The Truth in Lending Act
The Truth in Lending Act (TILA) is a
US federal law that was enacted in 1968. This Act is contained in
the Consumer Credit Protection Act and is designed to protect
consumers in credit transactions. It requires clear disclosure of
key terms and all costs involved in a lending arrangement. Read the
full Act below.
Sec. 1601. - Congressional findings
and declaration of purpose
(a) Informed use of credit
The Congress finds that economic stabilization would be enhanced and
the competition among the various financial institutions and other
firms engaged in the extension of consumer credit would be
strengthened by the informed use of credit. The informed use of
credit results from an awareness of the cost thereof by consumers.
It is the purpose of this subchapter to assure a meaningful
disclosure of credit terms so that the consumer will be able to
compare more readily the various credit terms available to him and
avoid the uninformed use of credit, and to protect the consumer
against inaccurate and unfair credit billing and credit card
practices.
(b) Terms of personal property leases
The Congress also finds that there has been a recent trend toward
leasing automobiles and other durable goods for consumer use as an
alternative to installment credit sales and that these leases have
been offered without adequate cost disclosures. It is the purpose of
this subchapter to assure a meaningful disclosure of the terms of
leases of personal property for personal, family, or household
purposes so as to enable the lessee to compare more readily the
various lease terms available to him, limit balloon payments in
consumer leasing, enable comparison of lease terms with credit terms
where appropriate, and to assure meaningful and accurate disclosures
of lease terms in advertisements
Sec. 1602. - Definitions and rules of construction
(a) The definitions and rules of construction set forth in this
section are applicable for the purposes of this subchapter.
(b) The term ''Board'' refers to the Board of Governors of the
Federal Reserve System.
(c) The term ''organization'' means a corporation, government or
governmental subdivision or agency, trust, estate, partnership,
cooperative, or association.
(d) The term ''person'' means a natural person or an organization.
(e) The term ''credit'' means the right granted by a creditor to a
debtor to defer payment of debt or to incur debt and defer its
payment.
(f) The term ''creditor'' refers only to a person who both
(1) regularly extends, whether in connection with loans, sales of
property or services, or otherwise, consumer credit which is payable
by agreement in more than four installments or for which the payment
of a finance charge is or may be required, and
(2) is the person to whom the debt arising from the consumer credit
transaction is initially payable on the face of the evidence of
indebtedness or, if there is no such evidence of indebtedness, by
agreement. Notwithstanding the preceding sentence, in the case of an
open-end credit plan involving a credit card, the card issuer and
any person who honors the credit card and offers a discount which is
a finance charge are creditors. For the purpose of the requirements
imposed under part D of this subchapter and sections 1637(a)(5),
1637(a)(6), 1637(a)(7), 1637(b)(1), 1637(b)(2), 1637(b)(3),
1637(b)(8), and 1637(b)(10) of this title, the term ''creditor''
shall also include card issuers whether or not the amount due is
payable by agreement in more than four installments or the payment
of a finance charge is or may be required, and the Board shall, by
regulation, apply these requirements to such card issuers, to the
extent appropriate, even though the requirements are by their terms
applicable only to creditors offering open-end credit plans. Any
person who originates 2 or more mortgages referred to in subsection
(aa) of this section in any 12-month period or any person who
originates 1 or more such mortgages through a mortgage broker shall
be considered to be a creditor for purposes of this subchapter.
(g) The term ''credit sale'' refers to any sale in which the seller
is a creditor. The term includes any contract in the form of a
bailment or lease if the bailee or lessee contracts to pay as
compensation for use a sum substantially equivalent to or in excess
of the aggregate value of the property and services involved and it
is agreed that the bailee or lessee will become, or for no other or
a nominal consideration has the option to become, the owner of the
property upon full compliance with his obligations under the
contract.
(h) The adjective ''consumer'', used with reference to a credit
transaction, characterizes the transaction as one in which the party
to whom credit is offered or extended is a natural person, and the
money, property, or services which are the subject of the
transaction are primarily for personal, family, or household
purposes.
(i) The term ''open end credit plan'' means a plan under which the
creditor reasonably contemplates repeated transactions, which
prescribes the terms of such transactions, and which provides for a
finance charge which may be computed from time to time on the
outstanding unpaid balance. A credit plan which is an open end
credit plan within the meaning of the preceding sentence is an open
end credit plan even if credit information is verified from time to
time.
