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A p r il 16,
1986
To t h e A d d r e s s e e :
The Board o f G o v e r n o r s o f t h e F e d e r a l R e s e r v e S y s te m h a s i s s u e d
s e v e r a l amendments t o , i t s
o f f i c i a l s t a f f com mentary on R e g u l a t i o n Z, "T ruth i n
L e n d i n g ," e f f e c t i v e A p r i l 1 ,
1986.
E n clo sed i s
a copy o f th e t e x t o f th o se
am endm ents, w h ic h h a s b een r e p r i n t e d from t h e F e d e r a l R e g i s t e r ,
Q u e s t i o n s r e g a r d i n g R e g u l a t i o n Z o r t h e com mentary may be d i r e c t e d t o
our C o m p lia n c e E x a m i n a t i o n s D e p a r tm en t ( T e l . N o. 2 1 2 - 7 9 1 - 5 9 1 9 ) .
C irc u la rs D iv is io n
FEDERAL RESERVE BANK OF NEW YORK
0734C
BOARD OF GOVERNORS OF THE FEDERAL RESER V E SYSTEM
T R U T H IN LEN D IN G
AMENDMENTS TO THE OFFICIAL STA FF COMMENTARY ON REGULATION Z
(effective April 1, 1986)
FEDERAL RESERVE SYSTEM
or Earnestine Hill or Dorothea
Thompson, Telecommunication Device
for the Deaf (TDD) at (202) 452-3544.
12 CFR Part 22®
[R eg. Z; T IL -1 ]
Tirutfn in Lending; Official Staff
۩mm@ntanf Update
(2) E xplanation o f revisions.
Following is a brief description of the
revisions to the commentary and how
they differ, if at all, from those proposed:
SUPPLEMENTARY BNF©RMAT1I©N: (1)
aqewcv: Board of Governors of the
Federal Reserve System.
ACTION: Final official staff
interpretation.
summary : The Board is publishing in
final form changes to the official staff
commentary to Regulation Z (Truth in
Lending). The commentary applies and
interprets the requirements of
Regulation Z and is a substitute for
individual staff interpretations of the
regulation. The revisions address a
variety of questions that have arisen
about the regulation, and include new
material and changes in existing
material.
EFFECTIVE DATE: April 1,1986, but
reliance optional until October 1,1986.
FOR FURTHER INFORMATION CONTACT:
The following attorneys in the Division
of Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, Washington, D.C.
20551, at (202) 452-3667 or (202) 452-3867:
Subpart A—Adrienne Hurt
Subpart B— Gerald Hurst, Susan
Kraeger, John W ood
Subpart C— Michael Bylsma, Leonard
Chanin, Adrienne Hurt
General. The Truth in Lending A ct (15
U.S.C. 1601 et seq .) governs consumer
credit transactions and is implemented
by the Board’s Regulation Z (12 CFR
Part 226). Effective October 13,1981, an
official staff commentary (TIL-1, Supp. I
to 12 CFR Part 226) was published to
interpret the regulation. The
commentary is designed to provide
guidance to creditors in applying the
regulation to specific transactions. The
commentary is updated periodically to
address significant questions that arise.
There have been four general updates so
far— the first in September 1982 (47 FR
41338), the second in April 1983 (48 FR
14882), the third in April 1984 (49 FR
13482), and the fourth in April 1985 (50
FR 13181). There w as also a limited
update concerning fees for the use of
automated teller machines, which was
adopted in October 1984 (49 FR 40560).
This notice contains the fifth general
update, which was proposed for
comment on December 12,1985 (50 FR
50794). The changes are effective on
April 1,1986. Although creditors are free
to rely on the provisions as of that date
and are protected if they do so, they
need not follow the revisions until
October 1,1986, the uniform effective
date provided for in section 105(d) of the
revised Truth in Lending Act.
Subpart A— General
Section 226.4— Finance Charge
4(b) Examples of Finance Charges
Paragraph 4(b)(5). Comment 4(b)(5)—2
is added to explain the treatment of
residual value insurance in a credit
transaction. This type of insurance has
been associated with balloon payment
fin an cin g, p articu larly au tom ob ile balloon
payment financing. In such a
transaction, the creditor may agree to
purchase, at the end of the loan term,
the property sold to the consumer for a
price equal to the final balloon payment
owred by the consumer, in lieu of that
payment. Residual value insurance
guarantees the estimated end of term
value of the property. Comment 4(b)(5)—
2 has been revised to make clear that
premiums for residual value insurance
are included in the finance charge for
the period that the insurance is to be
maintained, but only to the extent that a
consumer is separately charged for the
coverage. The premiums for the
insurance are not considered part of the
finance charge if the creditor pays the
premiums and absorbs the cost (even if
the creditor includes the cost in the cash
price of goods or services or includes the
cost in determining an interest rate to be
charged).
PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 51, NO. 64
Note: The official staff commentaries on certain of the Board’s regulations are generally
mailed only to the head offices of depository institutions in this District. However, they are
available to others on our mailing lists upon request directed to the Circulars Division of this
Bank (Tel. No. 212-791-5216).
Subpart B—Open-End Credit
Section 226.7 —Periodic Statem ent
7(c)
Credits
Comment 7(c)-4 is added—with minor
changes from that proposed— to make
clear that, where the creditor lists
credits made to the account during the
billing cycle, the regulation does not
require that the creditor also disclose a
total for each particular type of credit
made to the account (for example,
payments); nor does the regulation
require that the creditor provide a total
figure for all credits made to the account
during the billing cycle.
Section 226.8— Identification o f
Transactions
Certain material has been deleted in
comment 8-5; the deleted material is
incorporated in new comment 8-8.
Comment 8 -8 is added to clarify the
identification of transaction
requirements for transactions in which a
creditor and a seller have a corporate
connection. Comment 8-8 makes clear
that in certain instances creditors may
describe transactions involving sellers
with whom they have a corporate
connection using the identification
requirements for unrelated creditors and
sellers (| 226.8(a)(3)), instead of the
identification requirements for related
creditors and sellers (f 226.8(a)(2)).
Creditors may use the rules in
§ 226.8(a)(3) when (1) the transactions
occw under a credit plan that was
established primarily for use with sellers
that do not have a corporate connection
with the creditor, or (2) the transactions
involve a seller whose connection with
the creditor would not be known to the
consumer (for example, where the
creditor’s and seller’s names are not
similar, and the periodic statements are
issued only in the creditor’s name). The
second situation, which was previously
addressed by comment 8-5, is now
addressed in new comment 8-8. Staff
believes that, in the circumstances
described in comment 8-8, the
information provided to consumers
under | 226.8(a)(3) would be at least as
useful as that provided under
| 226.8(a)(2).
Editorial changes have been made to
the proposed language of comments 8-5
and 8-8.
Section 226.12— Special Credit Card
Provisions
12(d)
Offsets by Card Issuer Prohibited
Action is not being taken at this time
oss the proposed changes to comment
12(d )(2)-! and the proposed deletion of
comment 12(d)(2)—2. The proposed
changes addressed the security interest
exception in § 226.12(d) of Regulation Z,
which implements section 169 of the
Truth in Lending Act.
Section 169 of the act prohibits a card
issuer from taking any action to offset a
cardholder's indebtedness under a
credit card plan against funds of the
cardholder held on deposit with the card
issu®. Since the statute provides only
one exception to this prohibition— an
exception for plans in which a
cardholder authorizes the card issuer to
periodically deduct all or part of the
cardholder’s credit card debt from
deposit accounts held with the card
issuer— questions arose in the past as to
whether a cardholder’s deposit accounts
could ever serve as security for credit
card indebtedness.
Recognizing that there were instances
where security interests were called
for— for example, an applicant for an
open-end credit card account may be
required to provide collateral to obtain
or retain a credit card account— the
Board provided in Regulation Z that
consensual security interests in deposit
accounts could be taken without
violating the offset prohibition, There is
some evidence, however, that this
position has been interpreted as
allowing card issuers to debit
cardholders’ accounts pursuant to
language routinely included in all
cardholder contracts that takes a
security interest in deposit accounts.
The proposed changes were intended
to provide additional guidance on the
security interest exception to the offsets
prohibition. Some of the commenters on
file proposal, however, expressed
concern about the impact of the
proposed changes and questioned
whether the changes as proposed
correctly addressed the issue. As a
result, action is not being takeii at this
time in order to more fully explore the
concerns raised and the issues involved.
