[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2017 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 12

Banks and Banking


________________________

Parts 1026 to 1099

                         Revised as of January 1, 2017

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2017
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter X--Bureau of Consumer Financial Protection 
          (Continued)                                                3
  Finding Aids:
      Table of CFR Titles and Chapters........................    1097
      Alphabetical List of Agencies Appearing in the CFR......    1117
      List of CFR Sections Affected...........................    1127

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 1026.1 refers 
                       to title 12, part 1026, 
                       section 1

                     .---------------------------

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2017), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
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instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
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Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not accidentally dropped due to a printing or computer error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
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This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
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alphabetical list of agencies publishing in the CFR are also included in 
this volume.

[[Page vii]]

    An index to the text of ``Title 3--The President'' is carried within 
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the revision dates of the 50 CFR titles.

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INQUIRIES

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    Oliver A. Potts,
    Director,
    Office of the Federal Register.
    January 1, 2017.







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                               THIS TITLE

    Title 12--Banks and Banking is composed of ten volumes. The parts in 
these volumes are arranged in the following order: Parts 1-199, 200-219, 
220-229, 230-299, 300-499, 500-599, 600-899, 900-1025, 1026-1099, and 
1100-end. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of January 1, 2017.

    For this volume, Ann Worley was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of John Hyrum 
Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                 (This book contains parts 1026 to 1099)

  --------------------------------------------------------------------
                                                                    Part

chapter x--Bureau of Consumer Financial Protection 
  (Continued)...............................................        1026

[[Page 3]]



     CHAPTER X--BUREAU OF CONSUMER FINANCIAL PROTECTION (CONTINUED)




  --------------------------------------------------------------------
Part                                                                Page
1026            Truth in lending (Regulation Z).............           5
1030            Truth in savings (Regulation DD)............         936
1070            Disclosure of records and information.......         975
1071            Rule implementing Equal Access to Justice 
                    Act.....................................        1006
1072            Enforcement of nondiscrimination on the 
                    basis of disability in programs and 
                    activities conducted by the Bureau of 
                    Consumer Financial Protection...........        1012
1073            Procedures for bureau debt collection.......        1018
1074            Procedure relating to rulemaking............        1028
1075            Consumer financial civil penalty fund rule..        1028
1076            Claims against the United States............        1033
1080            Rules relating to investigations............        1034
1081            Rules of practice for adjudication 
                    proceedings.............................        1040
1082            State official notification rules...........        1074
1083            Civil penalty adjustments...................        1076
1090            Defining larger participants of certain 
                    consumer financial product and service 
                    markets.................................        1077
1091            Procedural rule to establish supervisory 
                    authority over certain nonbank covered 
                    persons based on risk determination.....        1084
1092-1099       [Reserved]

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PART 1026_TRUTH IN LENDING (REGULATION Z)--Table of Contents



                            Subpart A_General

Sec.
1026.1 Authority, purpose, coverage, organization, enforcement, and 
          liability.
1026.2 Definitions and rules of construction.
1026.3 Exempt transactions.
1026.4 Finance charge.

                        Subpart B_Open-End Credit

1026.5 General disclosure requirements.
1026.6 Account-opening disclosures.
1026.7 Periodic statement.
1026.8 Identifying transactions on periodic statements.
1026.9 Subsequent disclosure requirements.
1026.10 Payments.
1026.11 Treatment of credit balances; account termination.
1026.12 Special credit card provisions.
1026.13 Billing error resolution.
1026.14 Determination of annual percentage rate.
1026.15 Right of rescission.
1026.16 Advertising.

                       Subpart C_Closed-End Credit

1026.17 General disclosure requirements.
1026.18 Content of disclosures.
1026.19 Certain mortgage and variable-rate transactions.
1026.20 Disclosure requirements regarding post-consummation events.
1026.21 Treatment of credit balances.
1026.22 Determination of annual percentage rate.
1026.23 Right of rescission.
1026.24 Advertising.

                         Subpart D_Miscellaneous

1026.25 Record retention.
1026.26 Use of annual percentage rate in oral disclosures.
1026.27 Language of disclosures.
1026.28 Effect on state laws.
1026.29 State exemptions.
1026.30 Limitation on rates.

     Subpart E_Special Rules for Certain Home Mortgage Transactions

1026.31 General rules.
1026.32 Requirements for high-cost mortgages.
1026.33 Requirements for reverse mortgages.
1026.34 Prohibited acts or practices in connection with high-cost 
          mortgages.
1026.35 Requirements for higher-priced mortgage loans.
1026.36 Prohibited acts or practices and certain requirements for credit 
          secured by a dwelling.
1026.37 Content of disclosures for certain mortgage transactions (Loan 
          Estimate).
1026.38 Content of disclosures for certain mortgage transactions 
          (Closing Disclosure).
1026.39 Mortgage transfer disclosures.
1026.40 Requirements for home equity plans.
1026.41 Periodic statements for residential mortgage loans.
1026.42 Valuation independence.
1026.43 Minimum standards for transactions secured by a dwelling.
1026.44-1026.45 [Reserved]

           Subpart F_Special Rules for Private Education Loans

1026.46 Special disclosure requirements for private education loans.
1026.47 Content of disclosures.
1026.48 Limitations on private education loans.

Subpart G_Special Rules Applicable to Credit Card Accounts and Open-End 
                   Credit Offered to College Students

1026.51 Ability to Pay.
1026.52 Limitations on fees.
1026.53 Allocation of payments.
1026.54 Limitations on the imposition of finance charges.
1026.55 Limitations on increasing annual percentage rates, fees, and 
          charges.
1026.56 Requirements for over-the-limit transactions.
1026.57 Reporting and marketing rules for college student open-end 
          credit.
1026.58 Internet posting of credit card agreements.
1026.59 Reevaluation of rate increases.
1026.60 Credit and charge card applications and solicitations.
1026.61 Hybrid prepaid-credit cards.

Appendix A to Part 1026--Effect on State Laws
Appendix B to Part 1026--State Exemptions
Appendix C to Part 1026--Issuance of Official Interpretations
Appendix D to Part 1026--Multiple Advance Construction Loans
Appendix E to Part 1026--Rules for Card Issuers That Bill on a 
          Transaction-by-Transaction Basis
Appendix F to Part 1026--Optional Annual Percentage Rate Computations 
          for Creditors Offering Open-End Credit Plans Secured by a 
          Consumer's Dwelling
Appendix G to Part 1026--Open-End Model Forms and Clauses
Appendix H to Part 1026-- Closed-End Model Forms and Clauses

[[Page 6]]

Appendix I to Part 1026 [Reserved]
Appendix J to Part 1026--Annual Percentage Rate Computations for Closed-
          End Credit Transactions
Appendix K to Part 1026--Total Annual Loan Cost Rate Computations for 
          Reverse Mortgage Transactions
Appendix L to Part 1026--Assumed Loan Periods for Computations of Total 
          Annual Loan Cost Rates
Appendix M1 to Part 1026--Repayment Disclosures
Appendix M2 to Part 1026--Sample Calculations of Repayment Disclosures
Appendix N to Part 1026--Higher-Priced Mortgage Loan Appraisal Safe 
          Harbor Review
Appendixes O-P to Part 1026 [Reserved]
Appendix Q to Part 1026--Standards for Determining Monthly Debt and 
          Income
Supplement I to Part 1026--Official Interpretations

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 5511, 
5512, 5532, 5581; 15 U.S.C. 1601 et seq.

    Source: 76 FR 79772, Dec. 22, 2011, unless otherwise noted.



                            Subpart A_General



Sec. 1026.1  Authority, purpose, coverage, organization, enforcement,
and liability.

    (a) Authority. This part, known as Regulation Z, is issued by the 
Bureau of Consumer Financial Protection to implement the Federal Truth 
in Lending Act, which is contained in title I of the Consumer Credit 
Protection Act, as amended (15 U.S.C. 1601 et seq.). This part also 
implements title XII, section 1204 of the Competitive Equality Banking 
Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Furthermore, this part 
implements certain provisions of the Real Estate Settlement Procedures 
Act of 1974, as amended (12 U.S.C. 2601 et seq.). In addition, this part 
implements certain provisions of the Financial Institutions Reform, 
Recovery, and Enforcement Act, as amended (12 U.S.C. 3331 et seq.). The 
Bureau's information-collection requirements contained in this part have 
been approved by the Office of Management and Budget (OMB) under the 
provisions of 44 U.S.C. 3501 et seq. and have been assigned OMB No. 
3170-0015 (Truth in Lending).
    (b) Purpose. The purpose of this part is to promote the informed use 
of consumer credit by requiring disclosures about its terms and cost, to 
ensure that consumers are provided with greater and more timely 
information on the nature and costs of the residential real estate 
settlement process, and to effect certain changes in the settlement 
process for residential real estate that will result in more effective 
advance disclosure to home buyers and sellers of settlement costs. The 
regulation also includes substantive protections. It gives consumers the 
right to cancel certain credit transactions that involve a lien on a 
consumer's principal dwelling, regulates certain credit card practices, 
and provides a means for fair and timely resolution of credit billing 
disputes. The regulation does not generally govern charges for consumer 
credit, except that several provisions in subpart G set forth special 
rules addressing certain charges applicable to credit card accounts 
under an open-end (not home-secured) consumer credit plan. The 
regulation requires a maximum interest rate to be stated in variable-
rate contracts secured by the consumer's dwelling. It also imposes 
limitations on home-equity plans that are subject to the requirements of 
Sec. 1026.40 and mortgages that are subject to the requirements of 
Sec. 1026.32. The regulation prohibits certain acts or practices in 
connection with credit secured by a dwelling in Sec. 1026.36, and 
credit secured by a consumer's principal dwelling in Sec. 1026.35. The 
regulation also regulates certain practices of creditors who extend 
private education loans as defined in Sec. 1026.46(b)(5). In addition, 
it imposes certain limitations on increases in costs for mortgage 
transactions subject to Sec. 1026.19(e) and (f).
    (c) Coverage. (1) In general, this part applies to each individual 
or business that offers or extends credit, other than a person excluded 
from coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376, when four 
conditions are met:
    (i) The credit is offered or extended to consumers;
    (ii) The offering or extension of credit is done regularly;

