p erio d ic s ta te m ents, w o u ld sim plify p lacem en t of th e d isc lo su res in a w ay w h ich is ex p ected to be m o re m e an in g fu l a n d u se fu l to th e cu sto m e r an d m in im ize co n fu sio n . The. am en d m e n t in c o rp o rates B o a rd in te rp re ta tio n § 226.702. If th e p ro p o sed am en d m e n ts a re ad o p ted , th e B o a rd w ill issu e th e am en d m e n ts in final fo rm w ith a n a p p r o p ria te p ro sp ec tiv e d ate so as to p e rm it such ch an g es in p rin te d fo rm s a n d p ro c e d u re s as m ay be n ecessary fo r com pliance in an o rd e rly m a n n er. T h is notice is p u b lish ed p u rs u a n t of T itle 5, U n ite d S ta te s C ode, a n d R u les of P ro c e d u re of th e B o a rd of F e d e ra l R e serv e S y stem (1 2 C F R to sectio n 5 5 3 ( b ) § 2 6 2 .2 (a ) of th e G o v e rn o rs of th e 2 6 2 .2 ( a ) ) . T o aid in th e c o n sid eratio n of th e se m a tte rs by th e B o a rd , in te re ste d p erso n s a re in v ited to su b m it re le v a n t d ata, view s, o r arg u m e n ts. A n y such m a te ria l sh o u ld be su b m itte d in w ritin g to th e S e c re ta ry , th e B o a rd of G o v e rn o rs of th e F e d e ra l R e serv e S y stem , W a sh in g to n , D . C. 20551, o r to a n y F e d e ra l R e se rv e B a n k fo r tr a n s m itta l to th e B o a rd , to be received a t th e B o a rd n o t la ter th a n J u ly 31. 1972. S u ch m a te ria l w ill be m ad e available fo r in sp ectio n an d co p y in g u p o n req u e st, ex cep t as p ro v id ed in § 2 6 1 .6 (a ) of th e B o a rd ’s R u les R e g a rd in g A v ailab ility o f In fo rm a tio n . By order of the Board of Governors, June 21, 1972. PART 226—TRUTH IN LENDING Miscellaneous Interpretations I n te rp re ta tio n § 226.703 is am en d e d to re a d as fo llo w s : § 226.706 O p e n e n d c r e d it— a llo c a tio n o f p a y m e n ts § 226.703 F in a n c e c h a rg e b a s e d o n a v e ra g e d a ily b a la n c e in o p e n e n d c r e d it a c c o u n ts S ectio n 2 2 6 . 7 ( a ) ( 2 ) p ro v id es th a t before th e first tra n sa c tio n is m ad e on an y o p en en d c re d it acco u n t, th e c re d ito r m u st disclose “ th e m eth o d of d eterm in in g th e balance u p o n w h ich a finance ch a rg e m ay be im p o se d .” S ectio n 2 2 6 .7 ( b ) ( 8 ) re q u ire s th e cre d ito r to disclose on th e p erio d ic sta te m e n t “ th e balance o n w hich th e finance ch arg e w as co m p u ted , a n d a sta te m e n t of how th a t b alance w as d e te rm in e d .” T h e q u estio n is ra ise d w h e th e r th ese p ro v isio n s re q u ire a c re d ito r to p ro v id e a d escrip tio n of th e m a n n e r in w h ich p ay m en ts o r o th e r cre d its a re ap p lied to v ario u s p o rtio n s of th e balance o r b alances on w h ich finance ch a rg es a re co m puted. S ection 2 2 6 .7 ( b ) ( 8 ) re q u ire s th a t p erio d ic sta te m en ts fo r open en d acco u n ts shall disclose, am o n g o th e r th in g s, “ th e balance on w hich th e finance ch a rg e w as com p u ted , a n d a sta te m e n t of how th a t balance w as d e te rm in e d .” I n som e in stan ces, c re d ito rs co m p u te a finance ch a rg e on th e a v e rag e daily balance by ap p li c atio n of a m o n th ly perio d ic rate. I n such case, th is in fo rm atio n is ad eq u ately disclosed if th e sta te m e n t gives the a m o u n t of th e a v e rag e daily balance o n w hich the finance ch arg e w as com p u ted , an d also sta te s how th e balance is d eterm in ed . In o th e r in stan ces, th e finance ch a rg e is com p u ted on th e balance each d ay by ap p licatio n of a daily periodic ra te an d such ch a rg es a re accum u lated a n d d ebited to th e ac co u n t in a single a m o u n t for th e billing cycle. T h e q u estio n arise s w h e th e r th e perio d ic sta te m e n t m u st show fo r each d ay of th e b illing cycle a balance on w hich a finance ch a rg e w as com puted. If a daily perio d ic ra te is used, th e balance to w hich it is applicable shall be sta te d as fo llo w s: ( 1 ) A balance fo r each day in th e billing cy cle; or ( 2 ) A balance fo r each d ay in the billing cycle on w hich the balance in th e ac co u n t c h a n g e s ; o r ( 3 ) T h e sum of th e daily .balances d u rin g th e billing c y c le ; o r ( 4 ) T h e a v e rag e daily balance d u rin g th e billing cycle in w hich case the c re d ito r shall sta te on th e face of the p eriodic sta te m e n t, its re v e rse side, o r o n an enclosed su p p le m e n t w o rd in g to th e effect th a t th e av e rag e daily balance is o r can be m u ltip lied by th e n u m b e r of days in th e b illing cycle an d th e p erio d ic ra te applied to th e p ro d u c t to d eterm in e th e a m o u n t of th e finance charge. (Interprets and applies 15 U.S.C. 1637.) In d isclo sin g th e m e th o d of d e te rm in in g th e b al ance ( s ) u p o n w h ich finance ch a rg es a re co m p u ted , it is n o t n ecessary to show th e m e th o d of allo catin g p ay m en ts o r o th e r cred its. F o r ex am p le, ex p lan a tio n of the m a n n e r in w hich p ay m en ts o r cre d its m ay be ap p lied to late ch a rg es, o v erd u e b alances, finance ch arg es, in su ran c e p rem iu m s o r o th e r p o rtio n s of b alances is not req u ired . S im ilarly , e x p la n a tio n of th e m e th o d of allo catin g such p ay m en ts b etw een cash ad v an ce an d p u rch a se p o rtio n s of th e acco u n t is n o t re q u ire d . S u ch ex p lan a tio n s in m an y cases involve len g th y an d com plex d escrip tio n s w hich m ay u n d u ly com plicate disclosures. E x p la n a tio n o f th e allo catio n m eth o d m ay be m ade by c re d ito rs w h ere it can be done in co n fo rm ity w ith § 2 2 6 .6 (c ) w hich au th o riz e s ad d itio n a l in fo rm atio n o r ex p lan a tio n s as long as th e y a re n o t stated , utilized, o r placed so as to m islead o r co nfuse th e cu sto m e r o r co n tra d ict, o bscure, o r d e tra c t atte n tio n fro m th e r e q u ired d isclo su res. (Interprets and applies 15 U.S.C. 1637.)
@FedFRASER