(j) The term ''adequate notice,'' as used in section 1643 of this
title, means a printed notice to a cardholder which sets forth the
pertinent facts clearly and conspicuously so that a person against
whom it is to operate could reasonably be expected to have noticed
it and understood its meaning. Such notice may be given to a
cardholder by printing the notice on any credit card, or on each
periodic statement of account, issued to the cardholder, or by any
other means reasonably assuring the receipt thereof by the
cardholder.
(k) The term ''credit card'' means any card, plate, coupon book or
other credit device existing for the purpose of obtaining money,
property, labor, or services on credit.
(l) The term ''accepted credit card'' means any credit card which
the cardholder has requested and received or has signed or has used,
or authorized another to use, for the purpose of obtaining money,
property, labor, or services on credit.
(m) The term ''cardholder'' means any person to whom a credit card
is issued or any person who has agreed with the card issuer to pay
obligations arising from the issuance of a credit card to another
person.
(n) The term ''card issuer'' means any person who issues a credit
card, or the agent of such person with respect to such card.
(o) The term ''unauthorized use,'' as used in section 1643 of this
title, means a use of a credit card by a person other than the
cardholder who does not have actual, implied, or apparent authority
for such use and from which the cardholder receives no benefit.
(p) The term ''discount'' as used in section 1666f of this title
means a reduction made from the regular price. The term ''discount''
as used in section 1666f of this title shall not mean a surcharge.
(q) The term ''surcharge'' as used in this section and section 1666f
of this title means any means of increasing the regular price to a
cardholder which is not imposed upon customers paying by cash,
check, or similar means.''
(r) The term ''State'' refers to any State, the Commonwealth of
Puerto Rico, the District of Columbia, and any territory or
possession of the United States.
(s) The term ''agricultural purposes'' includes the production,
harvest, exhibition, marketing, transportation, processing, or
manufacture of agricultural products by a natural person who
cultivates, plants, propagates, or nurtures those agricultural
products, including but not limited to the acquisition of farmland,
real property with a farm residence, and personal property and
services used primarily in farming.
(t) The term ''agricultural products'' includes agricultural,
horticultural, viticultural, and dairy products, livestock,
wildlife, poultry, bees, forest products, fish and shellfish, and
any products thereof, including processed and manufactured products,
and any and all products raised or produced on farms and any
processed or manufactured products thereof.
(u) The term ''material disclosures'' means the disclosure, as
required by this subchapter, of the annual percentage rate, the
method of determining the finance charge and the balance upon which
a finance charge will be imposed, the amount of the finance charge,
the amount to be financed, the total of payments, the number and
amount of payments, the due dates or periods of payments scheduled
to repay the indebtedness, and the disclosures required by section
1639(a) of this title.
(v) The term ''dwelling'' means a residential structure or mobile
home which contains one to four family housing units, or individual
units of condominiums or cooperatives.
(w) The term ''residential mortgage transaction'' means a
transaction in which a mortgage, deed of trust, purchase money
security interest arising under an installment sales contract, or
equivalent consensual security interest is created or retained
against the consumer's dwelling to finance the acquisition or
initial construction of such dwelling.
(x) As used in this section and section 1666f of this title, the
term ''regular price'' means the tag or posted price charged for the
property or service if a single price is tagged or posted, or the
price charged for the property or service when payment is made by
use of an open-end credit plan or a credit card if either
(1) no price is tagged or posted, or
(2) two prices are tagged or posted, one of which is charged when
payment is made by use of an open-end credit plan or a credit card
and the other when payment is made by use of cash, check, or similar
means. For purposes of this definition, payment by check, draft, or
other negotiable instrument which may result in the debiting of an
open-end credit plan or a credit cardholder's open-end account shall
not be considered payment made by use of the plan or the account.
(y) Any reference to any requirement imposed under this subchapter
or any provision thereof includes reference to the regulations of
the Board under this subchapter or the provision thereof in
question.
(z) The disclosure of an amount or percentage which is greater than
the amount or percentage required to be disclosed under this
subchapter does not in itself constitute a violation of this
subchapter.
