regulation z. definitions and finance charge informed use of consumer credit via required...

REGULATION Z

DEFINITIONS AND FINANCE CHARGE

Informed use of consumer credit via required disclosures about terms and cost

Consumer credit protections

PURPOSE OF REG Z

Applies when four conditions are met:The credit is offered or extended to

consumers.The offering or extension of credit is done

regularly.The credit is subject to a finance charge

or is payable by a written agreement in more than four installments.

The credit is primarily for personal, family, or household purposes.

SCOPE OF REG Z

Business creditAmounts over $50,000 except when:

Secured by real property Secured by a dwelling A private education loan

Guaranteed student loansAn extension of credit to a participant

in an employer-sponsored retirement plan

EXEMPTIONS

Look at the “primary purpose” of the credit extension

Special rules for rental property

Organizational credit is always exempt

BUSINESS CREDIT

KEY DEFINITIONS

A commercial message in any medium that promotes, directly or indirectly, a credit transaction.

ADVERTISEMENT

A day on which the creditor’s offi ces are open to the public for carrying on substantially all of its business functions.

BUSINESS DAY

All calendar days except Sundays and legal public holidays (not state holidays):Holidays that fall on a Saturday: count

the previous FridayHolidays that fall on a Sunday: don’t

count any days (even if you’re closed)

BUSINESS DAY - RESCISSION

Any consumer credit other than “open-end credit.”

CLOSED-END CREDIT

Consumer:A consumer is a person to whom consumer

credit is offered or extended. For purposes of rescission - any natural

person whose ownership interest in his or her principal dwelling is subject to the risk of loss.

Consumer Credit:Credit offered or extended to a consumer

primarily for personal, family, or household purposes.

CONSUMER & CONSUMER CREDIT

The time that a consumer becomes contractually obligated on a credit transaction.

CONSUMMATION

Any card, plate, or other single credit device that may be used from time to time to obtain credit.

Does not include: A credit card that accesses a home-equity plan An overdraft line of credit accessed by a debit card

CREDIT CARD

A residential structure that contains one to four units, whether or not that structure is attached to real property.

DWELLING

Consumer credit extended under a plan:Repeated transactionsFinance chargeRevolving

OPEN-END CREDIT

Any finance charge paid separately in cash or by check before or at consummation of a transaction, or withheld from the proceeds of the credit at any time.

PREPAID FINANCE CHARGE

A loan secured by the consumer's principal dwelling to finance the acquisition or initial construction of that dwelling:Not limited to first lien transactionsConstruction loans can be RMTsMulti-purpose loans can be RMTs

RESIDENTIAL MORTGAGE TRANSACTION

FINANCE CHARGE

The cost of consumer credit as a dollar amount:Includes charges

imposed as a condition of the extension of credit.

Does not include any charge of a type payable in a comparable cash transaction.

DEFINITION

The finance charge includes fees and amounts charged by someone other than the creditor, if the creditor:Requires the use of a third party, ORRetains a portion of the third-party

charge.

THIRD PARTY CHARGES

Are finance charges only if the creditor:Requires the particular services for

which the consumer is charged.Requires the imposition of the charge.Retains a portion of the third-party

charge, to the extent of the portion retained.

CLOSING AGENT CHARGES

Always a finance charge

MORTGAGE BROKER FEES

InterestService, transaction and activity chargesPoints and loan feesDiscounts for inducing payment by means

other than creditAppraisal, investigation, and credit report

fees (exceptions apply)Insurance premiums (exceptions apply)Loan purchase fees if they are passed on

to the consumer

FINANCE CHARGES

Application fees charged to all applicants

Late payment feesOverdraft fees not agreed to in writingParticipation feesSeller's points (or any other seller paid

fees)

EXCLUSIONS

Title feesDocument prep

feesNotary and

credit-report feesAppraisal feesEscrow amounts

REAL ESTATE RELATED FEES

Are not finances charges if:The applicant can choose their own

insurance company and this fact is disclosed.

Coverage obtained through the creditor is disclosed.

PROPERTY INSURANCE PREMIUMS

Premiums for credit life, accident, health, or loss-of-income insurance may be excluded from the finance charge if:Coverage is not required (and that fact

is disclosed)The premium for the initial term of

insurance coverage is disclosedThe consumer signs or initials an

affi rmative written request for the insurance after receiving disclosures

INSURANCE AND DEBT CANCELLATION AND DEBT SUSPENSION COVERAGE

Charges or premiums paid for debt cancellation coverage may be excluded from the finance charge if:Coverage is not required and this fact is disclosed The fee or premium for the initial term of

coverage is disclosedFor debt suspension coverage: That the

obligation to pay loan principal and interest is only suspended

The consumer signs or initials an affi rmative written request for coverage after receiving the disclosures

VOLUNTARY DEBT CANCELLATION OR DEBT SUSPENSION FEES

Are not finances charges if they are itemized and disclosed.

SECURITY INTEREST CHARGES