Page 66
Closed-End Credit Forms Review Worksheet
c.
Obtained the customer’s signature or
initials as an affirmative request for the
insurance? [226.18(n) and 226.4(d)]
17. If the property insurance premium has
been excluded from finance charge, has
the bank:
a.
Disclosed that the consumer may
choose the insurance company?
b.
Disclosed the cost of the insurance for
the initial term if obtained from or
through the bank? [226.18(n) and
226.4(d)]
18. Are the disclosures required under
226.4(e) to exclude certain fees required
by law, such as a filing fee or certain
insurance premiums from the finance
charge provided? [226.18(o)]
19. Is there a statement referring to the
contract document for specified
information? [226.18(p)]
20. Is there an appropriate assumption
disclosure for residential mortgage
transactions? [226.18(q)]
21. If a deposit is required as a condition of
the transaction, has the bank disclosed
that the APR does not reflect its effect?
[226.18(r)]
Truth in Lending Act
62
Comptroller’s Handbook
Page 67
Worksheet #4
Closed-End Credit – Adjustable Rate Mortgage Forms Review
Use this worksheet when reviewing variable rate loans or ARMs with a maturity greater than one year secured
by the principal dwelling of the borrower. To complete, review the forms and place a check in each
applicable box. Determine the accuracy of the disclosures by comparing them to the contract and other
bank documents. This worksheet can be used for reviewing audit work papers, evaluating bank policies,
performing expanded procedures, and training as appropriate. Only complete those sections of the worksheet
that specifically relate to the issue being reviewed, evaluated or tested, and retain those completed sections in
the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit Adjustable Rate Mortgage Forms Review Worksheet
Product Type:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Is the fact that the note contains a
variable rate feature disclosed?
[226.18(f)(2)(i)]
2. Is there a statement that variable rate
disclosures were provided earlier?
[226.18(f)(2)(ii)]
Disclosure At Time Of Application (one for each program in which the consumer expresses an interest)
[226.19(b)(2)]
3. Are disclosures provided either at time of
application or before consumer pays any
nonrefundable fee or, if the application
is received from a mortgage broker or
over the telephone, mailed within three
business days following receipt of the
application? [226.19(b) & footnote 45b]
4. Do variable rate program disclosures
provide:
a. The booklet entitled “Consumer
Handbook on ARMs,” or a suitable
substitute? [226.19(b)(1)]
b. A statement that interest rate,
payment or the term can change?
[226.19(b)(2)(i)]
c. The index/formula with source of
Comptroller’s Handbook
63
Truth in Lending Act
Page 68
Closed-End Credit Adjustable Rate Mortgage Forms Review Worksheet
Product Type:
Yes No
Yes No
Yes No
Yes No
Yes No
information disclosed?
[226.19(b)(2)(ii)]
d. An explanation of the interest
rate/payment determination and
margin? [226.19(b)(2)(iii)]
e. A statement that consumer should ask
for the current margin and interest
rate? [226.19(b)(2)(iv)]
f. The fact that interest rate is
discounted, if applicable, and a
statement that the consumer should
ask about the amount of discount?
[226.19(b)(2)(v)]
g. The frequency of interest rate and
payment changes? [226.19(b)(2)(vi)]
h. The rules relating to changes?
[226.19(b)(2)(vii)]
i. An historical example or the
maximum interest rate and payment?
[226.19(b)(2)(viii)]
j. An explanation of how the loan
payment can be calculated based on
example? [226.19(b)(2)(ix)]
k. The fact that the loan program
contains a demand feature?
[226.19(b)(2)(x)]
l. Information on, and timing of,
adjustment notices? [226.19(b)(2)(xi)]
m. A statement that disclosures for other
variable rate loan programs are
available? [226.19(b)(2)(xii)]
Truth in Lending Act
64
Comptroller’s Handbook
Page 69
Worksheet #5
Closed-End Credit File Review
Use this worksheet when reviewing closed-end credit loans. The worksheet contains all the standard closed-
end credit disclosure requirements and should be used with the other closed-end worksheets. Determine the
accuracy of the disclosures by comparing them to the contract and other bank documents. To complete,
review loan files and place a check in each applicable box.
This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing expanded
procedures, and training as appropriate. Only complete those sections of the worksheet that specifically relate
to the issue being reviewed, evaluated or tested, and retain those completed sections in the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Are disclosures furnished before
consummation? [226.17(b)]
2. Is the amount financed disclosed and
accurate? [226.18(b)]
3. Is there a separate itemization of the
amount financed (RESPA-GFE, if
applicable, may be substituted)?
[226.18(c)]
4. Is the finance charge disclosed and
accurate? [226.4, 226.18(d) & footnote
41]
5. Is the APR disclosed and accurate?
[226.18(e), footnote 42 & 226.22(a)]
6. Are the following required disclosures on
variable rate loans (other than those
secured by the consumer’s principal
dwelling with a term of more than one
year) provided?
a. Circumstances that permit rate
increase? [226.18(f)(1)(i)]
b. Limits on the increase:
Comptroller’s Handbook
65
Truth in Lending Act
Page 70
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
Periodic? [226.18(f)(1)(ii)]
Lifetime? [226.18(f)(1)(ii)]
c. Effects of increase? [226.18(f)(1)(iii)]
d. Hypothetical example of new payment
terms? [226.18(f)(1)(iv)]
7. Are the following required disclosures
provided if the annual percentage rate
may increase after consummation on
variable rate loan transaction secured by
the consumer’s principal dwelling with a
term greater than one year:
a. The fact that the transaction contains a
variable-rate feature?
b. A statement that variable-rate
disclosures have been provided earlier?
[226.18(f)(2)]
8. Is the payment schedule (amount, timing,
and number of payments) provided and
accurate? [226.18(g)]
9. Is the total of payments provided and
accurate? [226.18(h)]
10. a. If the obligation has a demand feature,
is that fact disclosed?
b. If the disclosures are based on an
assumption of one year as provided in
section 226.17(c)(5), is that fact disclosed?
[226.18(i)]
11. If a credit sale, is the total sale price
accurate? [226.18(j)]
12. Is the security interest described
accurately, if applicable? [226.18(m)]
13. Is the credit life insurance premium or
debt cancellation fee for the initial term
Truth in Lending Act
66
Comptroller’s Handbook
Page 71
Closed-End Credit File Review Worksheet
Product Type:
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
accurately disclosed, if applicable?
[226.18(n) & 226.4(d)]
14. Is the cost of insurance for the initial term
accurately disclosed if from or through
the creditor? [226.18(n) and 226.4(d)]
15. Are deposits required for credit
transactions disclosed accurately?