[[Page 7]]

    (iii) The credit is subject to a finance charge or is payable by a 
written agreement in more than four installments; and
    (iv) The credit is primarily for personal, family, or household 
purposes.
    (2) If a credit card is involved, however, certain provisions apply 
even if the credit is not subject to a finance charge, or is not payable 
by a written agreement in more than four installments, or if the credit 
card is to be used for business purposes.
    (3) In addition, certain requirements of Sec. 1026.40 apply to 
persons who are not creditors but who provide applications for home-
equity plans to consumers.
    (4) Furthermore, certain requirements of Sec. 1026.57 apply to 
institutions of higher education.
    (5) Except in transactions subject to Sec. 1026.19(e) and (f), no 
person is required to provide the disclosures required by sections 
128(a)(16) through (19), 128(b)(4), 129C(f)(1), 129C(g)(2) and (3), 
129D(h), or 129D(j)(1)(A) of the Truth in Lending Act, section 4(c) of 
the Real Estate Settlement Procedures Act, or the disclosure required 
prior to settlement by section 129C(h) of the Truth in Lending Act. 
Except in transactions subject to Sec. 1026.20(e), no person is 
required to provide the disclosure required by section 129D(j)(1)(B) of 
the Truth in Lending Act. Except in transactions subject to Sec. 
1026.39(d)(5), no person becoming a creditor with respect to an existing 
residential mortgage loan is required to provide the disclosure required 
by section 129C(h) of the Truth in Lending Act.
    (d) Organization. The regulation is divided into subparts and 
appendices as follows:
    (1) Subpart A contains general information. It sets forth:
    (i) The authority, purpose, coverage, and organization of the 
regulation;
    (ii) The definitions of basic terms;
    (iii) The transactions that are exempt from coverage; and
    (iv) The method of determining the finance charge.
    (2) Subpart B contains the rules for open-end credit. It requires 
that account-opening disclosures and periodic statements be provided, as 
well as additional disclosures for credit and charge card applications 
and solicitations and for home-equity plans subject to the requirements 
of Sec. 1026.60 and Sec. 1026.40, respectively. It also describes 
special rules that apply to credit card transactions, treatment of 
payments and credit balances, procedures for resolving credit billing 
errors, annual percentage rate calculations, rescission requirements, 
and advertising.
    (3) Subpart C relates to closed-end credit. It contains rules on 
disclosures, treatment of credit balances, annual percentage rate 
calculations, rescission requirements, and advertising.
    (4) Subpart D contains rules on oral disclosures, disclosures in 
languages other than English, record retention, effect on state laws, 
state exemptions, and rate limitations.
    (5) Subpart E contains special rules for mortgage transactions. 
Section 1026.32 requires certain disclosures and provides limitations 
for closed-end credit transactions and open-end credit plans that have 
rates or fees above specified amounts or certain prepayment penalties. 
Section 1026.33 requires special disclosures, including the total annual 
loan cost rate, for reverse mortgage transactions. Section 1026.34 
prohibits specific acts and practices in connection with high-cost 
mortgages, as defined in Sec. 1026.32(a). Section 1026.35 prohibits 
specific acts and practices in connection with closed-end higher-priced 
mortgage loans, as defined in Sec. 1026.35(a). Section 1026.36 
prohibits specific acts and practices in connection with an extension of 
credit secured by a dwelling. Sections 1026.37 and 1026.38 set forth 
special disclosure requirements for certain closed-end transactions 
secured by real property, as required by Sec. 1026.19(e) and (f).
    (6) Subpart F relates to private education loans. It contains rules 
on disclosures, limitations on changes in terms after approval, the 
right to cancel the loan, and limitations on co-branding in the 
marketing of private education loans.
    (7) Subpart G relates to credit card accounts under an open-end (not 
home-secured) consumer credit plan (except for Sec. 1026.57(c), which 
applies to all open-end credit plans). Section 1026.51 contains rules on 
evaluation of a consumer's ability to make the required

[[Page 8]]

payments under the terms of an account. Section 1026.52 limits the fees 
that a consumer can be required to pay with respect to an open-end (not 
home-secured) consumer credit plan during the first year after account 
opening. Section 1026.53 contains rules on allocation of payments in 
excess of the minimum payment. Section 1026.54 sets forth certain 
limitations on the imposition of finance charges as the result of a loss 
of a grace period. Section 1026.55 contains limitations on increases in 
annual percentage rates, fees, and charges for credit card accounts. 
Section 1026.56 prohibits the assessment of fees or charges for over-
the-limit transactions unless the consumer affirmatively consents to the 
creditor's payment of over-the-limit transactions. Section 1026.57 sets 
forth rules for reporting and marketing of college student open-end 
credit. Section 1026.58 sets forth requirements for the Internet posting 
of credit card accounts under an open-end (not home-secured) consumer 
credit plan.
    (8) Several appendices contain information such as the procedures 
for determinations about state laws, state exemptions and issuance of 
official interpretations, special rules for certain kinds of credit 
plans, and the rules for computing annual percentage rates in closed-end 
credit transactions and total-annual-loan-cost rates for reverse 
mortgage transactions.
    (e) Enforcement and liability. Section 108 of the Truth in Lending 
Act contains the administrative enforcement provisions for that Act. 
Sections 112, 113, 130, 131, and 134 contain provisions relating to 
liability for failure to comply with the requirements of the Truth in 
Lending Act and the regulation. Section 1204(c) of title XII of the 
Competitive Equality Banking Act of 1987, Public Law 100-86, 101 Stat. 
552, incorporates by reference administrative enforcement and civil 
liability provisions of sections 108 and 130 of the Truth in Lending 
Act. Section 19 of the Real Estate Settlement Procedures Act contains 
the administrative enforcement provisions for that Act.

[76 FR 79772, Dec. 22, 2011, as amended at 77 FR 70114, Nov. 23, 2012; 
78 FR 6962, Jan. 31, 2013; 78 FR 80106, Dec. 31, 2013; 80 FR 32687, June 
9, 2015]



Sec. 1026.2  Definitions and rules of construction.

    (a) Definitions. For purposes of this part, the following 
definitions apply:
    (1) Act means the Truth in Lending Act (15 U.S.C. 1601 et seq.).
    (2) Advertisement means a commercial message in any medium that 
promotes, directly or indirectly, a credit transaction.
    (3)(i) Application means the submission of a consumer's financial 
information for the purposes of obtaining an extension of credit.
    (ii) For transactions subject to Sec. 1026.19(e), (f), or (g) of 
this part, an application consists of the submission of the consumer's 
name, the consumer's income, the consumer's social security number to 
obtain a credit report, the property address, an estimate of the value 
of the property, and the mortgage loan amount sought.
    (4) Billing cycle or cycle means the interval between the days or 
dates of regular periodic statements. These intervals shall be equal and 
no longer than a quarter of a year. An interval will be considered equal 
if the number of days in the cycle does not vary more than four days 
from the regular day or date of the periodic statement.
    (5) Bureau means the Bureau of Consumer Financial Protection.
    (6) Business day means a day on which the creditor's offices are 
open to the public for carrying on substantially all of its business 
functions. However, for purposes of rescission under Sec. Sec. 1026.15 
and 1026.23, and for purposes of Sec. Sec. 1026.19(a)(1)(ii), 
1026.19(a)(2), 1026.19(e)(1)(iii)(B), 1026.19(e)(1)(iv), 
1026.19(e)(2)(i)(A), 1026.19(e)(4)(ii), 1026.19(f)(1)(ii), 
1026.19(f)(1)(iii), 1026.20(e)(5), 1026.31, and 1026.46(d)(4), the term 
means all calendar days except Sundays and the legal public holidays 
specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of 
Martin Luther King, Jr., Washington's Birthday, Memorial Day, 
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving 
Day, and Christmas Day.
    (7) Card issuer means a person that issues a credit card or that 
person's agent with respect to the card.