(aa)
(1) A mortgage referred to in this subsection means a consumer
credit transaction that is secured by the consumer's principal
dwelling, other than a residential mortgage transaction, a reverse
mortgage transaction, or a transaction under an open end credit
plan, if -
(A) the annual percentage rate at consummation of the transaction
will exceed by more than 10 percentage points the yield on Treasury
securities having comparable periods of maturity on the fifteenth
day of the month immediately preceding the month in which the
application for the extension of credit is received by the creditor;
or
(B) the total points and fees payable by the consumer at or before
closing will exceed the greater of -
(i) 8 percent of the total loan amount; or
(ii) $400.
(2)
(A) After the 2-year period beginning on the effective date of the
regulations promulgated under section 155 of the Riegle Community
Development and Regulatory Improvement Act of 1994, and no more
frequently than biennially after the first increase or decrease
under this subparagraph, the Board may by regulation increase or
decrease the number of percentage points specified in paragraph
(1)(A), if the Board determines that the increase or decrease is -
(i) consistent with the consumer protections against abusive lending
provided by the amendments made by subtitle B of title I of the
Riegle Community Development and Regulatory Improvement Act of 1994;
and
(ii) warranted by the need for credit.
(B) An increase or decrease under subparagraph (A) may not result in
the number of percentage points referred to in subparagraph (A)
being -
(i) less that 8 percentage points; or
(ii) greater than 12 percentage points.
(C) In determining whether to increase or decrease the number of
percentage points referred to in subparagraph (A), the Board shall
consult with representatives of consumers, including low-income
consumers, and lenders.
(3) The amount specified in paragraph (1)(B)(ii) shall be adjusted
annually on January 1 by the annual percentage change in the
Consumer Price Index, as reported on June 1 of the year preceding
such adjustment.
(4) For purposes of paragraph (1)(B), points and fees shall include
-
(A) all items included in the finance charge, except interest or the
time-price differential;
(B) all compensation paid to mortgage brokers;
(C) each of the charges listed in section 1605(e) of this title
(except an escrow for future payment of taxes), unless -
(i) the charge is reasonable;
(ii) the creditor receives no direct or indirect compensation; and
(iii) the charge is paid to a third party unaffiliated with the
creditor; and
(D) such other charges as the Board determines to be appropriate.
(5) This subsection shall not be construed to limit the rate of
interest or the finance charge that a person may charge a consumer
for any extension of credit.
(bb) The term ''reverse mortgage transaction'' means a nonrecourse
transaction in which a mortgage, deed of trust, or equivalent
consensual security interest is created against the consumer's
principal dwelling -
(1) securing one or more advances; and
(2) with respect to which the payment of any principal, interest,
and shared appreciation or equity is due and payable (other than in
the case of default) only after -
(A) the transfer of the dwelling;
(B) the consumer ceases to occupy the dwelling as a principal
dwelling; or
(C) the death of the consumer
Sec. 1603. - Exempted transactions
This subchapter does not apply to the following:
(1) Credit transactions involving extensions of credit primarily for
business, commercial, or agricultural purposes, or to government or
governmental agencies or instrumentalities, or to organizations.
(2) Transactions in securities or commodities accounts by a
broker-dealer registered with the Securities and Exchange
Commission.
(3) Credit transactions, other than those in which a security
interest is or will be acquired in real property, or in personal
property used or expected to be used as the principal dwelling of
the consumer, in which the total amount financed exceeds $25,000.
(4) Transactions under public utility tariffs, if the Board
determines that a State regulatory body regulates the charges for
the public utility services involved, the charges for delayed
payment, and any discount allowed for early payment.
(5) Transactions for which the Board, by rule, determines that
coverage under this subchapter is not necessary to carry out the
purposes of this subchapter.
(6) Repealed. Pub.
L. 96-221, title VI, Sec. 603(c)(3), Mar. 31, 1980, 94 Stat. 169.
(7) Loans made, insured, or guaranteed pursuant to a program
authorized by title IV of the Higher Education Act of 1965 (20 U.S.C.
1070 et seq., 42 U.S.C. 2751 et seq.)
Sec. 1604. - Disclosure guidelines
(a) Promulgation, contents, etc., of regulations
The Board shall prescribe regulations to carry out the purposes of
this subchapter. Except in the case of a mortgage referred to in
section 1602(aa) of this title, these regulations may contain such
classifications, differentiations, or other provisions, and may
provide for such adjustments and exceptions for any class of
transactions, as in the judgment of the Board are necessary or
proper to effectuate the purposes of this subchapter, to prevent
circumvention or evasion thereof, or to facilitate compliance
therewith.