[226.18(r)]
16. Are REM closing fees that are excluded
from the disclosed finance charge bona
fide and reasonable? [226.4(c)(7)]
17. Is the maximum interest rate in the
contract (variable rate mortgage)
disclosed? [226.30(a)]
Comptroller’s Handbook
67
Truth in Lending Act
Page 72
Worksheet #6
Closed-End Credit – Adjustable Rate Mortgage File Review
Use this worksheet when reviewing variable rate loans or ARMs with maturity greater than one year secured by
the principal dwelling of the borrower. To complete, review applicable loan files and place a check in each
applicable box. Determine the accuracy of the disclosures by comparing them to the contract and other bank
documents. This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing
expanded procedures, and training as appropriate. Only complete those sections of the worksheet that
specifically relate to the issue being reviewed, evaluated or tested, and retain those completed sections in the
work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency and
should be explained in the work papers. When performing expanded procedures, a “No” answer indicates a
possible violation and should be explained in the work papers. If a line item is not applicable within the area
you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Closed-End Credit – Adjustable Rate Mortgage File Review Worksheet
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
1. Did the bank provide timely early disclosures for
residential mortgage transactions subject to RESPA?
[226.19(a)(1)]
2. Was the booklet entitled “Consumer Handbook on
ARMs” or a substitute provided? [226.19(b)(1)]
3. Does the contract contain an independent index [12
CFR 34.22] if the transaction is an ARM under 12
CFR 34.20 or an ARM under 226.19(b)?
Subsequent Disclosures
4. Were subsequent disclosures mailed in accordance
with timing requirements? [226.20(c)] and do they
provide the:
a. Current and prior interest rates (verify accuracy of
rates used)? [226.20(c)(1)]
b. Index values on which interest rates are based
(verify accuracy of indexes used)? [226.20(c)(2)]
c. Extent to which the creditor has foregone an
interest rate increase (only if carryover exists)?
[226.20(c)(3)]
d. Contractual effects of the adjustment, including
Truth in Lending Act
68
Comptroller’s Handbook
Page 73
Closed-End Credit – Adjustable Rate Mortgage File Review Worksheet
Name of Borrower:
Account Number:
Yes No
Yes No
Yes No
Yes No
Yes No
the new payment amount and a statement of the
loan balance? [226.20(c)(4)]
e. Payment required to avoid negative amortization?
[226.20(c)(5)]
Comptroller’s Handbook
69
Truth in Lending Act
Page 74
Worksheet #7
Right of Rescission File Review
Use this worksheet when reviewing the right to rescission for both closed- and open-end loans subject to
Regulation Z that are secured by the consumer’s principal dwelling. Requirements for closed- and open-end
loans are found in 12 CFR 226.23 and 12 CFR 226.15, respectively. (Note: Loans not subject to rescission
include business purpose credit, refinancings in which no new money is advanced, and residential mortgage
transactions.). To complete, review applicable loan files and place a check in each applicable box
This worksheet can be used for reviewing audit work papers, evaluating bank policies, performing expanded
procedures, and training as appropriate. Only complete those sections of the worksheet that specifically relate
to the issue being reviewed, evaluated or tested, and retain those completed sections in the work papers.
When reviewing audit or evaluating bank policies, a “No” answer indicates a possible exception/deficiency
and should be explained in the work papers. When performing expanded procedures, a “No” answer
indicates a possible violation and should be explained in the work papers. If a line item is not applicable
within the area you are reviewing, indicate “NA.”
Underline the applicable use:
Audit
Bank Policies
Expanded Procedures
Right of Rescission File Review Worksheet
Product Type:
Name of Borrower:
Loan/Account #:
Type of Credit (closed or open):
Yes No
Yes No
Yes No
Yes No Yes No
1. Were two copies furnished to each person
entitled to rescind? [226.23(b)(1)/226.15(b)]
2. Does the rescission notice identify the
transaction? [226.23(b)(1)/226.15(b)]
3. Does the rescission notice disclose:
a. The retention or acquisition of a security
interest in the consumer’s principal
dwelling? [226.23(b)(1)(i)/226.15(b)(1)]
b. The consumer’s right to rescind?
[226.23(b)(1)(ii)/226.15(b)(2)]
c. How to exercise the right to rescind?
[226.15(b)(1)(iii)/226.23(b)(3)]
d. The effects of rescission?
[226.23(b)(1)(iv)/226.15(b)(4)]
Tuesday, June 12, 2007
Time of disclosures 17(b in a form the consumer may keep, before consummation
Final rule—amendment to regulation Z - Legal Developments
Federal Reserve Bulletin, June, 2002
The Board of Governors is amending 12 C.F.R. Part 226, its Regulation Z (Truth in Lending). The Board is publishing revisions to the official staff commentary to Regulation Z, which implements the Truth in Lending Act. The commentary applies and interprets the requirements of Regulation Z. The revisions clarify how creditors that place Truth in Lending Act disclosures on the same document with the credit contract may satisfy the requirement for providing the disclosures, in a form the consumer may keep, before consummation. In addition, the revisions provide guidance on disclosing costs for certain credit insurance policies and on the definition of "business day" for purposes of the right to rescind certain home-secured loans.
Most Popular Articles
in Business
* www.sify.com to Host...
* Ruehl: A&F's hip...
* Too Young to Rent a...
* A Bull's Market - the...
The Board is also publishing technical corrections to the commentary and regulation.
Effective April 9, 2002, 12 C.F.R. Part 226 is amended as follows:
Part 226--Truth in Lending (Regulation Z)
1. The authority citation for Part 226 continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).
Section 226.17--[Amended]
2. Section 226.17, in paragraph (a)(1), footnote 38, is amended by removing "[section] 226.18(f)(4)" and adding "[section] 226.18(f)(1)(iv)" in its place.
3. In Supplement I to Part 226:
a. Under Section 226.2--Definitions and Rules of Construction, under 2(a)(6) Business Day, paragraph 2. is revised.
b. Under Section 226.4--Finance Charge, under 4(d) Insurance and Debt Cancellation Coverage, paragraph 12. is revised.
Advertisement
c. Under Section 226.6--Initial Disclosure Requirements, under Paragraph 6(b), paragraph 1.vi. is amended by removing "comment 4(a)-5" and adding "comment 4(a)-4" in its place.
d. Under Section 226.17--General Disclosure Requirements, under 17(b) Time of Disclosures, a new paragraph 3. is added.
e. Under Section 226.32--Requirements for Certain Closed-End Home Mortgages, under Paragraph 32(c)(3), paragraph 1. is revised; and under Paragraph 32(c)(4), paragraph 1. is amended by removing "[section] 226.19(b)(2)(x)" and adding "[section] 226.19(b)(2)(viii)(B)" in its place.