[[Page 9]]

    (8) Cardholder means a natural person to whom a credit card is 
issued for consumer credit purposes, or a natural person who has agreed 
with the card issuer to pay consumer credit obligations arising from the 
issuance of a credit card to another natural person. For purposes of 
Sec. 1026.12(a) and (b), the term includes any person to whom a credit 
card is issued for any purpose, including business, commercial or 
agricultural use, or a person who has agreed with the card issuer to pay 
obligations arising from the issuance of such a credit card to another 
person.
    (9) Cash price means the price at which a creditor, in the ordinary 
course of business, offers to sell for cash property or service that is 
the subject of the transaction. At the creditor's option, the term may 
include the price of accessories, services related to the sale, service 
contracts and taxes and fees for license, title, and registration. The 
term does not include any finance charge.
    (10) Closed-end credit means consumer credit other than ``open-end 
credit'' as defined in this section.
    (11) Consumer means a cardholder or natural person to whom consumer 
credit is offered or extended. However, for purposes of rescission under 
Sec. Sec. 1026.15 and 1026.23, the term also includes a natural person 
in whose principal dwelling a security interest is or will be retained 
or acquired, if that person's ownership interest in the dwelling is or 
will be subject to the security interest.
    (12) Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    (13) Consummation means the time that a consumer becomes 
contractually obligated on a credit transaction.
    (14) Credit means the right to defer payment of debt or to incur 
debt and defer its payment.
    (15)(i) Credit card means any card, plate, or other single credit 
device that may be used from time to time to obtain credit.
    (ii) Credit card account under an open-end (not home-secured) 
consumer credit plan means any open-end credit account that is accessed 
by a credit card, except:
    (A) A home-equity plan subject to the requirements of Sec. 1026.40 
that is accessed by a credit card; or
    (B) An overdraft line of credit that is accessed by a debit card or 
an account number.
    (iii) Charge card means a credit card on an account for which no 
periodic rate is used to compute a finance charge.
    (16) Credit sale means a sale in which the seller is a creditor. The 
term includes a bailment or lease (unless terminable without penalty at 
any time by the consumer) under which the consumer:
    (i) Agrees to pay as compensation for use a sum substantially 
equivalent to, or in excess of, the total value of the property and 
service involved; and
    (ii) Will become (or has the option to become), for no additional 
consideration or for nominal consideration, the owner of the property 
upon compliance with the agreement.
    (17) Creditor means:
    (i) A person who regularly extends consumer credit that is subject 
to a finance charge or is payable by written agreement in more than four 
installments (not including a down payment), and to whom the obligation 
is initially payable, either on the face of the note or contract, or by 
agreement when there is no note or contract.
    (ii) For purposes of Sec. Sec. 1026.4(c)(8) (Discounts), 1026.9(d) 
(Finance charge imposed at time of transaction), and 1026.12(e) (Prompt 
notification of returns and crediting of refunds), a person that honors 
a credit card.
    (iii) For purposes of subpart B, any card issuer that extends either 
open-end credit or credit that is not subject to a finance charge and is 
not payable by written agreement in more than four installments.
    (iv) For purposes of subpart B (except for the credit and charge 
card disclosures contained in Sec. Sec. 1026.60 and 1026.9(e) and (f), 
the finance charge disclosures contained in Sec. 1026.6(a)(1) and 
(b)(3)(i) and Sec. 1026.7(a)(4) through (7) and (b)(4) through (6) and 
the right of rescission set forth in Sec. 1026.15) and subpart C, any 
card issuer that extends closed-end credit that is subject to a finance 
charge or is payable by written

[[Page 10]]

agreement in more than four installments.
    (v) A person regularly extends consumer credit only if it extended 
credit (other than credit subject to the requirements of Sec. 1026.32) 
more than 25 times (or more than 5 times for transactions secured by a 
dwelling) in the preceding calendar year. If a person did not meet these 
numerical standards in the preceding calendar year, the numerical 
standards shall be applied to the current calendar year. A person 
regularly extends consumer credit if, in any 12-month period, the person 
originates more than one credit extension that is subject to the 
requirements of Sec. 1026.32 or one or more such credit extensions 
through a mortgage broker.
    (18) Downpayment means an amount, including the value of property 
used as a trade-in, paid to a seller to reduce the cash price of goods 
or services purchased in a credit sale transaction. A deferred portion 
of a downpayment may be treated as part of the downpayment if it is 
payable not later than the due date of the second otherwise regularly 
scheduled payment and is not subject to a finance charge.
    (19) Dwelling means a residential structure that contains one to 
four units, whether or not that structure is attached to real property. 
The term includes an individual condominium unit, cooperative unit, 
mobile home, and trailer, if it is used as a residence.
    (20) Open-end credit means consumer credit extended by a creditor 
under a plan in which:
    (i) The creditor reasonably contemplates repeated transactions;
    (ii) The creditor may impose a finance charge from time to time on 
an outstanding unpaid balance; and
    (iii) The amount of credit that may be extended to the consumer 
during the term of the plan (up to any limit set by the creditor) is 
generally made available to the extent that any outstanding balance is 
repaid.
    (21) Periodic rate means a rate of finance charge that is or may be 
imposed by a creditor on a balance for a day, week, month, or other 
subdivision of a year.
    (22) Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    (23) Prepaid finance charge means any finance charge paid separately 
in cash or by check before or at consummation of a transaction, or 
withheld from the proceeds of the credit at any time.
    (24) 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 in the consumer's principal dwelling to 
finance the acquisition or initial construction of that dwelling.
    (25) Security interest means an interest in property that secures 
performance of a consumer credit obligation and that is recognized by 
State or Federal law. It does not include incidental interests such as 
interests in proceeds, accessions, additions, fixtures, insurance 
proceeds (whether or not the creditor is a loss payee or beneficiary), 
premium rebates, or interests in after-acquired property. For purposes 
of disclosures under Sec. Sec. 1026.6, 1026.18, 1026.19(e) and (f), and 
1026.38(l)(6), the term does not include an interest that arises solely 
by operation of law. However, for purposes of the right of rescission 
under Sec. Sec. 1026.15 and 1026.23, the term does include interests 
that arise solely by operation of law.
    (26) State means any state, the District of Columbia, the 
Commonwealth of Puerto Rico, and any territory or possession of the 
United States.
    (b) Rules of construction. For purposes of this part, the following 
rules of construction apply:
    (1) Where appropriate, the singular form of a word includes the 
plural form and plural includes singular.
    (2) Where the words obligation and transaction are used in the 
regulation, they refer to a consumer credit obligation or transaction, 
depending upon the context. Where the word credit is used in the 
regulation, it means consumer credit unless the context clearly 
indicates otherwise.
    (3) Unless defined in this part, the words used have the meanings 
given to them by state law or contract.

[[Page 11]]

    (4) Where the word amount is used in this part to describe 
disclosure requirements, it refers to a numerical amount.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80106, Dec. 31, 2013]

    Effective Date Notes: 1. At 81 FR 84369, Nov. 22, 2016, Sec. 1026.2 
was amended by revising paragraphs (a)(15)(i), (a)(15)(ii)(A), and 
(a)(15)(ii)(B), and by adding paragraphs (a)(15)(ii)(C) and (a)(15)(iv), 
effective Oct. 1, 2017. For the convenience of the user, the added and 
revised text is set forth as follows:



Sec. 1026.2  Definitions and rules of construction.

    (a) * * *
    (15)(i) Credit card means any card, plate, or other single credit 
device that may be used from time to time to obtain credit. The term 
credit card includes a hybrid prepaid-credit card as defined in Sec. 
1026.61.
    (ii) * * *
    (A) A home-equity plan subject to the requirements of Sec. 1026.40 
that is accessed by a credit card;
    (B) An overdraft line of credit that is accessed by a debit card; or
    (C) An overdraft line of credit that is accessed by an account 
number, except if the account number is a hybrid prepaid-credit card 
that can access a covered separate credit feature as defined in Sec. 
1026.61.

                                * * * * *

    (iv) Debit card means any card, plate, or other single device that 
may be used from time to time to access an asset account other than a 
prepaid account as defined in Sec. 1026.61. The term debit card does 
not include a prepaid card as defined in Sec. 1026.61.

                                * * * * *

    Effective Date Notes: 2. At 81 FR 72388, Oct. 19, 2016, Sec. 1026.2 
was amended by revising paragraph (a)(11) and adding paragraph (a)(27), 
effective Apr. 19, 2018. For the convenience of the user, the added and 
revised text is set forth as follows:



Sec. 1026.2  Definitions and rules of construction.

    (a) * * *
    (11) Consumer means a cardholder or natural person to whom consumer 
credit is offered or extended. However, for purposes of rescission under 
Sec. Sec. 1026.15 and 1026.23, the term also includes a natural person 
in whose principal dwelling a security interest is or will be retained 
or acquired, if that person's ownership interest in the dwelling is or 
will be subject to the security interest. For purposes of Sec. Sec. 
1026.20(c) through (e), 1026.36(c), 1026.39, and 1026.41, the term 
includes a confirmed successor in interest.