Section 226.16—A d vertisin g
16(b) Advertisement of Terms That
Require Additional Disclosures
A new comment 16(b )-l is added to
indicate that, in an advertisement, the
disclosures required by f 226.16(b)(l)-{3)
need be made only when the
advertisement reflects one or more of
the disclosure terms contained in
1226.6(a) or 226.6(b). In light of this new
comment, comment 16(b}-2 is
redesignated comment 16(b)—3 and is
revised to delete the example indicating
that the implicit disclosure of a security
interest requires that the additional
advertising disclosures of § 226.16(b)(1)(3) be made. Present comment 16(b )-l is
redesignated comment 18(b)—2, and
comments 16(b)—3 through 16(b)-7 are
2
redesignated comments 16(b)—4 through
16(b)-8.
Subpart C—Closed-End Credit
Section 226.17— G eneral D isclosure
R equirem ents
17(a)
Form of Disclosures
Paragraph 17(a)(1). Comment 17(a)(1)4 is revised to clarify the existing rule on
disclosing certain security interest
charges under sections 226.4(e) and
226.18(o). Footnote 38 gives creditors the
option of making this disclosure either
with the segregated disclosures or
elsewhere. The revised comment makes
clear that if a creditor chooses to list
security interest charges in the
itemization of the amount financed, no
further disclosure of those charges is
necessary.
A provision is added to comment 17
(a)fl)-5 allowing specific information
about certain prepayment penalties to
be included with the segregated
disclosures. In cases where federal or
state law prohibits the assessment of a
prepayment penalty, creditors that are
permitted to charge interest for some
period after prepayment in full may
make a statement to that effect without
identifying the charge as a penalty.
Comment 1 7 (a )(l)-7 is added to clarify
the disclosure requirements with regard
to balloon payment financing, having some characteristics of both a lease
transaction subject to Regulation M and
a credit transaction subject to
Regulation Z. The final comment differs
somewhat from the proposed comment
which used a title concept to distinguish
between a lease transaction and a credit
transaction. The distinction between
such transactions is generally based on
ownership rights. Although legal or
equitable title is considered an element
of ownership, it is not always
determinative of whether a transaction
is a credit transaction or a lease
transaction. Such a determination is
more appropriately based on which
party to a transaction has the indicia of
ownership, including the risks, benefits
and burdens of ownership.
Paragraph 17(c)(2). Comment 17(c)(2)3 is added to clarify the use of estimated
disclosures in simple-interest
transactions. Creditors may label
disclosures as estimates because of
possible inaccuracies resulting from
consumers’ payment patterns. Creditors
also have the option of not labelling
disclosures as estimates and assuming
that all payments w’ill be made on the
scheduled dates in making their
disclosure calculations.
Section 226.18— Content o f D isclosures
Section 226.23— Right of Rescission
18(f)
23(f)
Variable Rate
A cross-reference is added to
comment 18(f)—2 to point out the
redisclosure rules in comment 19(b)-4,
which apply to some variable-rate
transactions subject to early disclosure
requirements.
Proposed comment 18(f)—6, which
covered mortgages containing an option
for consumers to convert an adjustablerate mortgage to a fixed-rate mortgage,
has been deleted in view of expected
revisions to disclosure regulations for
adjustable-rate mortgages by several
federal agencies.
18(k)
Prepayment
Paragraph 18(k)(l). Comment 18(k)(l)~
1 is revised to clarify that prepayment
penalties include interest charges
assessed for any period of time after the
date prepayment in full is made. Such
charges are assessed strictly because
prepayment in full has been made at a
date earlier than maturity. For example,
under regulations of the Department of
Housing and Urban Development (24
CFR Parts 203, 213, 222, and 234), a
lender who accepts prepayment in full
on a date other than the installment due
date may assess a charge for interest to
the end of the month. The revision
makes clear that any interest charge
assessed from the date of prepayment in
full until the end of the month is a
prepayment penalty. A cross-reference
to comment 17(a)(1)—5 is added to
identify permissible additional
information that may be included with
this disclosure.
18(m) Security Interest
Comments 18(m )-l and 18(m)-3 are
amended to clarify acceptable
descriptions of security interests for
transactions in which the proceeds, or a
portion of the proceeds, are used to
purchase the collateral. The revisions
make clear that creditors may identify
the collateral generally with a phrase
such as “the property purchased" or,
instead, may identify the collateral by
item or type.
Section 226.19— Certain Residential
Mortgage Transactions
19(b)
Redisclosure Required
A paragraph is added to address the
basis of disclosures when creditors
redisclose at settlement and settlement
occurs later than consummation. In
these transactions, whether fixed-rate or
variable-rate, creditors may base the
disclosures on the terms in effect at
settlement, rather than at
consummation.