Supplement I to Part 226--Official Staff Interpretations
Subpart A--General
Section 226.2--Definition and Rules of Construction
2(a)(6) Business day.
2. Rescission rule. A more precise rule for what is a business day (all calendar days except Sundays and the federal legal holidays listed in 5 U.S.C. 6103(a)) applies when the right of rescission or mortgages subject to section 226.32 are involved. (See also comment 31 (c)(1)-1.) Four federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25. When one of these holidays (July 4, for example) falls on a Saturday, federal offices and other entities might observe the holiday on the preceding Friday (July 3). The observed holiday (in the example, July 3) is a business day for purposes of rescission or the delivery of disclosures for certain high-cost mortgages covered by Section 226.32.
Section 226.4--Finance Charge
4(d) Insurance and debt cancellation coverage.
12. Initial term; alternative, i. General. A creditor has the option of providing cost disclosures on the basis of an assumed initial term of one year of insurance or debt- cancellation coverage instead of a longer initial term (provided the premium or fee is clearly labeled as being for one year) if:
A. The initial term is indefinite or not clear, or
B. The consumer has agreed to pay a premium or fee that is assessed periodically but the consumer is under no obligation to continue the coverage, whether or not the consumer has made an initial payment.
ii. Open-end plans. For open-end plans, a creditor also has the option of providing unit-cost disclosure on the basis of a period that is less than one year if the consumer has agreed to pay a premium or fee that is assessed periodically, for example monthly, but the consumer is under no obligation to continue the coverage.
iii. Examples. To illustrate: A. A credit life insurance policy providing coverage for a 30-year mortgage loan has an initial term of 30 years, even though premiums are paid monthly and the consumer is not required to continue the coverage. Disclosures may be based on the initial term, but the creditor also has the option of making disclosures on the basis of coverage for an assumed initial term of one year.
Subpart C--Closed-End Credit
Section 226.17--General Disclosure Requirements
17(b) Time of disclosures.
3. Disclosures provided on credit contracts. Creditors must give the required disclosures to the consumer in writing, in a form that the consumer may keep, before consummation of the transaction. See section 226.17(a)(1) and (b). Sometimes the disclosures are placed on the same document with the credit contract. Creditors are not required to give the consumer two separate copies of the document before consummation, one for the consumer to keep and a second copy for the consumer to execute. The disclosure requirement is satisfied if the creditor gives a copy of the document containing the unexecuted credit contract and disclosures to the consumer to read and sign; and the consumer receives a copy to keep at the time the consumer becomes obligated. It is not sufficient for the creditor merely to show the consumer the document containing the disclosures before the consumer signs and becomes obligated. The consumer must be free to take possession of and review the document in its entirety before signing.
Federal Reserve Bulletin, June, 2002
The Board of Governors is amending 12 C.F.R. Part 226, its Regulation Z (Truth in Lending). The Board is publishing revisions to the official staff commentary to Regulation Z, which implements the Truth in Lending Act. The commentary applies and interprets the requirements of Regulation Z. The revisions clarify how creditors that place Truth in Lending Act disclosures on the same document with the credit contract may satisfy the requirement for providing the disclosures, in a form the consumer may keep, before consummation. In addition, the revisions provide guidance on disclosing costs for certain credit insurance policies and on the definition of "business day" for purposes of the right to rescind certain home-secured loans.
Most Popular Articles
in Business
* www.sify.com to Host...
* Ruehl: A&F's hip...
* Too Young to Rent a...
* A Bull's Market - the...
The Board is also publishing technical corrections to the commentary and regulation.
Effective April 9, 2002, 12 C.F.R. Part 226 is amended as follows:
Part 226--Truth in Lending (Regulation Z)
1. The authority citation for Part 226 continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).
Section 226.17--[Amended]
2. Section 226.17, in paragraph (a)(1), footnote 38, is amended by removing "[section] 226.18(f)(4)" and adding "[section] 226.18(f)(1)(iv)" in its place.
3. In Supplement I to Part 226:
a. Under Section 226.2--Definitions and Rules of Construction, under 2(a)(6) Business Day, paragraph 2. is revised.
b. Under Section 226.4--Finance Charge, under 4(d) Insurance and Debt Cancellation Coverage, paragraph 12. is revised.
Advertisement
c. Under Section 226.6--Initial Disclosure Requirements, under Paragraph 6(b), paragraph 1.vi. is amended by removing "comment 4(a)-5" and adding "comment 4(a)-4" in its place.
d. Under Section 226.17--General Disclosure Requirements, under 17(b) Time of Disclosures, a new paragraph 3. is added.
e. Under Section 226.32--Requirements for Certain Closed-End Home Mortgages, under Paragraph 32(c)(3), paragraph 1. is revised; and under Paragraph 32(c)(4), paragraph 1. is amended by removing "[section] 226.19(b)(2)(x)" and adding "[section] 226.19(b)(2)(viii)(B)" in its place.
Supplement I to Part 226--Official Staff Interpretations
Subpart A--General
Section 226.2--Definition and Rules of Construction
2(a)(6) Business day.
2. Rescission rule. A more precise rule for what is a business day (all calendar days except Sundays and the federal legal holidays listed in 5 U.S.C. 6103(a)) applies when the right of rescission or mortgages subject to section 226.32 are involved. (See also comment 31 (c)(1)-1.) Four federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25. When one of these holidays (July 4, for example) falls on a Saturday, federal offices and other entities might observe the holiday on the preceding Friday (July 3). The observed holiday (in the example, July 3) is a business day for purposes of rescission or the delivery of disclosures for certain high-cost mortgages covered by Section 226.32.
Section 226.4--Finance Charge
4(d) Insurance and debt cancellation coverage.
12. Initial term; alternative, i. General. A creditor has the option of providing cost disclosures on the basis of an assumed initial term of one year of insurance or debt- cancellation coverage instead of a longer initial term (provided the premium or fee is clearly labeled as being for one year) if:
A. The initial term is indefinite or not clear, or
B. The consumer has agreed to pay a premium or fee that is assessed periodically but the consumer is under no obligation to continue the coverage, whether or not the consumer has made an initial payment.
ii. Open-end plans. For open-end plans, a creditor also has the option of providing unit-cost disclosure on the basis of a period that is less than one year if the consumer has agreed to pay a premium or fee that is assessed periodically, for example monthly, but the consumer is under no obligation to continue the coverage.
iii. Examples. To illustrate: A. A credit life insurance policy providing coverage for a 30-year mortgage loan has an initial term of 30 years, even though premiums are paid monthly and the consumer is not required to continue the coverage. Disclosures may be based on the initial term, but the creditor also has the option of making disclosures on the basis of coverage for an assumed initial term of one year.
