(a)
Authority. This part, known as Regulation Z, is issued by the
Bureau of Consumer Financial Protection to implement the Federal Truth
in Lending Act, which is contained in title I of the Consumer Credit
Protection Act, as amended (15 U.S.C. 1601
et seq.).
† This part
also implements title XII, section 1204 of the Competitive Equality
Banking Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Furthermore,
this part implements certain provisions of the Real Estate Settlement
Procedures Act of 1974, as amended (12 U.S.C. 2601
et seq.).
In addition, this part implements certain provisions of the Financial
Institutions Reform, Recovery, and Enforcement Act, as amended (12
U.S.C. 3331
et seq.). The Bureau’s information-collection requirements
contained in this part have been approved by the Office of Management
and Budget (OMB) under the provisions of 44 U.S.C. 3501
et seq. and have been assigned OMB No. 3170-0015 (Truth in Lending).
(b) Purpose. The
purpose of this part is to promote the informed use of consumer credit
by requiring disclosures about its terms and cost, to ensure that
consumers are provided with greater and more timely information on the nature
and costs of the residential real estate settlement process, and to
effect certain changes in the settlement process for residential real
estate that will result in more effective advance disclosure to home
buyers and sellers of settlement costs. The regulation also includes
substantive protections. It gives consumers the right to cancel certain
credit transactions that involve a lien on a consumer’s principal
dwelling, regulates certain credit card practices, and provides a
means for fair and timely resolution of credit billing disputes. The
regulation does not generally govern charges for consumer credit,
except that several provisions in subpart G set forth special rules
addressing certain charges applicable to credit card accounts under
an open-end (not home-secured) consumer credit plan. The regulation
requires a maximum interest rate to be stated in variable-rate contracts
secured by the consumer’s dwelling. It also imposes limitations on
home-equity plans that are subject to the requirements of section
1026.40 and mortgages that are subject to the requirements of section
1026.32. The regulation prohibits certain acts or practices in connection
with credit secured by a dwelling in section 1026.36, and credit secured
by a consumer’s principal dwelling in section 1026.35. The regulation
also regulates certain practices of creditors who extend private education
loans as defined in section 1026.46(b)(5). In addition, it imposes
certain limitations on increases in costs for mortgage transactions
subject to section 1026.19(e) and (f).
6-5601
(c) Coverage.
(1) In general, this part applies to each
individual or business that offers or extends credit, other than a
person excluded from coverage of this part by section 1029 of the
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Public Law 111-203,
124 Stat. 1376, when four conditions are met:
(i) The
credit is offered or extended to consumers;
(ii) The offering or extension of credit
is done regularly;
(iii) The credit is subject to a finance charge or is payable by
a written agreement in more than four installments; and
(iv) The credit is primarily
for personal, family, or household purposes.
(2) If a credit card is involved,
however, certain provisions apply even if the credit is not subject
to a finance charge, or is not payable by a written agreement in more
than four installments, or if the credit card is to be used for business
purposes.
(3) In addition,
certain requirements of section 1026.40 apply to persons who are not
creditors but who provide applications for home-equity plans to consumers.
(4) Furthermore, certain
requirements of section 1026.57 apply to institutions of higher education.
(5) Except in transactions
subject to section 1026.19(e) and (f), no person is required to provide
the disclosures required by sections 128(a)(16) through (19), 128(b)(4),
129C(f)(1), 129C(g)(2) and (3), 129D(h), or 129D(j)(1)(A) of the Truth
in Lending Act, section 4(c) of the Real Estate Settlement Procedures
Act, or the disclosure required prior to settlement by section 129C(h)
of the Truth in Lending Act. Except in transactions subject to section
1026.20(e), no person is required to provide the disclosure required
by section 129D(j)(1)(B) of the Truth in Lending Act. Except in transactions
subject to section 1026.39(d)(5), no person becoming a creditor with
respect to an existing residential mortgage loan is required to provide
the disclosure required by section 129C(h) of the Truth in Lending
Act.