                                * * * * *

    (27)(i) Successor in interest means a person to whom an ownership 
interest in a dwelling securing a closed-end consumer credit transaction 
is transferred from a consumer, provided that the transfer is:
    (A) A transfer by devise, descent, or operation of law on the death 
of a joint tenant or tenant by the entirety;
    (B) A transfer to a relative resulting from the death of the 
consumer;
    (C) A transfer where the spouse or children of the consumer become 
an owner of the property;
    (D) A transfer resulting from a decree of a dissolution of marriage, 
legal separation agreement, or from an incidental property settlement 
agreement, by which the spouse of the consumer becomes an owner of the 
property; or
    (E) A transfer into an inter vivos trust in which the consumer is 
and remains a beneficiary and which does not relate to a transfer of 
rights of occupancy in the property.
    (ii) Confirmed successor in interest means a successor in interest 
once a servicer has confirmed the successor in interest's identity and 
ownership interest in the dwelling.

                                * * * * *



Sec. 1026.3  Exempt transactions.

    The following transactions are not subject to this part or, if the 
exemption is limited to specified provisions of this part, are not 
subject to those provisions:
    (a) Business, commercial, agricultural, or organizational credit. 
(1) An extension of credit primarily for a business, commercial or 
agricultural purpose.
    (2) An extension of credit to other than a natural person, including 
credit to government agencies or instrumentalities.
    (b) Credit over applicable threshold amount--(1) Exemption--(i) 
Requirements. An extension of credit in which the amount of credit 
extended exceeds the applicable threshold amount or in which there is an 
express written commitment to extend credit in excess of the applicable 
threshold amount, unless the extension of credit is:
    (A) Secured by any real property, or by personal property used or 
expected to be used as the principal dwelling of the consumer; or

[[Page 12]]

    (B) A private education loan as defined in Sec. 1026.46(b)(5).
    (ii) Annual adjustments. The threshold amount in paragraph (b)(1)(i) 
of this section is adjusted annually to reflect increases in the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, as 
applicable. See the official commentary to this paragraph (b) for the 
threshold amount applicable to a specific extension of credit or express 
written commitment to extend credit.
    (2) Transition rule for open-end accounts exempt prior to July 21, 
2011. An open-end account that is exempt on July 20, 2011 based on an 
express written commitment to extend credit in excess of $25,000 remains 
exempt until December 31, 2011 unless:
    (i) The creditor takes a security interest in any real property, or 
in personal property used or expected to be used as the principal 
dwelling of the consumer; or
    (ii) The creditor reduces the express written commitment to extend 
credit to $25,000 or less.
    (c) Public utility credit. An extension of credit that involves 
public utility services provided through pipe, wire, other connected 
facilities, or radio or similar transmission (including extensions of 
such facilities), if the charges for service, delayed payment, or any 
discounts for prompt payment are filed with or regulated by any 
government unit. The financing of durable goods or home improvements by 
a public utility is not exempt.
    (d) Securities or commodities accounts. Transactions in securities 
or commodities accounts in which credit is extended by a broker-dealer 
registered with the Securities and Exchange Commission or the Commodity 
Futures Trading Commission.
    (e) Home fuel budget plans. An installment agreement for the 
purchase of home fuels in which no finance charge is imposed.
    (f) Student loan programs. 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 ).
    (g) Employer-sponsored retirement plans. An extension of credit to a 
participant in an employer-sponsored retirement plan qualified under 
section 401(a) of the Internal Revenue Code, a tax-sheltered annuity 
under section 403(b) of the Internal Revenue Code, or an eligible 
governmental deferred compensation plan under section 457(b) of the 
Internal Revenue Code (26 U.S.C. 401(a); 26 U.S.C. 403(b); 26 U.S.C. 
457(b)), provided that the extension of credit is comprised of fully 
vested funds from such participant's account and is made in compliance 
with the Internal Revenue Code (26 U.S.C. 1 et seq.).
    (h) Partial exemption for certain mortgage loans. The special 
disclosure requirements in Sec. 1026.19(e), (f), and (g) do not apply 
to a transaction that satisfies all of the following criteria:
    (1) The transaction is secured by a subordinate lien;
    (2) The transaction is for the purpose of:
    (i) Downpayment, closing costs, or other similar home buyer 
assistance, such as principal or interest subsidies;
    (ii) Property rehabilitation assistance;
    (iii) Energy efficiency assistance; or
    (iv) Foreclosure avoidance or prevention;
    (3) The credit contract does not require the payment of interest;
    (4) The credit contract provides that repayment of the amount of 
credit extended is:
    (i) Forgiven either incrementally or in whole, at a date certain, 
and subject only to specified ownership and occupancy conditions, such 
as a requirement that the consumer maintain the property as the 
consumer's principal dwelling for five years;
    (ii) Deferred for a minimum of 20 years after consummation of the 
transaction;
    (iii) Deferred until sale of the property securing the transaction; 
or
    (iv) Deferred until the property securing the transaction is no 
longer the principal dwelling of the consumer;
    (5) The total of costs payable by the consumer in connection with 
the transaction at consummation is less than one percent of the amount 
of credit extended and includes no charges other than:
    (i) Fees for recordation of security instruments, deeds, and similar 
documents;

[[Page 13]]

    (ii) A bona fide and reasonable application fee; and
    (iii) A bona fide and reasonable fee for housing counseling 
services; and
    (6) The creditor complies with all other applicable requirements of 
this part in connection with the transaction, including without 
limitation the disclosures required by Sec. 1026.18.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80107, Dec. 31, 2013]



Sec. 1026.4  Finance charge.

    (a) Definition. The finance charge is the cost of consumer credit as 
a dollar amount. It includes any charge payable directly or indirectly 
by the consumer and imposed directly or indirectly by the creditor as an 
incident to or a condition of the extension of credit. It does not 
include any charge of a type payable in a comparable cash transaction.
    (1) Charges by third parties. The finance charge includes fees and 
amounts charged by someone other than the creditor, unless otherwise 
excluded under this section, if the creditor:
    (i) Requires the use of a third party as a condition of or an 
incident to the extension of credit, even if the consumer can choose the 
third party; or
    (ii) Retains a portion of the third-party charge, to the extent of 
the portion retained.
    (2) Special rule; closing agent charges. Fees charged by a third 
party that conducts the loan closing (such as a settlement agent, 
attorney, or escrow or title company) are finance charges only if the 
creditor:
    (i) Requires the particular services for which the consumer is 
charged;
    (ii) Requires the imposition of the charge; or
    (iii) Retains a portion of the third-party charge, to the extent of 
the portion retained.
    (3) Special rule; mortgage broker fees. Fees charged by a mortgage 
broker (including fees paid by the consumer directly to the broker or to 
the creditor for delivery to the broker) are finance charges even if the 
creditor does not require the consumer to use a mortgage broker and even 
if the creditor does not retain any portion of the charge.
    (b) Examples of finance charges. The finance charge includes the 
following types of charges, except for charges specifically excluded by 
paragraphs (c) through (e) of this section:
    (1) Interest, time price differential, and any amount payable under 
an add-on or discount system of additional charges.
    (2) Service, transaction, activity, and carrying charges, including 
any charge imposed on a checking or other transaction account to the 
extent that the charge exceeds the charge for a similar account without 
a credit feature.
    (3) Points, loan fees, assumption fees, finder's fees, and similar 
charges.
    (4) Appraisal, investigation, and credit report fees.
    (5) Premiums or other charges for any guarantee or insurance 
protecting the creditor against the consumer's default or other credit 
loss.
    (6) Charges imposed on a creditor by another person for purchasing 
or accepting a consumer's obligation, if the consumer is required to pay 
the charges in cash, as an addition to the obligation, or as a deduction 
from the proceeds of the obligation.
    (7) Premiums or other charges for credit life, accident, health, or 
loss-of-income insurance, written in connection with a credit 
transaction.
    (8) Premiums or other charges for insurance against loss of or 
damage to property, or against liability arising out of the ownership or 
use of property, written in connection with a credit transaction.
    (9) Discounts for the purpose of inducing payment by a means other 
than the use of credit.
    (10) Charges or premiums paid for debt cancellation or debt 
suspension coverage written in connection with a credit transaction, 
whether or not the coverage is insurance under applicable law.
    (c) Charges excluded from the finance charge. The following charges 
are not finance charges:
    (1) Application fees charged to all applicants for credit, whether 
or not credit is actually extended.
    (2) Charges for actual unanticipated late payment, for exceeding a 
credit limit, or for delinquency, default, or a similar occurrence.