Exempt Transactions
Comment 23(f)-8 is revised to clarify
the application of the right of rescission
to an account that converts from an
open-end to a closed-end transaction. In
some cases, as permitted by comment
17(b)-2, creditors delay closed-end
disclosures until conversion of an
account even if consummation of the
closed-end transaction occurs when the
account is opened. Comment 23(f)—8 is
amended ie provide that no new right of
rescission arises at conversion,
regardless of a creditor’s compliance
with rescission provisions at the
opening of an account. Rescission rights
set out in § 226.15 are unaffected.
Section 226.24— Advertising
Comments 24(b )-l and 24(c)(2)-3 are
amended to permit the abbreviation
“APR” to be used instead of the term
“annual percentage rate” in
advertisements. This change makes the
advertising of annual percentage rates
for open-end and closed-end credit more
consistent.
List of Subjects in 12 CFR Part 226
Advertising, Banks, Banking,
Consumer protection, Credit, Federal
Reserve System, Finance, Penalties,
Truth in lending.
PART 226—[AMENDED]
(3) Text of revisions. The revisions to
the commentary (TIL-1, Supplement I to
12 CFR Part 226) read as follows:
Supplement I—Official Staff
Commentary—-TIL-1
Subpart A—General
*
*
*
*
*
Section 226.4— F inance Charge
4(b) Examples of Finance Charges
* * * * *
Paragraph 4(b)(5)
*
*
*
*
*
2. R esidual value insurance. Where a
creditor requires a consumer to maintain
residual value insurance or where the
creditor is a beneficiary of a residual value
insurance policy written in connection with
an extension of credit (as is the case in some
forms of automobile balloon payment
financing, for example), the premiums for the
insurance must be included in the finance
charge for the period that the insurance is to
be maintained. If a creditor pays for residual
value insurance and absorbs the payment as
a costs of doing business, such cost are not
considered finance charges. (See comment
4(a)—
2.)
*
*
*
*
*
Subpart B— Open-End Credit
*
*
*
*
*
Section 226.7—Periodic Statement
*
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*
*
*
7(c) Credits
*
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*
*
*
*
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*
Section 226.8—Identification o f transactions
*
*
*
*
*
5. Sam e or rela ted persons. For purposes of
identifying transactions, the term “same or
related persons" refers to, for example:
® Franchised or licensed sellers of a
creditor’s product or service
° Sellers who assign or sell open-end sales
accounts to a creditor or arrange for such
credit under a plan that allows the consumer
to use the credit only in transactions with
that seller
A seller-is not related to the creditor
merely because the seller and the creditor
have an agreement authorizing the seller to
honor the creditor’s credit card.
*
*
*
*
*
8. Transactions involving creditors and
sellers with corporate connections. In a
credit card plan established for use primarily
with sellers that have no corporate
connection with the creditor, the creditor may
describe all transactions under the plan by
using the rules in | 226.8(a)(3)— creditor and
seller not same or related persons— including
transactions involving a seller that has a
corporate connection with the creditor. In
other credit card plans, the creditor may
describe transactions involving a seller that
has a corporate connection with the creditor,
such as subsidiary-parent, using the rules in
§ 226.8(a)(3) where it is unlikely that the
consumer would know of the corporate
connection between the creditor and the
seller— for example, where the names of the
creditor and the seller are not similar, and the
periodic statement is issued in the name of
the creditor only.
*
*
*
*
*
Section 226.16—Advertising
*
*
*
*
*
16(b) Advertisement of Terms That Require
Additional Disclosures
1. Term s requiring additional disclosures.
In | 226.16(b) the phrase “the terms required
to be disclosed under § 226.6" refers to the
terms in § 226.6(a) and § 226.6(b).
*
*
*
*
*
Comment 16(b )-l is redesignated
comment 16(b)—2.
*
*
*
*
*
3.
Implicit terms. Section 226.16(b) applies
even if the triggering term is not stated
explicitly, but may be readily determined
from the advertisement.
*.
3
*
4. Totals. Where the creditor lists the
credits made to the account during the billing
cycle, the creditor need not disclose total
figures for the amounts credited.
*
*
4
*
Comments 16(b}-3 through 16(b)-7 are
redesignated comments 16(b)-4 through
I6(b}-8.