Subpart C--Closed-End Credit
Section 226.17--General Disclosure Requirements
17(b) Time of disclosures.
3. Disclosures provided on credit contracts. Creditors must give the required disclosures to the consumer in writing, in a form that the consumer may keep, before consummation of the transaction. See section 226.17(a)(1) and (b). Sometimes the disclosures are placed on the same document with the credit contract. Creditors are not required to give the consumer two separate copies of the document before consummation, one for the consumer to keep and a second copy for the consumer to execute. The disclosure requirement is satisfied if the creditor gives a copy of the document containing the unexecuted credit contract and disclosures to the consumer to read and sign; and the consumer receives a copy to keep at the time the consumer becomes obligated. It is not sufficient for the creditor merely to show the consumer the document containing the disclosures before the consumer signs and becomes obligated. The consumer must be free to take possession of and review the document in its entirety before signing.
Certain Closed-End Home Mortgages Section 226.32
Section 226.32—Requirements for Certain Closed-End Home Mortgages
32(a) Coverage.
Paragraph 32(a)(1)(i).
1. Application date. An application is deemed received when it reaches the creditor in any of the ways applications are normally transmitted. (See § 226.19(a).) For example, if a borrower applies for a 10-year loan on September 30 and the creditor counteroffers with a 7-year loan on October 10, the application is deemed received in September and the creditor must measure the annual percentage rate against the appropriate Treasury security yield as of August 15. An application transmitted through an intermediary agent or broker is received when it reaches the creditor, rather than when it reaches the agent or broker. (See comment 19(b)-3 to determine whether a transaction involves an intermediary agent or broker.)
2. When fifteenth not a business day. If the 15th day of the month immediately preceding the application date is not a business day, the creditor must use the yield as of the business day immediately preceding the 15th.
3. Calculating annual percentage rates for variable-rate loans and discount loans. Creditors must use the rules set out in the commentary to § 226.17(c)(1) in calculating the annual percentage rate for variable-rate loans (assume the rate in effect at the time of disclosure remains unchanged) and for discount, premium, and stepped-rate transactions (which must reflect composite annual percentage rates).
4. Treasury securities. To determine the yield on comparable Treasury securities for the annual percentage rate test, creditors may use the yield on actively traded issues adjusted to constant maturities published in the Board's "Selected Interest Rates" (statistical release H-15). Creditors must use the yield corresponding to the constant maturity that is closest to the loan's maturity. If the loan's maturity is exactly halfway between security maturities, the annual percentage rate on the loan should be compared with the yield for Treasury securities having the lower yield. In determining the loan's maturity, creditors may rely on the rules in § 226.17(c)(4) regarding irregular first payment periods. For example:
i. If the H-15 contains a yield for Treasury securities with constant maturities of 7 years and 10 years and no maturity in between, the annual percentage rate for an 8-year mortgage loan is compared with the yield of securities having a 7-year maturity, and the annual percentage rate for a 9-year mortgage loan is compared with the yield of securities having a 10-year maturity.
ii. If a mortgage loan has a term of 15 years, and the H-15 contains a yield of 5.21 percent for constant maturities of 10 years, and also contains a yield of 6.33 percent for constant maturities of 20 years, then the creditor compares the annual percentage rate for a 15-year mortgage loan with the yield for constant maturities of 10 years.
iii. If a mortgage loan has a term of 30 years, and the H-15 does not contain a yield for 30-year constant maturities, but contains a yield for 20-year constant maturities, and an average yield for securities with remaining terms to maturity of 25 years and over, then the annual percentage rate on the loan is compared with the yield for 20-year constant maturities.
Paragraph 32(a)(1)(ii).
1. Total loan amount. For purposes of the "points and fees" test, the total loan amount is calculated by taking the amount financed, as determined according to § 226.18(b), and deducting any cost listed in § 226.32(b)(1)(iii) and § 226.32(b)(1)(iv) that is both included as points and fees under § 226.32(b)(1) and financed by the creditor. Some
{{6-30-05 p.6980.01}}examples follow, each using a $10,000 amount borrowed, a $300 appraisal fee, and $400 in points. A $500 premium for optional credit life insurance is used in one example.
i. If the consumer finances a $300 fee for a creditor-conducted appraisal and pays $400 in points at closing, the amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 appraisal fee that is paid to and financed by the creditor, less $400 in prepaid
{{8-31-06 p.6981}}finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii). It is deducted from the amount financed ($9,900) to derive a total loan amount of $9,600.
ii. If the consumer pays the $300 fee for the creditor-conducted appraisal in cash at closing, the $300 is included in the points and fees calculation because it is paid to the creditor. However, because the $300 is not financed by the creditor, the fee is not part of the amount financed under § 226.18(b). In this case, the amount financed is the same as the total loan amount: $9,600 ($10,000, less $400 in prepaid finance charges).
iii. If the consumer finances a $300 fee for an appraisal conducted by someone other than the creditor or an affiliate, the $300 fee is not included with other points and fees under § 226.32(b)(1)(iii). The amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 fee for an independently-conducted appraisal that is financed by the creditor, less the $400 paid in cash and deducted as prepaid financed charges).
iv. If the consumer finances a $300 fee for a creditor-conducted appraisal and a $500 single premium for optional credit life insurance, and pays $400 in points at closing, the amount financed under § 226.18(b) is $10,400 ($10,000, plus the $300 appraisal fee that is paid to and financed by the creditor, plus the $500 insurance premium that is financed by the creditor, less $400 in prepaid finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii) and the $500 insurance premium is added under 226.32(b)(1)(iv). The $300 and $500 costs are deducted from the amount financed ($10,400) to derive a total loan amount of $9,600.
2. Annual adjustment of $400 amount. A mortgage loan is covered by § 226.32 if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount. The $400 figure is adjusted annually on January 1 by the annual percentage change in the CPI that was in effect on the preceding June 1. The Board will publish adjustments after the June figures become available each year. The adjustment for the upcoming year will be included in any proposed commentary published in the fall, and incorporated into the commentary the following spring. The adjusted figures are:
i. For 1996, $412, reflecting a 3.00 percent increase in the CPI--U from June 1994 to June 1995, rounded to the nearest whole dollar.
ii. For 1997, $424, reflecting a 2.9 percent increase in the CPI--U from June 1995 to June 1996, rounded to the nearest whole dollar.
iii. For 1998, $435, reflecting a 2.5 percent increase in the CPI--U from June 1996 to June 1997, rounded to the nearest whole dollar.
iv. For 1999, $441, reflecting a 1.4 percent increase in the CPI--U from June 1997 to June 1998, rounded to the nearest whole dollar.
v. For 2000, $451, reflecting a 2.3 percent increase in the CPI--U from June 1998 to June 1999, rounded to the nearest whole dollar.