[[Page 14]]

    (3) Charges imposed by a financial institution for paying items that 
overdraw an account, unless the payment of such items and the imposition 
of the charge were previously agreed upon in writing.
    (4) Fees charged for participation in a credit plan, whether 
assessed on an annual or other periodic basis.
    (5) Seller's points.
    (6) Interest forfeited as a result of an interest reduction required 
by law on a time deposit used as security for an extension of credit.
    (7) Real-estate related fees. The following fees in a transaction 
secured by real property or in a residential mortgage transaction, if 
the fees are bona fide and reasonable in amount:
    (i) Fees for title examination, abstract of title, title insurance, 
property survey, and similar purposes.
    (ii) Fees for preparing loan-related documents, such as deeds, 
mortgages, and reconveyance or settlement documents.
    (iii) Notary and credit-report fees.
    (iv) Property appraisal fees or fees for inspections to assess the 
value or condition of the property if the service is performed prior to 
closing, including fees related to pest-infestation or flood-hazard 
determinations.
    (v) Amounts required to be paid into escrow or trustee accounts if 
the amounts would not otherwise be included in the finance charge.
    (8) Discounts offered to induce payment for a purchase by cash, 
check, or other means, as provided in section 167(b) of the Act.
    (d) Insurance and debt cancellation and debt suspension coverage--
(1) Voluntary credit insurance premiums. Premiums for credit life, 
accident, health, or loss-of-income insurance may be excluded from the 
finance charge if the following conditions are met:
    (i) The insurance coverage is not required by the creditor, and this 
fact is disclosed in writing.
    (ii) The premium for the initial term of insurance coverage is 
disclosed in writing. If the term of insurance is less than the term of 
the transaction, the term of insurance also shall be disclosed. The 
premium may be disclosed on a unit-cost basis only in open-end credit 
transactions, closed-end credit transactions by mail or telephone under 
Sec. 1026.17(g), and certain closed-end credit transactions involving 
an insurance plan that limits the total amount of indebtedness subject 
to coverage.
    (iii) The consumer signs or initials an affirmative written request 
for the insurance after receiving the disclosures specified in this 
paragraph, except as provided in paragraph (d)(4) of this section. Any 
consumer in the transaction may sign or initial the request.
    (2) Property insurance premiums. Premiums for insurance against loss 
of or damage to property, or against liability arising out of the 
ownership or use of property, including single interest insurance if the 
insurer waives all right of subrogation against the consumer, may be 
excluded from the finance charge if the following conditions are met:
    (i) The insurance coverage may be obtained from a person of the 
consumer's choice, and this fact is disclosed. (A creditor may reserve 
the right to refuse to accept, for reasonable cause, an insurer offered 
by the consumer.)
    (ii) If the coverage is obtained from or through the creditor, the 
premium for the initial term of insurance coverage shall be disclosed. 
If the term of insurance is less than the term of the transaction, the 
term of insurance shall also be disclosed. The premium may be disclosed 
on a unit-cost basis only in open-end credit transactions, closed-end 
credit transactions by mail or telephone under Sec. 1026.17(g), and 
certain closed-end credit transactions involving an insurance plan that 
limits the total amount of indebtedness subject to coverage.
    (3) Voluntary debt cancellation or debt suspension fees. Charges or 
premiums paid for debt cancellation coverage for amounts exceeding the 
value of the collateral securing the obligation or for debt cancellation 
or debt suspension coverage in the event of the loss of life, health, or 
income or in case of accident may be excluded from the finance charge, 
whether or not the coverage is insurance, if the following conditions 
are met:
    (i) The debt cancellation or debt suspension agreement or coverage 
is not

[[Page 15]]

required by the creditor, and this fact is disclosed in writing;
    (ii) The fee or premium for the initial term of coverage is 
disclosed in writing. If the term of coverage is less than the term of 
the credit transaction, the term of coverage also shall be disclosed. 
The fee or premium may be disclosed on a unit-cost basis only in open-
end credit transactions, closed-end credit transactions by mail or 
telephone under Sec. 1026.17(g), and certain closed-end credit 
transactions involving a debt cancellation agreement that limits the 
total amount of indebtedness subject to coverage;
    (iii) The following are disclosed, as applicable, for debt 
suspension coverage: That the obligation to pay loan principal and 
interest is only suspended, and that interest will continue to accrue 
during the period of suspension.
    (iv) The consumer signs or initials an affirmative written request 
for coverage after receiving the disclosures specified in this 
paragraph, except as provided in paragraph (d)(4) of this section. Any 
consumer in the transaction may sign or initial the request.
    (4) Telephone purchases. If a consumer purchases credit insurance or 
debt cancellation or debt suspension coverage for an open-end (not home-
secured) plan by telephone, the creditor must make the disclosures under 
paragraphs (d)(1)(i) and (ii) or (d)(3)(i) through (iii) of this 
section, as applicable, orally. In such a case, the creditor shall:
    (i) Maintain evidence that the consumer, after being provided the 
disclosures orally, affirmatively elected to purchase the insurance or 
coverage; and(ii) Mail the disclosures under paragraphs (d)(1)(i) and 
(ii) or (d)(3)(i) through (iii) of this section, as applicable, within 
three business days after the telephone purchase.
    (e) Certain security interest charges. If itemized and disclosed, 
the following charges may be excluded from the finance charge:
    (1) Taxes and fees prescribed by law that actually are or will be 
paid to public officials for determining the existence of or for 
perfecting, releasing, or satisfying a security interest.
    (2) The premium for insurance in lieu of perfecting a security 
interest to the extent that the premium does not exceed the fees 
described in paragraph (e)(1) of this section that otherwise would be 
payable.
    (3) Taxes on security instruments. Any tax levied on security 
instruments or on documents evidencing indebtedness if the payment of 
such taxes is a requirement for recording the instrument securing the 
evidence of indebtedness.
    (f) Prohibited offsets. Interest, dividends, or other income 
received or to be received by the consumer on deposits or investments 
shall not be deducted in computing the finance charge.

    Effective Date Note: At 81 FR 84369, Nov. 22, 2016, Sec. 1026.4 was 
amended by revising paragraphs (b)(2), (c)(3), and (c)(4), and by adding 
paragraph (b)(11), effective Oct. 1, 2017. For the convenience of the 
user, the added and revised text is set forth as follows:



Sec. 1026.4  Finance charge.

                                * * * * *

    (b) * * *
    (2) Service, transaction, activity, and carrying charges, including 
any charge imposed on a checking or other transaction account (except a 
prepaid account as defined in Sec. 1026.61) to the extent that the 
charge exceeds the charge for a similar account without a credit 
feature.

                                * * * * *

    (11) With regard to a covered separate credit feature and an asset 
feature on a prepaid account that are both accessible by a hybrid 
prepaid-credit card as defined in Sec. 1026.61:
    (i) Any fee or charge described in paragraphs (b)(1) through (10) of 
this section imposed on the covered separate credit feature, whether it 
is structured as a credit subaccount of the prepaid account or a 
separate credit account.
    (ii) Any fee or charge imposed on the asset feature of the prepaid 
account to the extent that the amount of the fee or charge exceeds 
comparable fees or charges imposed on prepaid accounts in the same 
prepaid account program that do not have a covered separate credit 
feature accessible by a hybrid prepaid-credit card.
    (c) * * *
    (3) Charges imposed by a financial institution for paying items that 
overdraw an account, unless the payment of such items and the imposition 
of the charge were previously agreed upon in writing. This paragraph 
does

[[Page 16]]

not apply to credit offered in connection with a prepaid account as 
defined in Sec. 1026.61.
    (4) Fees charged for participation in a credit plan, whether 
assessed on an annual or other periodic basis. This paragraph does not 
apply to a fee to participate in a covered separate credit feature 
accessible by a hybrid prepaid-credit card as defined in Sec. 1026.61, 
regardless of whether this fee is imposed on the credit feature or on 
the asset feature of the prepaid account.

                                * * * * *



                        Subpart B_Open-End Credit



Sec. 1026.5  General disclosure requirements.

    (a) Form of disclosures--(1) General. (i) The creditor shall make 
the disclosures required by this subpart clearly and conspicuously.
    (ii) The creditor shall make the disclosures required by this 
subpart in writing, in a form that the consumer may keep, except that:
    (A) The following disclosures need not be written: Disclosures under 
Sec. 1026.6(b)(3) of charges that are imposed as part of an open-end 
(not home-secured) plan that are not required to be disclosed under 
Sec. 1026.6(b)(2) and related disclosures of charges under Sec. 
1026.9(c)(2)(iii)(B); disclosures under Sec. 1026.9(c)(2)(vi); 
disclosures under Sec. 1026.9(d) when a finance charge is imposed at 
the time of the transaction; and disclosures under Sec. 
1026.56(b)(1)(i).
    (B) The following disclosures need not be in a retainable form: 
Disclosures that need not be written under paragraph (a)(1)(ii)(A) of 
this section; disclosures for credit and charge card applications and 
solicitations under Sec. 1026.60; home-equity disclosures under Sec. 
1026.40(d); the alternative summary billing-rights statement under Sec. 
1026.9(a)(2); the credit and charge card renewal disclosures required 
under Sec. 1026.9(e); and the payment requirements under Sec. 
1026.10(b), except as provided in Sec. 1026.7(b)(13).
    (iii) The disclosures required by this subpart may be provided to 
the consumer in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
The disclosures required by Sec. Sec. 1026.60, 1026.40, and 1026.16 may 
be provided to the consumer in electronic form without regard to the 
consumer consent or other provisions of the E-Sign Act in the 
circumstances set forth in those sections.
    (2) Terminology. (i) Terminology used in providing the disclosures 
required by this subpart shall be consistent.
    (ii) For home-equity plans subject to Sec. 1026.40, the terms 
finance charge and annual percentage rate, when required to be disclosed 
with a corresponding amount or percentage rate, shall be more 
conspicuous than any other required disclosure. The terms need not be 
more conspicuous when used for periodic statement disclosures under 
Sec. 1026.7(a)(4) and for advertisements under Sec. 1026.16.
    (iii) If disclosures are required to be presented in a tabular 
format pursuant to paragraph (a)(3) of this section, the term penalty 
APR shall be used, as applicable. The term penalty APR need not be used 
in reference to the annual percentage rate that applies with the loss of 
a promotional rate, assuming the annual percentage rate that applies is 
not greater than the annual percentage rate that would have applied at 
the end of the promotional period; or if the annual percentage rate that 
applies with the loss of a promotional rate is a variable rate, the 
annual percentage rate is calculated using the same index and margin as 
would have been used to calculate the annual percentage rate that would 
have applied at the end of the promotional period. If credit insurance 
or debt cancellation or debt suspension coverage is required as part of 
the plan, the term required shall be used and the program shall be 
identified by its name. If an annual percentage rate is required to be 
presented in a tabular format pursuant to paragraph (a)(3)(i) or 
(a)(3)(iii) of this section, the term fixed, or a similar term, may not 
be used to describe such rate unless the creditor also specifies a time 
period that the rate will be fixed and the rate will not increase during 
that period, or if no such time period is provided, the rate will not 
increase while the plan is open.