*
*
*
*
*
Subpart C~CIosed-End Credit
Section 226.17— G eneral Disclosure
R equirem ents
17(a)
Form of Disclosures
Paragraph 17(a)(1)
*
*
*
*
*
4. Content o f segrega ted disclosures.
Footnotes 37 and 38 contain exceptions to the
requirement that the disclosures under
§ 226.18 be segregated from material that is
not directly related to those disclosures.
Footnote 37 lists the items that may be added
to the segregated disclosures, even though
not directly related to thosb disclosures.
Footnote 38 lists the items required under
§ 226.18 that may be deleted from the
segregated disclosures and appear elsewhere.
Any one or more of these additions or
deletions may be combined and appear either
together with or separate from the segregated
disclosures. The itemization of the amount
financed under § 226.18(c), however, must be
separate from the other segregated
disclosures under § 226.18. If a creditor
chooses to include the security interest
charges required to be itemized under
§ 226.4(e) and § 226.18(o) in the amount
financed itemization, it need not list these
charges elsewhere.
5. D irectly related. The segregated
disclosures may, at the creditor’s option,
include any information that is directly
related to those disclosures. Directly related
information includes, for example, the
following: * * *
° If a state or federal law prohibits
prepayment penalties and excludes the
charging of interest after prepayment from
coverage as a penalty, a statement that the
borrower may have to pay interest for some
period after prepayment in full. The
disclosure given under | 226.18(k) may state,
for example, "If you prepay your loan on
other than the regular installment date, you
may be assessed interest charges until the
end of the month.”
*
*
*
*
*
7. Balloon payment fiiwnring w ith leasing
characteristics. In certain credit sale or loan
transactions, a consumer may reduce the
dollar amount of the payments to be made
during ihe course of the transaction by
agreeing to make, at the end of the loan term,
a large final payment based on the expected
residual value of the property. The consumer
may have a number of options with respect to
the final payment, including, among other
things, retaining the property and making the
final payment, refinancing the final payment,
or transferring the property to the creditor in
lieu of the final payment. Such transactions
may have some of the characteristics of lease
transactions subject to Regulation M, but are
considered credit transactions where the
consumer assumes the indicia of ownership,
including the risks, burdens and benefits of
ownership upon consummation. These
transactions are governed by the disclosure
requirements of this regulation instead of
Regulation M. Creditors should not include in
the segregated Truth in Lending disclosures
additional information. Thus, disclosures
should show the large final payment in the
payment schedule and should not, for
example, reflect the other options available
to the consumer at maturity.
*
*
*
*
*
Paragraph 17(c)(2)
*
*
*
*
*
3. Sim ple-interest transactions. If
consumers do not make timely payments in a
simple-interest transaction, some of the
amounts calculated for Truth in Lending
disclosures will differ from amounts that
consumers will actually pay over the term of
the transaction. Creditors may label
disclosures as estimates in these
transactions. For example, because the
finance charge and total of payments may be
larger than disclosed if consumers make late
payments, creditors may label the finance
charge and total of payments as estimates.
On the other hand, creditors may choose not
to label disclosures as estim ates and may
base all disclosures on the assumption that
payments will be made on time, disregarding
any possible inaccuracies resulting from
consumers’ payment patterns.
*
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*
*
*
Section 226.18— Content o f D isclosures
*
*
18(f)
*
*
*
*
Variable Rate
*
*
*
*
2.
Basis fo r disclosures. For transactions
subject to the requirements of § 226.18(f), the
disclosures must be given for the full term of
the transaction and must be based on the
terms in effect at the time of consummation.
However, in a variable-rate transaction with
either a seller buydown that is reflected in
the credit contract or a consumer buydown,
disclosures should not be based solely on the
initial terms. In those transactions, the
disclosed annual percentage rate should be a
composite rate based on the lower rate for
the buydown period and the rate that is the
basis of the variable rate feature for the
remainder of the term. (See the commentary
to | 226.17(c) for a discussion-of buydown
transactions and the commentary to
| 226.19(b) for a discussion of the
redisclosure of certain residential mortage
transactions with a variable-rate feature.)
*
*
*
*
*
18(k)
*
*
Prepayment
*
*
*
Paragraph 18(h)(1)
1. Penalty. This applies only to those
transactions in which the interest calculation
takes account of all scheduled reductions in
principal, as well as transactions in which
interest calculations are made daily. The
term "penalty” as used here encompasses
only those charges that are assessed strictly
because of the prepayment in full of a simpleinterest obligation, as an addition to all other
amounts. Items which are penalties include,
for example:
® Interest charges for any period after
prepayment in full is made. (See the
4
commentary to § 226.17(a)(1) regarding
disclosure of interest charges assessed for
periods after prepayment in full as directly
related information.)