vi. For 2001, $465, reflecting a 3.1 percent increase in the CPI--U from June 1999 to June 2000, rounded to the nearest whole dollar.
vii. For 2002, $480, reflecting a 3.27 percent increase in the CPI--U from June 2000 to June 2001, rounded to the nearest whole dollar.
viii. For 2003, $488, reflecting a 1.64 percent increase in the CPI--U from June 2001 to June 2002, rounded to the nearest whole dollar.
ix. For 2004, $499, reflecting a 2.22 percent increase in the CPI--U from June 2002 to June 2003, rounded to the nearest whole dollar.
x. For 2005, $510, reflecting a 2.29 percent increase in the CPI--U from June 2003 to June 2004, rounded to the nearest whole dollar.
xi. For 2006, $528, reflecting a 3.51 percent increase in the CPI--U from June 2004 to June 2005, rounded to the nearest whole dollar.
xii. For 2007, $547, reflecting a 3.55 percent increase in the CPI--U from June 2005 to June 2006, rounded to the nearest whole dollar.
32(b) Definitions
Paragraph 32(b)(1)(i).
1. General. Section 226.32(b)(1)(i) includes in the total "points and fees" items defined as finance charges under §§ 226.4(a) and 226.(4)(b). Items excluded from the finance charge under other provisions of § 226.4 are not included in the total "points and fees" under paragraph 32(b)(1)(i), but may be included in "points and fees" under paragraphs
{{8-31-06 p.6982}}32(b)(1)(ii) and 32(b)(1)(iii). Interest, including per-diem interest, is excluded from "points and fees" under § 226.32(b)(1).
Paragraph 32(b)(1)(ii).
1. Mortgage broker fees. In determining "points and fees" for purposes of this section, compensation paid by a consumer to a mortgage broker (directly or through the creditor for delivery to the broker) is included in the calculation whether or not the amount is disclosed as a finance charge. Mortgage broker fees that are not paid by the consumer are not included. Mortgage broker fees already included in the calculation as finance charges under § 226.32(b)(1)(i) need not be counted again under § 226.32(b)(1)(ii).
2. Example. Section 226.32(b)(1)(iii) defines "points and fees" to include all items listed in § 226.4(c)(7), other than amounts held for the future payment of taxes. An item listed in § 226.4(c)(7) may be excluded from the "points and fees" calculation, however, if the charge is reasonable, the creditor receives no direct or indirect compensation from the charge, and the charge is not paid to an affiliate of the creditor. For example, a reasonable fee paid by the consumer to an independent, third-party appraiser may be excluded from the "points and fees" calculation (assuming no compensation is paid to the creditor). A fee paid by the consumer for an appraisal performed by the creditor must be included in the calculation, even though the fee may be excluded from the finance charge if it is bona fide and reasonable in amount.
Paragraph 32(b)(1)(iv).
1. Premium amount. In determining "points and fees" for purposes of this section, premiums paid at or before closing for credit insurance are included whether they are paid in cash or financed, and whether the amount represents the entire premium for the coverage or an initial payment.
32(c) Disclosures.
1. Format. The disclosures must be clear and conspicuous but need not be in any particular type size or typeface, nor presented in any particular manner. The disclosures need not be a part of the note or mortgage document.
Paragraph 32(c)(3) Regular payment; balloon payment.
1. General. The regular payment is the amount due from the borrower at regular intervals, such as monthly, bimonthly, quarterly, or annually. There must be at least two payments, and the payments must be in an amount and at such intervals that they fully amortize the amount owed. In disclosing the regular payment, creditors may rely on the rules set forth in § 226.18(g); however, the amounts for voluntary items, such as credit life insurance, may be included in the regular payment disclosure only if the consumer has previously agreed to the amounts.
i. If the loan has more than one payment level, the regular payment for each level must be disclosed. For example:
A. In a 30-year graduated payment mortgage where there will be payments of $300 for the first 120 months, $400 for the next 120 months, and $500 for the last 120 months, each payment amount must be disclosed, along with the length of time that the payment will be in effect.
B. If interest and principal are paid at different times, the regular amount for each must be disclosed.
C. In discounted or premium variable-rate transactions where the creditor sets the initial interest rate and later rate adjustments are determined by an index or formula, the creditor must disclose both the initial payment based on the discount or premium and the payment that will be in effect thereafter. Additional explanatory material which does not detract from the required disclosures may accompany the disclosed amounts. For example, if a monthly payment is $250 for the first six months and then increases based on an index and margin, the creditor could use language such as the following: "Your regular monthly payment will be $250 for six months. After six months your regular monthly payment will be based on an index and margin, which currently would make your payment $350. Your actual payment at that time may be higher or lower."
Paragraph 32(c)(4) Variable-rate.
1. Calculating "worst-case" payment example. Creditors may rely on instructions in § 226.19(b)(2)(viii)(B) for calculating the maximum possible increases in rates in the shortest possible timeframe, based on the face amount of the note (not the hypothetical loan amount of $10,000 required by § 226.19(b)(2)(viii)(B)). The creditor must provide a
{{4-30-04 p.6982.01}}maximum payment for each payment level, where a payment schedule provides for more than one payment level and more than one maximum payment amount is possible.
Paragraph 32(c)(5) Amount borrowed.
1. Optional insurance; debt-cancellation coverage. This disclosure is required when the amount borrowed in a refinancing includes premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health, or income or in the case of accident. See comment 4(d)(3)--2 and comment app. G and H--2 regarding terminology for debt-cancellation coverage.
32(d) Limitations
Paragraph 32(d)(1)(i) Balloon payment.
1. Regular periodic payments. The repayment schedule for a § 226.32 mortgage loan with a term of less than five years must fully amortize the outstanding principal balance through "regular periodic payments." A payment is a "regular periodic payment" if it is not more than twice the amount of other payments.
Paragraph 32(d)(2) Negative amortization.
1. Negative amortization. The prohibition against negative amortization in a mortgage covered by § 226.32 does not preclude reasonable increases in the principal balance that result from events permitted by the legal obligation unrelated to the payment schedule. For example, when a consumer fails to obtain property insurance and the creditor purchases insurance, the creditor may add a reasonable premium to the consumer's principal balance, to the extent permitted by the legal obligation.
Paragraph 32(d)(4) Increased interest rate.
1. Variable-rate transactions. The limitation on interest rate increases does not apply to rate increases resulting from changes in accordance with the legal obligation in a variable-rate transaction, even if the increase occurs after default by the consumer.
Paragraph 32(d)(5) Rebates.
1. Calculation of refunds. The limitation applies only to refunds of precomputed (such as add-on) interest and not to any other charges that are considered finance charges under § 226.4 (for example, points and fees paid at closing). The calculation of the refund of interest includes odd-days interest, whether paid at or after consummation.