(b) Model disclosure forms and clauses; publication, criteria,
compliance, etc.
The Board shall publish model disclosure forms and clauses for
common transactions to facilitate compliance with the disclosure
requirements of this subchapter and to aid the borrower or lessee in
understanding the transaction by utilizing readily understandable
language to simplify the technical nature of the disclosures. In
devising such forms, the Board shall consider the use by creditors
or lessors of data processing or similar automated equipment.
Nothing in this subchapter may be construed to require a creditor or
lessor to use any such model form or clause prescribed by the Board
under this section. A creditor or lessor shall be deemed to be in
compliance with the disclosure provisions of this subchapter with
respect to other than numerical disclosures if the creditor or
lessor
(1) uses any appropriate model form or clause as published by the
Board, or
(2) uses any such model form or clause and changes it by
(A) deleting any information which is not required by this
subchapter, or
(B) rearranging the format, if in making such deletion or
rearranging the format, the creditor or lessor does not affect the
substance, clarity, or meaningful sequence of the disclosure.
(c) Procedures applicable for adoption of model forms and clauses
Model disclosure forms and clauses shall be adopted by the Board
after notice duly given in the Federal Register and an opportunity
for public comment in accordance with section 553 of title 5.
(d) Effective dates of regulations containing new disclosure
requirements
Any regulation of the Board, or any amendment or interpretation
thereof, requiring any disclosure which differs from the disclosures
previously required by this part, part D, or part E of this
subchapter or by any regulation of the Board promulgated thereunder
shall have an effective date of that October 1 which follows by at
least six months the date of promulgation, except that the Board may
at its discretion take interim action by regulation, amendment, or
interpretation to lengthen the period of time permitted for
creditors or lessors to adjust their forms to accommodate new
requirements or shorten the length of time for creditors or lessors
to make such adjustments when it makes a specific finding that such
action is necessary to comply with the findings of a court or to
prevent unfair or deceptive disclosure practices. Notwithstanding
the previous sentence, any creditor or lessor may comply with any
such newly promulgated disclosure requirements prior to the
effective date of the requirements.
(f)
[1] Exemption authority
(1) In general
The Board may exempt, by regulation, from all or part of this
subchapter any class of transactions, other than transactions
involving any mortgage described in section 1602(aa) of this title,
for which, in the determination of the Board, coverage under all or
part of this subchapter does not provide a meaningful benefit to
consumers in the form of useful information or protection.
(2) Factors for consideration
In determining which classes of transactions to exempt in whole or
in part under paragraph (1), the Board shall consider the following
factors and publish its rationale at the time a proposed exemption
is published for comment:
(A) The amount of the loan and whether the disclosures, right of
rescission, and other provisions provide a benefit to the consumers
who are parties to such transactions, as determined by the Board.
(B) The extent to which the requirements of this subchapter
complicate, hinder, or make more expensive the credit process for
the class of transactions.
(C) The status of the borrower, including -
(i) any related financial arrangements of the borrower, as
determined by the Board;
(ii) the financial sophistication of the borrower relative to the
type of transaction; and
(iii) the importance to the borrower of the credit, related
supporting property, and coverage under this subchapter, as
determined by the Board;
(D) whether the loan is secured by the principal residence of the
consumer; and
(E) whether the goal of consumer protection would be undermined by
such an exemption.
(g) Waiver for certain borrowers
(1) In general
The Board, by regulation, may exempt from the requirements of this
subchapter certain credit transactions if -
(A) the transaction involves a consumer -
(i) with an annual earned income of more than $200,000; or
(ii) having net assets in excess of $1,000,000 at the time of the
transaction; and
(B) a waiver that is handwritten, signed, and dated by the consumer
is first obtained from the consumer.
(2) Adjustments by the Board
The Board, at its discretion, may adjust the annual earned income
and net asset requirements of paragraph (1) for inflation
Sec. 1605. - Determination of finance charge
(a) ''Finance charge'' defined
Except as otherwise provided in this section, the amount of the
finance charge in connection with any consumer credit transaction
shall be determined as the sum of all charges, payable directly or
indirectly by the person to whom the credit is extended, and imposed
directly or indirectly by the creditor as an incident to the
extension of credit. The finance charge does not include charges of
a type payable in a comparable cash transaction. The finance charge
shall not include fees and amounts imposed by third party closing
agents (including settlement agents, attorneys, and escrow and title
companies) if the creditor does not require the imposition of the
charges or the services provided and does not retain the charges.