° A minimum finance charge in a simpleinterest transaction. (See the commentary to
§ 226.17(a)(1) regarding the disclosure of a
minimum finance charge as directly related
information.)
° Loan guarantee fees
° Interim interest on a student loan
*
*
*
*
*
18(m)
Security Interest
1. P urchase m oney
transactions. When the
collateral is the item purchased as part of, or
with the proceeds of, the credit transaction,
section 226.18(m) requires only a general
identification such as “the property
purchased in this transaction.” However, the
creditor may identify the property by item or
type instead of identifying it more generally
with a phrase such as “the property
purchased in this transaction.” For example,
a creditor may identify collateral as "a motor
vehicle,” or as "the property purchased in
this transaction.” Any transaction in which
the credit is being used to purchase the
collateral is considered a purchase money
transaction and the abbreviated
identification may be used, whether the
obligation is treated as a loan or a credit sale.
*
*
*
*
*
3. M ix ed collateral. In some transactions in
which the credit is used to purchase the
collateral, the creditor may also take other
property of the consumer as security. In those
cases, a combined disclosure must be
provided, consisting of an identification of
the purchase money collateral consistent
with comment 18(m )-l and a specific
identification of the other collateral
consistent with comment 18(m)-2.
*
*
*
*
*
Section 226.19— Certain R esidential
M ortgage Transactions
*
*
19(b)
*
*
*
*
Redisclosure Required
*
*
*
*
4. Basis o f disclosures. In some cases, a
creditor may delay redisclosure until
settlement, which may be at a time later than
consummation. If a creditor chooses to
redisclose at settlement, disclosures may be
based on the terms in effect at settlement,
rather than at consummation. For example, in
a variable-rate transaction, a creditor may
choose to base disclosures on the terms in
effect at settlement despite the general rule in
the commentary to section 18(f) that variablerate disclosures should be based on the terms
in effect at consummation.
*
*
*
*
*
Section 226.23— Right o f Rescission
*
*
23(f)
*
*
*
*
*
Exempt Transactions
*
*
*
8. Converting o p en-end to closed-end
credit. Under certain state laws,
consummation of a closed-end credit
transaction may occur at the time a consumer
enters into the intitial open-end credit
agreement. As provided to the commentary to
I 226.17(b), closed-end credit disclosures may
be delayed under these circumstances until
fte conversion o f the ©pen-end account to a
igfcised-end transaction. In accounts secured
by -the consumer’s principal dwelling, no new
right of rescission arises at the time of
conversion. Rescission rights under § 226.15
are unaffected.
*
*
*
*
*
S e c tio n 226,24— A d v e rtis in g
*
*
24(b)
*
*
*
Advertisement of Rate of Finance
Charge
1. A n n u a l p e rc e n ta g e pate. Advertised rates
must be stated in terms of an “annual
percentage rate,” as defined in § 226.22. Even
though state or local law permits the use of
add-on, discount, time-price differential, or
other methods of stating rates,
advertisements must state them as annual
percentage rates. Unlike the transactional
disclosure of an annual percentage rate under
| 226.18(e), the advertised annual percentage
rate need not include a descriptive
explanation of the term and may be
expressed using the abbreviation “APR." The
advertisement must state that the rate is
subject to increase after consummation if that
is the case, but the advertisement need not
describe the rate increase, its limits, or how it
would affect the payment schedule. As under
| 226.18(f), relating to disclosure of a variable
rate, the rate increase disclosure requirement
in this provision does not apply to any rate
increase due to delinquency (including late
payment), default, acceleration, assumption,
or transfer of collateral.
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5
24(c) Advertisement of Terms That Require
Additional Disclosure
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P a ra g ra p h 24(c)(2)
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3. A n n u a l p e rc e n ta g e rate . The advertised
annual percentage rate may be expressed
using the abbreviation "APR.” The
advertisement must also state, if applicable,
that the annual percentage rate is subject to
increase after consummation.
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Board of Governors of the Federal Reserve
System, March 31,1986.
William W. Wiles
S e c re ta ry o f th e B o a rd
[FK Doc. 8S-6M8 Filed 4-2-86; 8:45 am]
@FedFRASER