Paragraph 32(d)(6) Prepayment penalties.
1. State law. For purposes of computing a refund of unearned interest, if using the actuarial method defined by applicable state law results in a refund that is greater than the refund calculated by using the method described in section 933(d) of the Housing and Community Development Act of 1992, creditors should use the state law definition in determining if a refund is a prepayment penalty.
32(d)(7) Prepayment penalty exception.
Paragraph 32(d)(7)(iii).
1. Calculating debt-to-income ratio. "Debt" does not include amounts paid by the borrower in cash at closing or amounts from the loan proceeds that directly repay an existing debt. Creditors may consider combined debt-to-income ratios for transactions involving joint applicants.
32(a) Coverage.
Paragraph 32(a)(1)(i).
1. Application date. An application is deemed received when it reaches the creditor in any of the ways applications are normally transmitted. (See § 226.19(a).) For example, if a borrower applies for a 10-year loan on September 30 and the creditor counteroffers with a 7-year loan on October 10, the application is deemed received in September and the creditor must measure the annual percentage rate against the appropriate Treasury security yield as of August 15. An application transmitted through an intermediary agent or broker is received when it reaches the creditor, rather than when it reaches the agent or broker. (See comment 19(b)-3 to determine whether a transaction involves an intermediary agent or broker.)
2. When fifteenth not a business day. If the 15th day of the month immediately preceding the application date is not a business day, the creditor must use the yield as of the business day immediately preceding the 15th.
3. Calculating annual percentage rates for variable-rate loans and discount loans. Creditors must use the rules set out in the commentary to § 226.17(c)(1) in calculating the annual percentage rate for variable-rate loans (assume the rate in effect at the time of disclosure remains unchanged) and for discount, premium, and stepped-rate transactions (which must reflect composite annual percentage rates).
4. Treasury securities. To determine the yield on comparable Treasury securities for the annual percentage rate test, creditors may use the yield on actively traded issues adjusted to constant maturities published in the Board's "Selected Interest Rates" (statistical release H-15). Creditors must use the yield corresponding to the constant maturity that is closest to the loan's maturity. If the loan's maturity is exactly halfway between security maturities, the annual percentage rate on the loan should be compared with the yield for Treasury securities having the lower yield. In determining the loan's maturity, creditors may rely on the rules in § 226.17(c)(4) regarding irregular first payment periods. For example:
i. If the H-15 contains a yield for Treasury securities with constant maturities of 7 years and 10 years and no maturity in between, the annual percentage rate for an 8-year mortgage loan is compared with the yield of securities having a 7-year maturity, and the annual percentage rate for a 9-year mortgage loan is compared with the yield of securities having a 10-year maturity.
ii. If a mortgage loan has a term of 15 years, and the H-15 contains a yield of 5.21 percent for constant maturities of 10 years, and also contains a yield of 6.33 percent for constant maturities of 20 years, then the creditor compares the annual percentage rate for a 15-year mortgage loan with the yield for constant maturities of 10 years.
iii. If a mortgage loan has a term of 30 years, and the H-15 does not contain a yield for 30-year constant maturities, but contains a yield for 20-year constant maturities, and an average yield for securities with remaining terms to maturity of 25 years and over, then the annual percentage rate on the loan is compared with the yield for 20-year constant maturities.
Paragraph 32(a)(1)(ii).
1. Total loan amount. For purposes of the "points and fees" test, the total loan amount is calculated by taking the amount financed, as determined according to § 226.18(b), and deducting any cost listed in § 226.32(b)(1)(iii) and § 226.32(b)(1)(iv) that is both included as points and fees under § 226.32(b)(1) and financed by the creditor. Some
{{6-30-05 p.6980.01}}examples follow, each using a $10,000 amount borrowed, a $300 appraisal fee, and $400 in points. A $500 premium for optional credit life insurance is used in one example.
i. If the consumer finances a $300 fee for a creditor-conducted appraisal and pays $400 in points at closing, the amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 appraisal fee that is paid to and financed by the creditor, less $400 in prepaid
{{8-31-06 p.6981}}finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii). It is deducted from the amount financed ($9,900) to derive a total loan amount of $9,600.
ii. If the consumer pays the $300 fee for the creditor-conducted appraisal in cash at closing, the $300 is included in the points and fees calculation because it is paid to the creditor. However, because the $300 is not financed by the creditor, the fee is not part of the amount financed under § 226.18(b). In this case, the amount financed is the same as the total loan amount: $9,600 ($10,000, less $400 in prepaid finance charges).
iii. If the consumer finances a $300 fee for an appraisal conducted by someone other than the creditor or an affiliate, the $300 fee is not included with other points and fees under § 226.32(b)(1)(iii). The amount financed under § 226.18(b) is $9,900 ($10,000 plus the $300 fee for an independently-conducted appraisal that is financed by the creditor, less the $400 paid in cash and deducted as prepaid financed charges).
iv. If the consumer finances a $300 fee for a creditor-conducted appraisal and a $500 single premium for optional credit life insurance, and pays $400 in points at closing, the amount financed under § 226.18(b) is $10,400 ($10,000, plus the $300 appraisal fee that is paid to and financed by the creditor, plus the $500 insurance premium that is financed by the creditor, less $400 in prepaid finance charges). The $300 appraisal fee paid to the creditor is added to other points and fees under § 226.32(b)(1)(iii) and the $500 insurance premium is added under 226.32(b)(1)(iv). The $300 and $500 costs are deducted from the amount financed ($10,400) to derive a total loan amount of $9,600.
2. Annual adjustment of $400 amount. A mortgage loan is covered by § 226.32 if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount. The $400 figure is adjusted annually on January 1 by the annual percentage change in the CPI that was in effect on the preceding June 1. The Board will publish adjustments after the June figures become available each year. The adjustment for the upcoming year will be included in any proposed commentary published in the fall, and incorporated into the commentary the following spring. The adjusted figures are:
i. For 1996, $412, reflecting a 3.00 percent increase in the CPI--U from June 1994 to June 1995, rounded to the nearest whole dollar.
ii. For 1997, $424, reflecting a 2.9 percent increase in the CPI--U from June 1995 to June 1996, rounded to the nearest whole dollar.
iii. For 1998, $435, reflecting a 2.5 percent increase in the CPI--U from June 1996 to June 1997, rounded to the nearest whole dollar.
iv. For 1999, $441, reflecting a 1.4 percent increase in the CPI--U from June 1997 to June 1998, rounded to the nearest whole dollar.
v. For 2000, $451, reflecting a 2.3 percent increase in the CPI--U from June 1998 to June 1999, rounded to the nearest whole dollar.
