(a) Authority. This regulation, known as Regulation Z, is issued
by the Board of Governors of the Federal Reserve System 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 regulation also implements title XII, section 1204 of
the Competitive Equality Banking Act of 1987 (Pub. L. 100-86, 101
Stat. 552). Information-collection requirements contained in this
regulation have been approved by the Office of Management and Budget
under the provisions of 44 U.S.C. 3501 et seq. and have been assigned
OMB No. 7100-0199.
(b) Purpose. The purpose of this regulation is to promote the informed
use of consumer credit by requiring disclosures about its terms and
cost. 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 226.5b and mortgages that are subject
to the requirements of section 226.32. The regulation prohibits certain
acts or practices in connection with credit secured by a dwelling
in section 226.36, and credit secured by a consumer’s principal dwelling
in section 226.35. The regulation also regulates certain practices
of creditors who extend private education loans as defined in section
226.46(b)(5).
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(c) Coverage.
(1) In general, this regulation
applies to each individual or business that offers or extends credit
when four conditions are met:
(i) The credit is offered
or extended to consumers;
(ii) The offering or extension of credit
is done regularly;
1(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 226.5b apply to persons who are not creditors
but who provide applications for home-equity plans to consumers.
(4) Furthermore, certain
requirements of section 226.57 apply to institutions of higher education.
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(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 open-end 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 226.5a and section 226.5b, 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 percentages 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 226.32 requires certain disclosures
and provides limitations for closed-end loans that have rates or fees
above specified amounts. Section 226.33 requires special disclosures,
including the total annual loan cost rate, for reverse mortgage transactions.
Section 226.34 prohibits specific acts and practices in connection
with closed-end mortgage transactions that are subject to section
226.32. Section 226.35 prohibits specific acts and practices in connection
with closed-end higher-priced mortgage loans, as defined in section
226.35(a). Section 226.36 prohibits specific acts and practices in
connection with an extension of credit secured by a dwelling.
(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 226.57(c), which applies to all open-end
credit plans). Section 226.51 contains rules on evaluation of a consumer’s
ability to make the required payments under the terms of an account.
Section 226.52 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 226.53 contains
rules on allocation of payments in excess of the minimum payment.
Section 226.54 sets forth certain limitations on the imposition of
finance charges as the result of a loss of a grace period. Section
226.55 contains limitations on increases in annual percentage rates,
fees, and charges for credit card accounts. Section 226.56 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 226.57 sets forth rules for
reporting and marketing of college student open-end credit. Section
226.58 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 staff interpretations,
special rules for certain kinds of credit plans, a list of enforcement
agencies, and the rules for computing annual percentage rates in closed-end
credit transactions and total-annual-loan-cost rates for reverse mortgage
transactions.
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(e) Enforcement and liability. Section 108
of the act contains the administrative enforcement provisions. Sections
112, 113, 130, 131, and 134 contain provisions relating to liability
for failure to comply with the requirements of the 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 act.