Examples of charges which are included in the finance charge include
any of the following types of charges which are applicable:
(1) Interest, time price differential, and any amount payable under
a point, discount, or other system or additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder's fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or insurance
protecting the creditor against the obligor's default or other
credit loss.
(6) Borrower-paid mortgage broker fees, including fees paid directly
to the broker or the lender (for delivery to the broker) whether
such fees are paid in cash or financed.
(b) Life, accident, or health insurance premiums included in finance
charge
Charges or premiums for credit life, accident, or health insurance
written in connection with any consumer credit transaction shall be
included in the finance charges unless
(1) the coverage of the debtor by the insurance is not a factor in
the approval by the creditor of the extension of credit, and this
fact is clearly disclosed in writing to the person applying for or
obtaining the extension of credit; and
(2) in order to obtain the insurance in connection with the
extension of credit, the person to whom the credit is extended must
give specific affirmative written indication of his desire to do so
after written disclosure to him of the cost thereof.
(c) Property damage and liability insurance premiums included in
finance charge
Charges or premiums for insurance, written in connection with any
consumer credit transaction, against loss of or damage to property
or against liability arising out of the ownership or use of
property, shall be included in the finance charge unless a clear and
specific statement in writing is furnished by the creditor to the
person to whom the credit is extended, setting forth the cost of the
insurance if obtained from or through the creditor, and stating that
the person to whom the credit is extended may choose the person
through which the insurance is to be obtained.
(d) Items exempted from computation of finance charge in all credit
transactions
If any of the following items is itemized and disclosed in
accordance with the regulations of the Board in connection with any
transaction, then the creditor need not include that item in the
computation of the finance charge with respect to that transaction:
(1) Fees and charges prescribed by law which actually are or will be
paid to public officials for determining the existence of or for
perfecting or releasing or satisfying any security related to the
credit transaction.
(2) The premium payable for any insurance in lieu of perfecting any
security interest otherwise required by the creditor in connection
with the transaction, if the premium does not exceed the fees and
charges described in paragraph (1) which would otherwise be payable.
(3) Any tax levied on security instruments or on documents
evidencing indebtedness if the payment of such taxes is a
precondition for recording the instrument securing the evidence of
indebtedness.
(e) Items exempted from computation of finance charge in extensions
of credit secured by an interest in real property
The following items, when charged in connection with any extension
of credit secured by an interest in real property, shall not be
included in the computation of the finance charge with respect to
that transaction:
(1) Fees or premiums for title examination, title insurance, or
similar purposes.
(2) Fees for preparation of loan-related documents.
(3) Escrows for future payments of taxes and insurance.
(4) Fees for notarizing deeds and other documents.
(5) Appraisal fees, including fees related to any pest infestation
or flood hazard inspections conducted prior to closing.
(6) Credit reports.
(f) Tolerances for accuracy
In connection with credit transactions not under an open end credit
plan that are secured by real property or a dwelling, the disclosure
of the finance charge and other disclosures affected by any finance
charge -
(1) shall be treated as being accurate for purposes of this
subchapter if the amount disclosed as the finance charge -
(A) does not vary from the actual finance charge by more than $100;
or
(B) is greater than the amount required to be disclosed under this
subchapter; and
(2) shall be treated as being accurate for purposes of section 1635
of this title if -
(A) except as provided in subparagraph (B), the amount disclosed as
the finance charge does not vary from the actual finance charge by
more than an amount equal to one-half of one percent of the total
amount of credit extended; or
(B) in the case of a transaction, other than a mortgage referred to
in section 1602(aa) of this title, which -
(i) is a refinancing of the principal balance then due and any
accrued and unpaid finance charges of a residential mortgage
transaction as defined in section 1602(w) of this title, or is any
subsequent refinancing of such a transaction; and
(ii) does not provide any new consolidation or new advance;
if the amount disclosed as the finance charge does not vary from the
actual finance charge by more than an amount equal to one percent of
the total amount of credit extended
Sec. 1606. - Determination of annual percentage rate
(a) ''Annual percentage rate'' defined
The annual percentage rate applicable to any extension of consumer
credit shall be determined, in accordance with the regulations of
the Board,
(1) in the case of any extension of credit other than under an open
end credit plan, as
(A) that nominal annual percentage rate which will yield a sum equal
to the amount of the finance charge when it is applied to the unpaid
balances of the amount financed, calculated according to the
actuarial method of allocating payments made on a debt between the
amount financed and the amount of the finance charge, pursuant to
which a payment is applied first to the accumulated finance charge
and the balance is applied to the unpaid amount financed; or
(B) the rate determined by any method prescribed by the Board as a
method which materially simplifies computation while retaining
reasonable accuracy as compared with the rate determined under
subparagraph (A).