vi. For 2001, $465, reflecting a 3.1 percent increase in the CPI--U from June 1999 to June 2000, rounded to the nearest whole dollar.
vii. For 2002, $480, reflecting a 3.27 percent increase in the CPI--U from June 2000 to June 2001, rounded to the nearest whole dollar.
viii. For 2003, $488, reflecting a 1.64 percent increase in the CPI--U from June 2001 to June 2002, rounded to the nearest whole dollar.
ix. For 2004, $499, reflecting a 2.22 percent increase in the CPI--U from June 2002 to June 2003, rounded to the nearest whole dollar.
x. For 2005, $510, reflecting a 2.29 percent increase in the CPI--U from June 2003 to June 2004, rounded to the nearest whole dollar.
xi. For 2006, $528, reflecting a 3.51 percent increase in the CPI--U from June 2004 to June 2005, rounded to the nearest whole dollar.
xii. For 2007, $547, reflecting a 3.55 percent increase in the CPI--U from June 2005 to June 2006, rounded to the nearest whole dollar.
32(b) Definitions
Paragraph 32(b)(1)(i).
1. General. Section 226.32(b)(1)(i) includes in the total "points and fees" items defined as finance charges under §§ 226.4(a) and 226.(4)(b). Items excluded from the finance charge under other provisions of § 226.4 are not included in the total "points and fees" under paragraph 32(b)(1)(i), but may be included in "points and fees" under paragraphs
{{8-31-06 p.6982}}32(b)(1)(ii) and 32(b)(1)(iii). Interest, including per-diem interest, is excluded from "points and fees" under § 226.32(b)(1).
Paragraph 32(b)(1)(ii).
1. Mortgage broker fees. In determining "points and fees" for purposes of this section, compensation paid by a consumer to a mortgage broker (directly or through the creditor for delivery to the broker) is included in the calculation whether or not the amount is disclosed as a finance charge. Mortgage broker fees that are not paid by the consumer are not included. Mortgage broker fees already included in the calculation as finance charges under § 226.32(b)(1)(i) need not be counted again under § 226.32(b)(1)(ii).
2. Example. Section 226.32(b)(1)(iii) defines "points and fees" to include all items listed in § 226.4(c)(7), other than amounts held for the future payment of taxes. An item listed in § 226.4(c)(7) may be excluded from the "points and fees" calculation, however, if the charge is reasonable, the creditor receives no direct or indirect compensation from the charge, and the charge is not paid to an affiliate of the creditor. For example, a reasonable fee paid by the consumer to an independent, third-party appraiser may be excluded from the "points and fees" calculation (assuming no compensation is paid to the creditor). A fee paid by the consumer for an appraisal performed by the creditor must be included in the calculation, even though the fee may be excluded from the finance charge if it is bona fide and reasonable in amount.
Paragraph 32(b)(1)(iv).
1. Premium amount. In determining "points and fees" for purposes of this section, premiums paid at or before closing for credit insurance are included whether they are paid in cash or financed, and whether the amount represents the entire premium for the coverage or an initial payment.
32(c) Disclosures.
1. Format. The disclosures must be clear and conspicuous but need not be in any particular type size or typeface, nor presented in any particular manner. The disclosures need not be a part of the note or mortgage document.
Paragraph 32(c)(3) Regular payment; balloon payment.
1. General. The regular payment is the amount due from the borrower at regular intervals, such as monthly, bimonthly, quarterly, or annually. There must be at least two payments, and the payments must be in an amount and at such intervals that they fully amortize the amount owed. In disclosing the regular payment, creditors may rely on the rules set forth in § 226.18(g); however, the amounts for voluntary items, such as credit life insurance, may be included in the regular payment disclosure only if the consumer has previously agreed to the amounts.
i. If the loan has more than one payment level, the regular payment for each level must be disclosed. For example:
A. In a 30-year graduated payment mortgage where there will be payments of $300 for the first 120 months, $400 for the next 120 months, and $500 for the last 120 months, each payment amount must be disclosed, along with the length of time that the payment will be in effect.
B. If interest and principal are paid at different times, the regular amount for each must be disclosed.
C. In discounted or premium variable-rate transactions where the creditor sets the initial interest rate and later rate adjustments are determined by an index or formula, the creditor must disclose both the initial payment based on the discount or premium and the payment that will be in effect thereafter. Additional explanatory material which does not detract from the required disclosures may accompany the disclosed amounts. For example, if a monthly payment is $250 for the first six months and then increases based on an index and margin, the creditor could use language such as the following: "Your regular monthly payment will be $250 for six months. After six months your regular monthly payment will be based on an index and margin, which currently would make your payment $350. Your actual payment at that time may be higher or lower."
Paragraph 32(c)(4) Variable-rate.
1. Calculating "worst-case" payment example. Creditors may rely on instructions in § 226.19(b)(2)(viii)(B) for calculating the maximum possible increases in rates in the shortest possible timeframe, based on the face amount of the note (not the hypothetical loan amount of $10,000 required by § 226.19(b)(2)(viii)(B)). The creditor must provide a
{{4-30-04 p.6982.01}}maximum payment for each payment level, where a payment schedule provides for more than one payment level and more than one maximum payment amount is possible.
Paragraph 32(c)(5) Amount borrowed.
1. Optional insurance; debt-cancellation coverage. This disclosure is required when the amount borrowed in a refinancing includes premiums or other charges for credit life, accident, health, or loss-of-income insurance, or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health, or income or in the case of accident. See comment 4(d)(3)--2 and comment app. G and H--2 regarding terminology for debt-cancellation coverage.
32(d) Limitations
Paragraph 32(d)(1)(i) Balloon payment.
1. Regular periodic payments. The repayment schedule for a § 226.32 mortgage loan with a term of less than five years must fully amortize the outstanding principal balance through "regular periodic payments." A payment is a "regular periodic payment" if it is not more than twice the amount of other payments.
Paragraph 32(d)(2) Negative amortization.
1. Negative amortization. The prohibition against negative amortization in a mortgage covered by § 226.32 does not preclude reasonable increases in the principal balance that result from events permitted by the legal obligation unrelated to the payment schedule. For example, when a consumer fails to obtain property insurance and the creditor purchases insurance, the creditor may add a reasonable premium to the consumer's principal balance, to the extent permitted by the legal obligation.
Paragraph 32(d)(4) Increased interest rate.
1. Variable-rate transactions. The limitation on interest rate increases does not apply to rate increases resulting from changes in accordance with the legal obligation in a variable-rate transaction, even if the increase occurs after default by the consumer.
Paragraph 32(d)(5) Rebates.