6-5602
(d) Organization. The
regulation is divided into subparts and appendices as follows:
(1) Subpart A contains general
information. It sets forth:
(i) The authority, purpose, coverage,
and organization of the regulation;
(ii) The definitions of basic terms;
(iii) The transactions
that are exempt from coverage; and
(iv) The method of determining the finance
charge.
(2) Subpart B contains the rules for openend credit. It requires that account-opening
disclosures and periodic statements be provided, as well as additional
disclosures for credit and charge card applications and solicitations
and for home-equity plans subject to the requirements of section 1026.60
and section 1026.40, respectively. It also describes special rules
that apply to credit card transactions, treatment of payments and
credit balances, procedures for resolving credit billing errors, annual
percentage rate calculations, rescission requirements, and advertising.
(3) Subpart C relates
to closed-end credit. It contains rules on disclosures, treatment
of credit balances, annual percentage rate calculations, rescission
requirements, and advertising.
(4) Subpart D contains rules on oral disclosures,
disclosures in languages other than English, record retention, effect
on state laws, state exemptions, and rate limitations.
(5) Subpart E contains special rules for
mortgage transactions. Section 1026.32 requires certain disclosures
and provides limitations for closed-end credit transactions and open-end
credit plans that have rates or fees above specified amounts or certain
prepayment penalties. Section 1026.33 requires special disclosures,
including the total annual loan cost rate, for reverse mortgage transactions.
Section 1026.34 prohibits specific acts and practices in connection
with high-cost mortgages, as defined in section 1026.32(a). Section
1026.35 prohibits specific acts and practices in connection with closed-end
higher-priced mortgage loans, as defined in section 1026.35(a). Section
1026.36 prohibits specific acts and practices in connection with an
extension of credit secured by a dwelling. Sections 1026.37 and 1026.38
set forth special disclosure requirements for certain closed-end transactions
secured by real property or a cooperative unit, as required by section
1026.19(e) and (f).
(6) Subpart F relates to private education loans. It contains rules
on disclosures, limitations on changes in terms after approval, the
right to cancel the loan, and limitations on co-branding in the marketing
of private education loans.
(7) Subpart G relates to credit card accounts
under an open-end (not home-secured) consumer credit plan (except
for section 1026.57(c), which applies to all open-end credit plans).
Section 1026.51 contains rules on evaluation of a consumer’s ability
to make the required payments under the terms of an account. Section
1026.52 limits the fees that a consumer can be required to pay with
respect to an open-end (not home-secured) consumer credit plan during
the first year after account opening. Section 1026.53 contains rules
on allocation of payments in excess of the minimum payment. Section
1026.54 sets forth certain limitations on the imposition of finance
charges as the result of a loss of a grace period. Section 1026.55
contains limitations on increases in annual percentage rates, fees,
and charges for credit card accounts. Section 1026.56 prohibits the
assessment of fees or charges for over-the-limit transactions unless
the consumer affirmatively consents to the creditor’s payment of over-the-limit
transactions. Section 1026.57 sets forth rules for reporting and marketing
of college student open-end credit. Section 1026.58 sets forth requirements
for the Internet posting of credit card accounts under an open-end
(not home-secured) consumer credit plan.
(8) Several appendices contain information
such as the procedures for determinations about state laws, state
exemptions and issuance of official interpretations, special rules
for certain kinds of credit plans, and the rules for computing annual
percentage rates in closed-end credit transactions and total-annual-loan-cost
rates for reverse mortgage transactions.
6-5603
(e) Enforcement and liability. Section
108 of the Truth in Lending Act contains the administrative enforcement
provisions for that Act. Sections 112, 113, 130, 131, and 134 contain
provisions relating to liability for failure to comply with the requirements
of the Truth in Lending Act and the regulation. Section 1204(c) of
title XII of the Competitive Equality Banking Act of 1987, Public
Law 100-86, 101 Stat. 552, incorporates by reference administrative enforcement
and civil liability provisions of sections 108 and 130 of the Truth
in Lending Act. Section 19 of the Real Estate Settlement Procedures
Act contains the administrative enforcement provisions for that Act.
