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