1. Calculation of refunds. The limitation applies only to refunds of precomputed (such as add-on) interest and not to any other charges that are considered finance charges under § 226.4 (for example, points and fees paid at closing). The calculation of the refund of interest includes odd-days interest, whether paid at or after consummation.
Paragraph 32(d)(6) Prepayment penalties.
1. State law. For purposes of computing a refund of unearned interest, if using the actuarial method defined by applicable state law results in a refund that is greater than the refund calculated by using the method described in section 933(d) of the Housing and Community Development Act of 1992, creditors should use the state law definition in determining if a refund is a prepayment penalty.
32(d)(7) Prepayment penalty exception.
Paragraph 32(d)(7)(iii).
1. Calculating debt-to-income ratio. "Debt" does not include amounts paid by the borrower in cash at closing or amounts from the loan proceeds that directly repay an existing debt. Creditors may consider combined debt-to-income ratios for transactions involving joint applicants.
Chapter 93: Section 54A accuracy of information reported
The General Laws of Massachusetts
Mass.gov
CHAPTER 93. REGULATION OF TRADE AND CERTAIN ENTERPRISES
REGULATION OF CREDIT BUREAUS
Chapter 93: Section 54A. Procedures to ensure accuracy of information reported to consumer reporting agency; disputed information; liability
Section 54A. (a) Every person who furnishes information to a consumer reporting agency shall follow reasonable procedures to ensure that the information reported to a consumer reporting agency is accurate and complete. No person may provide information to a consumer reporting agency if such person knows or has reasonable cause to believe such information is not accurate or complete.
(b) A person who (1) in the ordinary course of business regularly and on a routine basis furnishes information to one or more consumer reporting agencies about the person’s own transactions or experiences with one or more consumers, and (2) determines that information on a specific transaction or experience so provided to a consumer reporting agency is not complete or accurate, shall promptly notify the consumer reporting agency of such determination and provide to the consumer reporting agency any corrections to that information, or any additional information, which is necessary to make the information provided by the person to the consumer reporting agency complete and accurate.
(c) While the completeness or accuracy of any information on a specific transaction or experience furnished by any person to a consumer reporting agency is subject to a continuing bona fide dispute between the affected consumer and that person, the person may not furnish the information to any consumer reporting agency without also including a notice that the information is disputed by the consumer; provided further, that no person may report to a consumer reporting agency that a consumer’s account is delinquent until said bona fide dispute is resolved pursuant to the federal Fair Credit Billing Act.
(d) A person who regularly furnishes information to a consumer reporting agency regarding a consumer who has an open-end credit account with such person, and which account is closed by the consumer, shall notify the consumer reporting agency of the closure of such account by the consumer, in information regularly furnished for the period in which the account is closed.
(e) A person who places a delinquent account for collection, internally or by referral to a third party, charges the delinquent account to profit or loss, or takes similar action, and subsequently furnishes information to a consumer reporting agency regarding such action, shall include within the information furnished, the approximate commencement date of the delinquency which gave rise to such action, unless such date was previously reported to the consumer reporting agency. Nothing contained in this paragraph shall be deemed to require that a delinquency must be reported to a consumer reporting agency.
(f) Upon receiving notice of a dispute notice pursuant to paragraph (a) of section fifty-eight with regard to the completeness or accuracy of any information provided to a consumer reporting agency, the person that provided the information shall (1) complete an investigation with respect to the disputed information and report to the consumer reporting agency the results of that investigation before the end of the thirty-business-day period beginning on the date the consumer reporting agency receives the notice of dispute from the consumer in accordance with paragraph (a) of section fifty-eight and (2) review relevant information submitted to it.
(g) A person who furnishes information to a consumer reporting agency shall be liable for failure to comply with the provisions of this section, unless the person so furnishing the information establishes by a preponderance of the evidence that, at the time of the failure to comply with this section, such person maintained reasonable procedures to comply with such provisions.
Mass.gov
CHAPTER 93. REGULATION OF TRADE AND CERTAIN ENTERPRISES
REGULATION OF CREDIT BUREAUS
Chapter 93: Section 54A. Procedures to ensure accuracy of information reported to consumer reporting agency; disputed information; liability
Section 54A. (a) Every person who furnishes information to a consumer reporting agency shall follow reasonable procedures to ensure that the information reported to a consumer reporting agency is accurate and complete. No person may provide information to a consumer reporting agency if such person knows or has reasonable cause to believe such information is not accurate or complete.
(b) A person who (1) in the ordinary course of business regularly and on a routine basis furnishes information to one or more consumer reporting agencies about the person’s own transactions or experiences with one or more consumers, and (2) determines that information on a specific transaction or experience so provided to a consumer reporting agency is not complete or accurate, shall promptly notify the consumer reporting agency of such determination and provide to the consumer reporting agency any corrections to that information, or any additional information, which is necessary to make the information provided by the person to the consumer reporting agency complete and accurate.
(c) While the completeness or accuracy of any information on a specific transaction or experience furnished by any person to a consumer reporting agency is subject to a continuing bona fide dispute between the affected consumer and that person, the person may not furnish the information to any consumer reporting agency without also including a notice that the information is disputed by the consumer; provided further, that no person may report to a consumer reporting agency that a consumer’s account is delinquent until said bona fide dispute is resolved pursuant to the federal Fair Credit Billing Act.
(d) A person who regularly furnishes information to a consumer reporting agency regarding a consumer who has an open-end credit account with such person, and which account is closed by the consumer, shall notify the consumer reporting agency of the closure of such account by the consumer, in information regularly furnished for the period in which the account is closed.
(e) A person who places a delinquent account for collection, internally or by referral to a third party, charges the delinquent account to profit or loss, or takes similar action, and subsequently furnishes information to a consumer reporting agency regarding such action, shall include within the information furnished, the approximate commencement date of the delinquency which gave rise to such action, unless such date was previously reported to the consumer reporting agency. Nothing contained in this paragraph shall be deemed to require that a delinquency must be reported to a consumer reporting agency.
(f) Upon receiving notice of a dispute notice pursuant to paragraph (a) of section fifty-eight with regard to the completeness or accuracy of any information provided to a consumer reporting agency, the person that provided the information shall (1) complete an investigation with respect to the disputed information and report to the consumer reporting agency the results of that investigation before the end of the thirty-business-day period beginning on the date the consumer reporting agency receives the notice of dispute from the consumer in accordance with paragraph (a) of section fifty-eight and (2) review relevant information submitted to it.
(g) A person who furnishes information to a consumer reporting agency shall be liable for failure to comply with the provisions of this section, unless the person so furnishing the information establishes by a preponderance of the evidence that, at the time of the failure to comply with this section, such person maintained reasonable procedures to comply with such provisions.
Subscribe to:
Posts (Atom)