(2) in the case of any extension of credit under an open end credit
plan, as the quotient (expressed as a percentage) of the total
finance charge for the period to which it relates divided by the
amount upon which the finance charge for that period is based,
multiplied by the number of such periods in a year.
(b) Computation of rate of finance charges for balances within a
specified range
Where a creditor imposes the same finance charge for balances within
a specified range, the annual percentage rate shall be computed on
the median balance within the range, except that if the Board
determines that a rate so computed would not be meaningful, or would
be materially misleading, the annual percentage rate shall be
computed on such other basis as the Board may be regulation require.
(c) Allowable tolerances for purposes of compliance with disclosure
requirements
The disclosure of an annual percentage rate is accurate for the
purpose of this subchapter if the rate disclosed is within a
tolerance not greater than one-eighth of 1 per centum more or less
than the actual rate or rounded to the nearest one-fourth of 1 per
centum. The Board may allow a greater tolerance to simplify
compliance where irregular payments are involved.
(d) Use of rate tables or charts having allowable variance from
determined rates
The Board may authorize the use of rate tables or charts which may
provide for the disclosure of annual percentage rates which vary
from the rate determined in accordance with subsection (a)(1)(A) of
this section by not more than such tolerances as the Board may
allow. The Board may not allow a tolerance greater than 8 per centum
of that rate except to simplify compliance where irregular payments
are involved.
(e) Authorization of tolerances in determining annual percentage
rates
In the case of creditors determining the annual percentage rate in a
manner other than as described in subsection (d) of this section,
the Board may authorize other reasonable tolerances
Sec. 1607. - Administrative enforcement
(a) Enforcing agencies
Compliance with the requirements imposed under this subchapter shall
be enforced under
(1) section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
in the case of -
(A) national banks, and Federal branches and Federal agencies of
foreign banks, by the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national
banks), branches and agencies of foreign banks (other than Federal
branches, Federal agencies, and insured State branches of foreign
banks), commercial lending companies owned or controlled by foreign
banks, and organizations operating under section 25 or 25(a) [1] of
the Federal Reserve Act (12 U.S.C. 601 et seq., 611 et seq.), by the
Board; and
(C) banks insured by the Federal Deposit Insurance Corporation
(other than members of the Federal Reserve System) and insured State
branches of foreign banks, by the Board of Directors of the Federal
Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
by the Director of the Office of Thrift Supervision, in the case of
a savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation.
(3) the Federal Credit Union Act (12 U.S.C. 1751 et seq.), by the
National Credit Union Administration Board with respect to any
Federal credit union.
(4) part A of subtitle VII of title 49, by the Secretary of
Transportation with respect to any air carrier or foreign air
carrier subject to that part.
(5) the Packers and Stockyards Act, 1921 (7 U.S.C. 181 et seq.)
(except as provided in section 406 of that Act (7 U.S.C. 226, 227)),
by the Secretary of Agriculture with respect to any activities
subject to that Act.
(6) the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) by the Farm
Credit Administration with respect to any Federal land bank, Federal
land bank association, Federal intermediate credit bank, or
production credit association.
The terms used in paragraph (1) that are not defined in this
subchapter or otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning
given to them in section 1(b) of the International Banking Act of
1978 (12 U.S.C. 3101).
(b) Violations of this subchapter deemed violations of pre-existing
statutory requirements; additional agency powers
For the purpose of the exercise by any agency referred to in
subsection (a) of this section of its powers under any Act referred
to in that subsection, a violation of any requirement imposed under
this subchapter shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (a) of this
section, each of the agencies referred to in that subsection may
exercise, for the purpose of enforcing compliance with any
requirement imposed under this subchapter, any other authority
conferred on it by law.
