12 CFR Part 226

Federal Compliance

Truth in Lending Act

Regulations

Truth In Lending - Regulation Z (12 CFR Part 226) (08/20/09)

Part 226, Subpart C: Closed-End Credit

§226.18: Content of Disclosures (01/01/97)

For each transaction, the creditor shall disclose the following information as applicable:

(a)	Creditor. The identity of the creditor making the disclosures.

(b)

Amount financed. The amount financed, using that term, and a brief description such as the amount of credit provided to you or on your behalf. The amount financed is calculated by:

(1)	Determining the principal loan amount or the cash price (subtracting any downpayment);

(2)	Adding any other amounts that are financed by the creditor and are not part of the finance charge; and

(3)	Subtracting any prepaid finance charge.

(c)

Itemization of amount financed.

(1)

A separate written itemization of the amount financed, including:⁴⁰

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40	Good faith estimates of settlement costs provided for transactions subject to the Real Estate Settlement Procedures Act (12 USC 2601 et seq.) may be substituted for the disclosures required by paragraph (c) of this section.

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(i)	The amount of any proceeds distributed directly to the consumer.

(ii)	The amount credited to the consumer's account with the creditor.

(iii)

Any amounts paid to other persons by the creditor on the consumer's behalf. The creditor shall identify those persons.⁴¹

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41	The following payees may be described using generic or other general terms and need not be further identified; public officials or government agencies, credit reporting agencies, appraisers, and insurance companies.

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(iv)	The prepaid finance charge.

(2)

The creditor need not comply with paragraph (c)(1) of this section if the creditor provides a statement that the consumer has the right to receive a written itemization of the amount financed, together with a space for the consumer to indicate whether it is desired, and the consumer does not request it.

(d)

Finance charge. The finance charge, using that term, and a brief description such as "the dollar amount the credit will cost you."

(1)

Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:

(i)	is understated by no more than $100; or

(ii)	is greater than the amount required to be disclosed.

(2)

Other credit. In any other transaction, the amount disclosed as the finance charge shall be treated as accurate if, in a transaction involving an amount financed of $1,000 or less, it is not more than $5 above or below the amount required to be disclosed; or, in a transaction involving an amount financed of more than $1,000, it is not more than $10 above or below the amount required to be disclosed.

(e)

Annual percentage rate. The annual percentage rate, using that term, and a brief description such as "the cost of your credit as a yearly rate."⁴²

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42	For any transaction involving a finance charge of $5 or less on an amount financed of $75 or less, or a finance charge of $7.50 or less on an amount financed of more than $75, the creditor need not disclose the annual percentage rate.

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(f)

Variable rate.

(1)

If the annual percentage rate may increase after consummation in a transaction not secured by the consumer's principal dwelling or in a transaction secured by the consumer's principal dwelling with a term of one year or less, the following disclosures:⁴³

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43	Information provided in accordance with §§226.18(f)(2) and 226.19(b) may be substituted for the disclosures required by paragraph (f)(1) of this section.

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(i)	The circumstances under which the rate may increase.

(ii)	Any limitations on the increase.

(iii)

The effect of an increase.

(iv)	An example of the payment terms that would result from an increase.

(2)

If the annual percentage rate may increase after consummation in a transaction secured by the consumer's principal dwelling with a term greater than one year, the following disclosures:

(i)	The fact that the transaction contains a variable-rate feature.

(ii)	A statement that variable-rate disclosures have been provided earlier.

(g)

Payment schedule. The number, amounts, and timing of payments scheduled to repay the obligation.

(1)	In a demand obligation with no alternate maturity date, the creditor may comply with this paragraph by disclosing the due dates or payment periods of any scheduled interest payments for the first year.

(2)

In a transaction in which a series of payments varies because a finance charge is applied to the unpaid principal balance, the creditor may comply with this paragraph by disclosing the following information:

(i)	The dollar amounts of the largest and smallest payments in the series.

(ii)	A reference to the variations in the other payments in the series.

(h)

Total of payments. The total of payments, using that term, and a descriptive explanation such as "the amount you will have paid when you have made all scheduled payments."⁴⁴

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44	In any transaction involving a single payment, the creditor need not disclose the total of payments.

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(i)	Demand feature. If the obligation has a demand feature, that fact shall be disclosed. When the disclosures are based on an assumed maturity of 1 year as provided in §226.17(c)(5), that fact shall also be disclosed.

(j)

Total sale price. In a credit sale, the total sale price, using that term, and a descriptive explanation (including the amount of any downpayment) such as "the total price of your purchase on credit, including your downpayment of $_________." The total sale price is the sum of the cash price, the items described in paragraph (b)(2), and the finance charge disclosed under paragraph (d) of this section.

(k)

Prepayment.

(1)	When an obligation includes a finance charge computed from time to time by application of a rate to the unpaid principal balance, a statement indicating whether or not a penalty may be imposed if the obligation is prepaid in full.

(2)	When an obligation includes a finance charge other than the finance charge described in paragraph (k)(1) of this section, a statement indicating whether or not the consumer is entitled to a rebate of any finance charge if the obligation is prepaid in full.

(l)	Late payment. Any dollar or percentage charge that may be imposed before maturity due to a late payment, other than a deferral or extension charge.

(m)	Security interest. The fact that the creditor has or will acquire a security interest in the property purchased as part of the transaction, or in other property identified by item or type.

(n)	Insurance and debt cancellation. The items required by §226.4 (d) in order to exclude certain insurance premiums and debt cancellation fees from the finance charge.

(o)	Certain security interest charges. The disclosures required by §226.4(e) in order to exclude from the finance charge certain fees prescribed by law or certain premiums for insurance in lieu of perfecting a security interest.

(p)

Contract reference. A statement that the consumer should refer to the appropriate contract document for information about nonpayment, default, the right to accelerate the maturity of the obligation, and prepayment rebates and penalties. At the creditor's option, the statement may also include a reference to the contract for further information about security interests and, in a residential mortgage transaction, about the creditor's policy regarding assumption of the obligation.

(q)	Assumption policy. In a residential mortgage transaction, a statement whether or not a subsequent purchaser of the dwelling from the consumer may be permitted to assume the remaining obligation on its original terms.

(r)

Required deposit. If the creditor requires the consumer to maintain a deposit as a condition of the specific transaction, a statement that the annual percentage rate does not reflect the effect of the required deposit.⁴⁵

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⁴⁵

A required deposit need not include, for example:

(1)	An escrow account for items such as taxes, insurance or repairs;

(2)	a deposit that earns not less than 5 percent per year; or

(3)	payments under a Morris Plan.

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[46 FR 20892, Apr. 7, 1981; 46 FR 29246, June 1, 1981, as amended at 52 FR 48670, Dec. 24, 1987; 61 FR 49246, Sept. 19, 1996]

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