[[Page 17]]

    (3) Specific formats. (i) Certain disclosures for credit and charge 
card applications and solicitations must be provided in a tabular format 
in accordance with the requirements of Sec. 1026.60(a)(2).
    (ii) Certain disclosures for home-equity plans must precede other 
disclosures and must be given in accordance with the requirements of 
Sec. 1026.40(a).
    (iii) Certain account-opening disclosures must be provided in a 
tabular format in accordance with the requirements of Sec. 
1026.6(b)(1).
    (iv) Certain disclosures provided on periodic statements must be 
grouped together in accordance with the requirements of Sec. 
1026.7(b)(6) and (b)(13).
    (v) Certain disclosures provided on periodic statements must be 
given in accordance with the requirements of Sec. 1026.7(b)(12).
    (vi) Certain disclosures accompanying checks that access a credit 
card account must be provided in a tabular format in accordance with the 
requirements of Sec. 1026.9(b)(3).
    (vii) Certain disclosures provided in a change-in-terms notice must 
be provided in a tabular format in accordance with the requirements of 
Sec. 1026.9(c)(2)(iv)(D).
    (viii) Certain disclosures provided when a rate is increased due to 
delinquency, default or as a penalty must be provided in a tabular 
format in accordance with the requirements of Sec. 1026.9(g)(3)(ii).
    (b) Time of disclosures--(1) Account-opening disclosures--(i) 
General rule. The creditor shall furnish account-opening disclosures 
required by Sec. 1026.6 before the first transaction is made under the 
plan.
    (ii) Charges imposed as part of an open-end (not home-secured) plan. 
Charges that are imposed as part of an open-end (not home-secured) plan 
and are not required to be disclosed under Sec. 1026.6(b)(2) may be 
disclosed after account opening but before the consumer agrees to pay or 
becomes obligated to pay for the charge, provided they are disclosed at 
a time and in a manner that a consumer would be likely to notice them. 
This provision does not apply to charges imposed as part of a home-
equity plan subject to the requirements of Sec. 1026.40.
    (iii) Telephone purchases. Disclosures required by Sec. 1026.6 may 
be provided as soon as reasonably practicable after the first 
transaction if:
    (A) The first transaction occurs when a consumer contacts a merchant 
by telephone to purchase goods and at the same time the consumer accepts 
an offer to finance the purchase by establishing an open-end plan with 
the merchant or third-party creditor;
    (B) The merchant or third-party creditor permits consumers to return 
any goods financed under the plan and provides consumers with a 
sufficient time to reject the plan and return the goods free of cost 
after the merchant or third-party creditor has provided the written 
disclosures required by Sec. 1026.6; and
    (C) The consumer's right to reject the plan and return the goods is 
disclosed to the consumer as a part of the offer to finance the 
purchase.
    (iv) Membership fees--(A) General. In general, a creditor may not 
collect any fee before account-opening disclosures are provided. A 
creditor may collect, or obtain the consumer's agreement to pay, 
membership fees, including application fees excludable from the finance 
charge under Sec. 1026.4(c)(1), before providing account-opening 
disclosures if, after receiving the disclosures, the consumer may reject 
the plan and have no obligation to pay these fees (including application 
fees) or any other fee or charge. A membership fee for purposes of this 
paragraph has the same meaning as a fee for the issuance or availability 
of credit described in Sec. 1026.60(b)(2). If the consumer rejects the 
plan, the creditor must promptly refund the membership fee if it has 
been paid, or take other action necessary to ensure the consumer is not 
obligated to pay that fee or any other fee or charge.
    (B) Home-equity plans. Creditors offering home-equity plans subject 
to the requirements of Sec. 1026.40 are not subject to the requirements 
of paragraph (b)(1)(iv)(A) of this section.
    (v) Application fees. A creditor may collect an application fee 
excludable from the finance charge under Sec. 1026.4(c)(1) before 
providing account-opening disclosures. However, if a consumer rejects 
the plan after receiving

[[Page 18]]

account-opening disclosures, the consumer must have no obligation to pay 
such an application fee, or if the fee was paid, it must be refunded. 
See Sec. 1026.5(b)(1)(iv)(A).
    (2) Periodic statements--(i) Statement required. The creditor shall 
mail or deliver a periodic statement as required by Sec. 1026.7 for 
each billing cycle at the end of which an account has a debit or credit 
balance of more than $1 or on which a finance charge has been imposed. A 
periodic statement need not be sent for an account if the creditor deems 
it uncollectible, if delinquency collection proceedings have been 
instituted, if the creditor has charged off the account in accordance 
with loan-loss provisions and will not charge any additional fees or 
interest on the account, or if furnishing the statement would violate 
Federal law.
    (ii) Timing requirements--(A) Credit card accounts under an open-end 
(not home-secured) consumer credit plan. For credit card accounts under 
an open-end (not home-secured) consumer credit plan, a card issuer must 
adopt reasonable procedures designed to ensure that:
    (1) Periodic statements are mailed or delivered at least 21 days 
prior to the payment due date disclosed on the statement pursuant to 
Sec. 1026.7(b)(11)(i)(A); and
    (2) The card issuer does not treat as late for any purpose a 
required minimum periodic payment received by the card issuer within 21 
days after mailing or delivery of the periodic statement disclosing the 
due date for that payment.
    (B) Open-end consumer credit plans. For accounts under an open-end 
consumer credit plan, a creditor must adopt reasonable procedures 
designed to ensure that:
    (1) If a grace period applies to the account:
    (i) Periodic statements are mailed or delivered at least 21 days 
prior to the date on which the grace period expires; and
    (ii) The creditor does not impose finance charges as a result of the 
loss of the grace period if a payment that satisfies the terms of the 
grace period is received by the creditor within 21 days after mailing or 
delivery of the periodic statement.
    (2) Regardless of whether a grace period applies to the account:
    (i) Periodic statements are mailed or delivered at least 14 days 
prior to the date on which the required minimum periodic payment must be 
received in order to avoid being treated as late for any purpose; and
    (ii) The creditor does not treat as late for any purpose a required 
minimum periodic payment received by the creditor within 14 days after 
mailing or delivery of the periodic statement.
    (3) For purposes of paragraph (b)(2)(ii)(B) of this section, ``grace 
period'' means a period within which any credit extended may be repaid 
without incurring a finance charge due to a periodic interest rate.
    (3) Credit and charge card application and solicitation disclosures. 
The card issuer shall furnish the disclosures for credit and charge card 
applications and solicitations in accordance with the timing 
requirements of Sec. 1026.60.
    (4) Home-equity plans. Disclosures for home-equity plans shall be 
made in accordance with the timing requirements of Sec. 1026.40(b).
    (c) Basis of disclosures and use of estimates. Disclosures shall 
reflect the terms of the legal obligation between the parties. If any 
information necessary for accurate disclosure is unknown to the 
creditor, it shall make the disclosure based on the best information 
reasonably available and shall state clearly that the disclosure is an 
estimate.
    (d) Multiple creditors; multiple consumers. If the credit plan 
involves more than one creditor, only one set of disclosures shall be 
given, and the creditors shall agree among themselves which creditor 
must comply with the requirements that this part imposes on any or all 
of them. If there is more than one consumer, the disclosures may be made 
to any consumer who is primarily liable on the account. If the right of 
rescission under Sec. 1026.15 is applicable, however, the disclosures 
required by Sec. Sec. 1026.6 and 1026.15(b) shall be made to each 
consumer having the right to rescind.
    (e) Effect of subsequent events. If a disclosure becomes inaccurate 
because of

[[Page 19]]

an event that occurs after the creditor mails or delivers the 
disclosures, the resulting inaccuracy is not a violation of this part, 
although new disclosures may be required under Sec. 1026.9(c).



Sec. 1026.6  Account-opening disclosures.