(c) Federal Trade Commission as overall enforcing agency
Except to the extent that enforcement of the requirements imposed
under this subchapter is specifically committed to some other
Government agency under subsection (a) of this section, the Federal
Trade Commission shall enforce such requirements. For the purpose of
the exercise by the Federal Trade Commission of its functions and
powers under the Federal Trade Commission Act (15 U.S.C. 41 et
seq.), a violation of any requirement imposed under this subchapter
shall be deemed a violation of a requirement imposed under that Act.
All of the functions and powers of the Federal Trade Commission
under the Federal Trade Commission Act are available to the
Commission to enforce compliance by any person with the requirements
imposed under this subchapter, irrespective of whether that person
is engaged in commerce or meets any other jurisdictional tests in
the Federal Trade Commission Act.
(d) Rules and regulations
The authority of the Board to issue regulations under this
subchapter does not impair the authority of any other agency
designated in this section to make rules respecting its own
procedures in enforcing compliance with requirements imposed under
this subchapter.
(e) Adjustment of finance charges; procedures applicable, coverage,
criteria, etc.
(1) In carrying out its enforcement activities under this section,
each agency referred to in subsection (a) or (c) of this section, in
cases where an annual percentage rate or finance charge was
inaccurately disclosed, shall notify the creditor of such disclosure
error and is authorized in accordance with the provisions of this
subsection to require the creditor to make an adjustment to the
account of the person to whom credit was extended, to assure that
such person will not be required to pay a finance charge in excess
of the finance charge actually disclosed or the dollar equivalent of
the annual percentage rate actually disclosed, whichever is lower.
For the purposes of this subsection, except where such disclosure
error resulted from a willful violation which was intended to
mislead the person to whom credit was extended, in determining
whether a disclosure error has occurred and in calculating any
adjustment,
(A) each agency shall apply
(i) with respect to the annual percentage rate, a tolerance of
one-quarter of 1 percent more or less than the actual rate,
determined without regard to section 1606(c) of this title, and
(ii) with respect to the finance charge, a corresponding numerical
tolerance as generated by the tolerance provided under this
subsection for the annual percentage rate; except that
(B) with respect to transactions consummated after two years
following March 31, 1980, each agency shall apply
(i) for transactions that have a scheduled amortization of ten years
or less, with respect to the annual percentage rate, a tolerance not
to exceed one-quarter of 1 percent more or less than the actual
rate, determined without regard to section 1606(c) of this title,
but in no event a tolerance of less than the tolerances allowed
under section 1606(c) of this title,
(ii) for transactions that have a scheduled amortization of more
than ten years, with respect to the annual percentage rate, only
such tolerances as are allowed under section 1606(c) of this title,
and
(iii) for all transactions, with respect to the finance charge, a
corresponding numerical tolerance as generated by the tolerances
provided under this subsection for the annual percentage rate.
(2) Each agency shall require such an adjustment when it determines
that such disclosure error resulted from
(A) a clear and consistent pattern or practice of violations,
(B) gross negligence, or
(C) a willful violation which was intended to mislead the person to
whom the credit was extended. Notwithstanding the preceding
sentence, except where such disclosure error resulted from a willful
violation which was intended to mislead the person to whom credit
was extended, an agency need not require such an adjustment if it
determines that such disclosure error -
(A) resulted from an error involving the disclosure of a fee or
charge that would otherwise be excludable in computing the finance
charge, including but not limited to violations involving the
disclosures described in sections 1605(b), (c) and (d) of this
title, in which event the agency may require such remedial action as
it determines to be equitable, except that for transactions
consummated after two years after March 31, 1980, such an adjustment
shall be ordered for violations of section 1605(b) of this title;
(B) involved a disclosed amount which was 10 per centum or less of
the amount that should have been disclosed and
(i) in cases where the error involved a disclosed finance charge,
the annual percentage rate was disclosed correctly, and
(ii) in cases where the error involved a disclosed annual percentage
rate, the finance charge was disclosed correctly; in which event the
agency may require such adjustment as it determines to be equitable;
(C) involved a total failure to disclose either the annual
percentage rate or the finance charge, in which event the agency may
require such adjustment as it determines to be equitable; or
(D) resulted from any other unique circumstance involving clearly
technical and nonsubstantive disclosure violations that do not
adversely affect information provided to the consumer and that have
not misled or otherwise deceived the consumer.