    (a) Rules affecting home-equity plans. The requirements of this 
paragraph (a) apply only to home-equity plans subject to the 
requirements of Sec. 1026.40. A creditor shall disclose the items in 
this section, to the extent applicable:
    (1) Finance charge. The circumstances under which a finance charge 
will be imposed and an explanation of how it will be determined, as 
follows:
    (i) A statement of when finance charges begin to accrue, including 
an explanation of whether or not any time period exists within which any 
credit extended may be repaid without incurring a finance charge. If 
such a time period is provided, a creditor may, at its option and 
without disclosure, impose no finance charge when payment is received 
after the time period's expiration.
    (ii) A disclosure of each periodic rate that may be used to compute 
the finance charge, the range of balances to which it is applicable, and 
the corresponding annual percentage rate. If a creditor offers a 
variable-rate plan, the creditor shall also disclose: The circumstances 
under which the rate(s) may increase; any limitations on the increase; 
and the effect(s) of an increase. When different periodic rates apply to 
different types of transactions, the types of transactions to which the 
periodic rates shall apply shall also be disclosed. A creditor is not 
required to adjust the range of balances disclosure to reflect the 
balance below which only a minimum charge applies.
    (iii) An explanation of the method used to determine the balance on 
which the finance charge may be computed.
    (iv) An explanation of how the amount of any finance charge will be 
determined, including a description of how any finance charge other than 
the periodic rate will be determined.
    (2) Other charges. The amount of any charge other than a finance 
charge that may be imposed as part of the plan, or an explanation of how 
the charge will be determined.
    (3) Home-equity plan information. The following disclosures 
described in Sec. 1026.40(d), as applicable:
    (i) A statement of the conditions under which the creditor may take 
certain action, as described in Sec. 1026.40(d)(4)(i), such as 
terminating the plan or changing the terms.
    (ii) The payment information described in Sec. 1026.40(d)(5)(i) and 
(ii) for both the draw period and any repayment period.
    (iii) A statement that negative amortization may occur as described 
in Sec. 1026.40(d)(9).
    (iv) A statement of any transaction requirements as described in 
Sec. 1026.40(d)(10).
    (v) A statement regarding the tax implications as described in Sec. 
1026.40(d)(11).
    (vi) A statement that the annual percentage rate imposed under the 
plan does not include costs other than interest as described in Sec. 
1026.40(d)(6) and (d)(12)(ii).
    (vii) The variable-rate disclosures described in Sec. 
1026.40(d)(12)(viii), (d)(12)(x), (d)(12)(xi), and (d)(12)(xii), as well 
as the disclosure described in Sec. 1026.40(d)(5)(iii), unless the 
disclosures provided with the application were in a form the consumer 
could keep and included a representative payment example for the 
category of payment option chosen by the consumer.
    (4) Security interests. The fact that the creditor has or will 
acquire a security interest in the property purchased under the plan, or 
in other property identified by item or type.
    (5) Statement of billing rights. A statement that outlines the 
consumer's rights and the creditor's responsibilities under Sec. Sec. 
1026.12(c) and 1026.13 and that is substantially similar to the 
statement found in Model Form G-3 or, at the creditor's option, G-3(A), 
in appendix G to this part.
    (b) Rules affecting open-end (not home-secured) plans. The 
requirements of paragraph (b) of this section apply to plans other than 
home-equity plans subject to the requirements of Sec. 1026.40.
    (1) Form of disclosures; tabular format for open-end (not home-
secured) plans. Creditors must provide the account-

[[Page 20]]

opening disclosures specified in paragraph (b)(2)(i) through (b)(2)(v) 
(except for (b)(2)(i)(D)(2)) and (b)(2)(vii) through (b)(2)(xiv) of this 
section in the form of a table with the headings, content, and format 
substantially similar to any of the applicable tables in G-17 in 
appendix G.
    (i) Highlighting. In the table, any annual percentage rate required 
to be disclosed pursuant to paragraph (b)(2)(i) of this section; any 
introductory rate permitted to be disclosed pursuant to paragraph 
(b)(2)(i)(B) or required to be disclosed under paragraph (b)(2)(i)(F) of 
this section, any rate that will apply after a premium initial rate 
expires permitted to be disclosed pursuant to paragraph (b)(2)(i)(C) or 
required to be disclosed pursuant to paragraph (b)(2)(i)(F), and any fee 
or percentage amounts or maximum limits on fee amounts disclosed 
pursuant to paragraphs (b)(2)(ii), (b)(2)(iv), (b)(2)(vii) through 
(b)(2)(xii) of this section must be disclosed in bold text. However, 
bold text shall not be used for: The amount of any periodic fee 
disclosed pursuant to paragraph (b)(2) of this section that is not an 
annualized amount; and other annual percentage rates or fee amounts 
disclosed in the table.
    (ii) Location. Only the information required or permitted by 
paragraphs (b)(2)(i) through (v) (except for (b)(2)(i)(D)(2)) and 
(b)(2)(vii) through (xiv) of this section shall be in the table. 
Disclosures required by paragraphs (b)(2)(i)(D)(2), (b)(2)(i)(D)(3), 
(b)(2)(vi), and (b)(2)(xv) of this section shall be placed directly 
below the table. Disclosures required by paragraphs (b)(3) through (5) 
of this section that are not otherwise required to be in the table and 
other information may be presented with the account agreement or 
account-opening disclosure statement, provided such information appears 
outside the required table.
    (iii) Fees that vary by state. Creditors that impose fees referred 
to in paragraphs (b)(2)(vii) through (b)(2)(xi) of this section that 
vary by state and that provide the disclosures required by paragraph (b) 
of this section in person at the time the open-end (not home-secured) 
plan is established in connection with financing the purchase of goods 
or services may, at the creditor's option, disclose in the account-
opening table the specific fee applicable to the consumer's account, or 
the range of the fees, if the disclosure includes a statement that the 
amount of the fee varies by state and refers the consumer to the account 
agreement or other disclosure provided with the account-opening table 
where the amount of the fee applicable to the consumer's account is 
disclosed. A creditor may not list fees for multiple states in the 
account-opening summary table.
    (iv) Fees based on a percentage. If the amount of any fee required 
to be disclosed under this section is determined on the basis of a 
percentage of another amount, the percentage used and the identification 
of the amount against which the percentage is applied may be disclosed 
instead of the amount of the fee.
    (2) Required disclosures for account-opening table for open-end (not 
home-secured) plans. A creditor shall disclose the items in this 
section, to the extent applicable:
    (i) Annual percentage rate. Each periodic rate that may be used to 
compute the finance charge on an outstanding balance for purchases, a 
cash advance, or a balance transfer, expressed as an annual percentage 
rate (as determined by Sec. 1026.14(b)). When more than one rate 
applies for a category of transactions, the range of balances to which 
each rate is applicable shall also be disclosed. The annual percentage 
rate for purchases disclosed pursuant to this paragraph shall be in at 
least 16-point type, except for the following: A penalty rate that may 
apply upon the occurrence of one or more specific events.
    (A) Variable-rate information. If a rate disclosed under paragraph 
(b)(2)(i) of this section is a variable rate, the creditor shall also 
disclose the fact that the rate may vary and how the rate is determined. 
In describing how the applicable rate will be determined, the creditor 
must identify the type of index or formula that is used in setting the 
rate. The value of the index and the amount of the margin that are used 
to calculate the variable rate shall not be disclosed in the table. A 
disclosure of any applicable limitations on rate increases or decreases 
shall not be included in the table.

[[Page 21]]