In the case of other such disclosure errors, each agency may require
such an adjustment.
(3) Notwithstanding paragraph (2), no adjustment shall be ordered -
(A) if it would have a significantly adverse impact upon the safety
or soundness of the creditor, but in any such case, the agency may -
(i) require a partial adjustment in an amount which does not have
such an impact; or
(ii) require the full adjustment, but permit the creditor to make
the required adjustment in partial payments over an extended period
of time which the agency considers to be reasonable, if (in the case
of an agency referred to in paragraph (1), (2), or (3) of subsection
(a) of this section), the agency determines that a partial
adjustment or making partial payments over an extended period is
necessary to avoid causing the creditor to become undercapitalized
pursuant to section 38 of the Federal Deposit Insurance Act (12
U.S.C. 1831o);
(B) the [2] amount of the adjustment would be less than $1, except
that if more than one year has elapsed since the date of the
violation, the agency may require that such amount be paid into the
Treasury of the United States, or ''if''.
(C) except where such disclosure error resulted from a willful
violation which was intended to mislead the person to whom credit
was extended, in the case of an open-end credit plan, more than two
years after the violation, or in the case of any other extension of
credit, as follows:
(i) with respect to creditors that are subject to examination by the
agencies referred to in paragraphs (1) through (3) of subsection (a)
of this section, except in connection with violations arising from
practices identified in the current examination and only in
connection with transactions that are consummated after the date of
the immediately preceding examination, except that where practices
giving rise to violations identified in earlier examinations have
not been corrected, adjustments for those violations shall be
required in connection with transactions consummated after the date
of examination in which such practices were first identified;
(ii) with respect to creditors that are not subject to examination
by such agencies, except in connection with transactions that are
consummated after May 10, 1978; and
(iii) in no event after the later of
(I) the expiration of the life of the credit extension, or
(II) two years after the agreement to extend credit was consummated.
(4)
(A) Notwithstanding any other provision of this section, an
adjustment under this subsection may be required by an agency
referred to in subsection (a) or (c) of this section only by an
order issued in accordance with cease and desist procedures provided
by the provision of law referred to in such subsections.
(B) In case of an agency which is not authorized to conduct cease
and desist proceedings, such an order may be issued after an agency
hearing on the record conducted at least thirty but not more than
sixty days after notice of the alleged violation is served on the
creditor. Such a hearing shall be deemed to be a hearing which is
subject to the provisions of section 8(h) of the Federal Deposit
Insurance Act (12 U.S.C. 1818(h)) and shall be subject to judicial
review as provided therein.
(5) Except as otherwise specifically provided in this subsection and
notwithstanding any provision of law referred to in subsection (a)
or (c) of this section, no agency referred to in subsection (a) or
(c) of this section may require a creditor to make dollar
adjustments for errors in any requirements under this subchapter,
except with regard to the requirements of section 1666d of this
title.
(6) A creditor shall not be subject to an order to make an
adjustment, if within sixty days after discovering a disclosure
error, whether pursuant to a final written examination report or
through the creditor's own procedures, the creditor notifies the
person concerned of the error and adjusts the account so as to
assure that such person will not be required to pay a finance charge
in excess of the finance charge actually disclosed or the dollar
equivalent of the annual percentage rate actually disclosed,
whichever is lower.
(7) Notwithstanding the second sentence of subsection (e)(1),
subsection (e)(3)(C)(i), and subsection (e)(3)(C)(ii) of this
section, each agency referred to in subsection (a) or (c) of this
section shall require an adjustment for an annual percentage rate
disclosure error that exceeds a tolerance of one quarter of one
percent less than the actual rate, determined without regard to
section 1606(c) of this title, with respect to any transaction
consummated between January 1, 1977, and March 31, 1980
Sec. 1608. - Views of other agencies
In the exercise of its functions under this subchapter, the Board
may obtain upon requests the views of any other Federal agency
which, in the judgment of the Board, exercises regulatory or
supervisory functions with respect to any class of creditors subject
to this subchapter.
The Truth in Lending Act is a very valuable law that seeks to ensure
consumers understand the terms of any lending arrangement.
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