    (B) Discounted initial rates. If the initial rate is an introductory 
rate, as that term is defined in Sec. 1026.16(g)(2)(ii), the creditor 
must disclose the rate that would otherwise apply to the account 
pursuant to paragraph (b)(2)(i) of this section. Where the rate is not 
tied to an index or formula, the creditor must disclose the rate that 
will apply after the introductory rate expires. In a variable-rate 
account, the creditor must disclose a rate based on the applicable index 
or formula in accordance with the accuracy requirements of paragraph 
(b)(4)(ii)(G) of this section. Except as provided in paragraph 
(b)(2)(i)(F) of this section, the creditor is not required to, but may 
disclose in the table the introductory rate along with the rate that 
would otherwise apply to the account if the creditor also discloses the 
time period during which the introductory rate will remain in effect, 
and uses the term ``introductory'' or ``intro'' in immediate proximity 
to the introductory rate.
    (C) Premium initial rate. If the initial rate is temporary and is 
higher than the rate that will apply after the temporary rate expires, 
the creditor must disclose the premium initial rate pursuant to 
paragraph (b)(2)(i) of this section. Consistent with paragraph (b)(2)(i) 
of this section, the premium initial rate for purchases must be in at 
least 16-point type. Except as provided in paragraph (b)(2)(i)(F) of 
this section, the creditor is not required to, but may disclose in the 
table the rate that will apply after the premium initial rate expires if 
the creditor also discloses the time period during which the premium 
initial rate will remain in effect. If the creditor also discloses in 
the table the rate that will apply after the premium initial rate for 
purchases expires, that rate also must be in at least 16-point type.
    (D) Penalty rates--(1) In general. Except as provided in paragraph 
(b)(2)(i)(D)(2) and (b)(2)(i)(D)(3) of this section, if a rate may 
increase as a penalty for one or more events specified in the account 
agreement, such as a late payment or an extension of credit that exceeds 
the credit limit, the creditor must disclose pursuant to paragraph 
(b)(2)(i) of this section the increased rate that may apply, a brief 
description of the event or events that may result in the increased 
rate, and a brief description of how long the increased rate will remain 
in effect. If more than one penalty rate may apply, the creditor at its 
option may disclose the highest rate that could apply, instead of 
disclosing the specific rates or the range of rates that could apply.
    (2) Introductory rates. If the creditor discloses in the table an 
introductory rate, as that term is defined in Sec. 1026.16(g)(2)(ii), 
creditors must briefly disclose directly beneath the table the 
circumstances under which the introductory rate may be revoked, and the 
rate that will apply after the introductory rate is revoked.
    (3) Employee preferential rates. If a creditor discloses in the 
table a preferential annual percentage rate for which only employees of 
the creditor, employees of a third party, or other individuals with 
similar affiliations with the creditor or third party, such as executive 
officers, directors, or principal shareholders are eligible, the 
creditor must briefly disclose directly beneath the table the 
circumstances under which such preferential rate may be revoked, and the 
rate that will apply after such preferential rate is revoked.
    (E) Point of sale where APRs vary by state or based on 
creditworthiness. Creditors imposing annual percentage rates that vary 
by state or based on the consumer's creditworthiness and providing the 
disclosures required by paragraph (b) of this section in person at the 
time the open-end (not home-secured) plan is established in connection 
with financing the purchase of goods or services may, at the creditor's 
option, disclose pursuant to paragraph (b)(2)(i) of this section in the 
account-opening table:
    (1) The specific annual percentage rate applicable to the consumer's 
account; or
    (2) The range of the annual percentage rates, if the disclosure 
includes a statement that the annual percentage rate varies by state or 
will be determined based on the consumer's creditworthiness and refers 
the consumer to the account agreement or other disclosure provided with 
the account-opening table where the annual percentage rate applicable to 
the consumer's account is

[[Page 22]]

disclosed. A creditor may not list annual percentage rates for multiple 
states in the account-opening table.
    (F) Credit card accounts under an open-end (not home-secured) 
consumer credit plan. Notwithstanding paragraphs (b)(2)(i)(B) and 
(b)(2)(i)(C) of this section, for credit card accounts under an open-end 
(not home-secured) plan, issuers must disclose in the table:
    (1) Any introductory rate as that term is defined in Sec. 
1026.16(g)(2)(ii) that would apply to the account, consistent with the 
requirements of paragraph (b)(2)(i)(B) of this section, and
    (2) Any rate that would apply upon the expiration of a premium 
initial rate, consistent with the requirements of paragraph (b)(2)(i)(C) 
of this section.
    (ii) Fees for issuance or availability. (A) Any annual or other 
periodic fee that may be imposed for the issuance or availability of an 
open-end plan, including any fee based on account activity or 
inactivity; how frequently it will be imposed; and the annualized amount 
of the fee.
    (B) Any non-periodic fee that relates to opening the plan. A 
creditor must disclose that the fee is a one-time fee.
    (iii) Fixed finance charge; minimum interest charge. Any fixed 
finance charge and a brief description of the charge. Any minimum 
interest charge if it exceeds $1.00 that could be imposed during a 
billing cycle, and a brief description of the charge. The $1.00 
threshold amount shall be adjusted periodically by the Bureau to reflect 
changes in the Consumer Price Index. The Bureau shall calculate each 
year a price level adjusted minimum interest charge using the Consumer 
Price Index in effect on the June 1 of that year. When the cumulative 
change in the adjusted minimum value derived from applying the annual 
Consumer Price level to the current minimum interest charge threshold 
has risen by a whole dollar, the minimum interest charge will be 
increased by $1.00. The creditor may, at its option, disclose in the 
table minimum interest charges below this threshold.
    (iv) Transaction charges. Any transaction charge imposed by the 
creditor for use of the open-end plan for purchases.
    (v) Grace period. The date by which or the period within which any 
credit extended may be repaid without incurring a finance charge due to 
a periodic interest rate and any conditions on the availability of the 
grace period. If no grace period is provided, that fact must be 
disclosed. If the length of the grace period varies, the creditor may 
disclose the range of days, the minimum number of days, or the average 
number of the days in the grace period, if the disclosure is identified 
as a range, minimum, or average. In disclosing in the tabular format a 
grace period that applies to all features on the account, the phrase 
``How to Avoid Paying Interest'' shall be used as the heading for the 
row describing the grace period. If a grace period is not offered on all 
features of the account, in disclosing this fact in the tabular format, 
the phrase ``Paying Interest'' shall be used as the heading for the row 
describing this fact.
    (vi) Balance computation method. The name of the balance computation 
method listed in Sec. 1026.60(g) that is used to determine the balance 
on which the finance charge is computed for each feature, or an 
explanation of the method used if it is not listed, along with a 
statement that an explanation of the method(s) required by paragraph 
(b)(4)(i)(D) of this section is provided with the account-opening 
disclosures. In determining which balance computation method to 
disclose, the creditor shall assume that credit extended will not be 
repaid within any grace period, if any.
    (vii) Cash advance fee. Any fee imposed for an extension of credit 
in the form of cash or its equivalent.
    (viii) Late payment fee. Any fee imposed for a late payment.
    (ix) Over-the-limit fee. Any fee imposed for exceeding a credit 
limit.
    (x) Balance transfer fee. Any fee imposed to transfer an outstanding 
balance.
    (xi) Returned-payment fee. Any fee imposed by the creditor for a 
returned payment.
    (xii) Required insurance, debt cancellation or debt suspension 
coverage. (A) A fee for insurance described in Sec. 1026.4(b)(7) or 
debt cancellation or suspension coverage described in Sec. 
1026.4(b)(10), if the insurance, or debt

[[Page 23]]

cancellation or suspension coverage is required as part of the plan; and
    (B) A cross reference to any additional information provided about 
the insurance or coverage, as applicable.
    (xiii) Available credit. If a creditor requires fees for the 
issuance or availability of credit described in paragraph (b)(2)(ii) of 
this section, or requires a security deposit for such credit, and the 
total amount of those required fees and/or security deposit that will be 
imposed and charged to the account when the account is opened is 15 
percent or more of the minimum credit limit for the plan, a creditor 
must disclose the available credit remaining after these fees or 
security deposit are debited to the account. The determination whether 
the 15 percent threshold is met must be based on the minimum credit 
limit for the plan. However, the disclosure provided under this 
paragraph must be based on the actual initial credit limit provided on 
the account. In determining whether the 15 percent threshold test is 
met, the creditor must only consider fees for issuance or availability 
of credit, or a security deposit, that are required. If fees for 
issuance or availability are optional, these fees should not be 
considered in determining whether the disclosure must be given. 
Nonetheless, if the 15 percent threshold test is met, the creditor in 
providing the disclosure must disclose the amount of available credit 
calculated by excluding those optional fees, and the available credit 
including those optional fees. The creditor shall also disclose that the 
consumer has the right to reject the plan and not be obligated to pay 
those fees or any other fee or charges until the consumer has used the 
account or made a payment on the account after receiving a periodic 
statement. This paragraph does not apply with respect to fees or 
security deposits that are not debited to the account.
    (xiv) Web site reference. For issuers of credit cards that are not 
charge cards, a reference to the Web site established by the Bureau and 
a statement that consumers may obtain on the Web site information about 
shopping for and using credit cards. Until January 1, 2013, issuers may 
substitute for this reference a reference to the Web site established by 
the Board of Governors of the Federal Reserve System.
    (xv) Billing error rights reference. A statement that information 
about consumers' right to dispute transactions is included in the 
account-opening disclosures.
    (3) Disclosure of charges imposed as part of open-end (not home-
secured) plans. A creditor shall disclose, to the extent applicable:
    (i) For charges imposed as part of an open-end (not home-secured) 
plan, the circumstances under which the charge may be imposed, including 
the amount of the charge or an explanation of how the charge is 
determined. For finance charges, a statement of when the charge begins 
to accrue and an explanation of whether or not any time period exists 
within which any credit that has been extended may be repaid without 
incurring the charge. If such a time period is provided, a creditor may, 
at its option and without disclosure, elect not to impose a finance 
charge when payment is received after the time period expires.
    (ii) Charges imposed as part of the plan are:
    (A) Finance charges identified under Sec. 1026.4(a) and Sec. 
1026.4(b).
    (B) Charges resulting from the consumer's failure to use the plan as 
agreed, except amounts payable for collection activity after default, 
attorney's fees whether or not automatically imposed, and post-judgment 
interest rates permitted by law.
    (C) Taxes imposed on the credit transaction by a state or other 
governmental body, such as documentary stamp taxes on cash advances.
    (D) Charges for which the payment, or nonpayment, affect the 
consumer's access to the plan, the duration of the plan, the amount of 
credit extended, the period for which credit is extended, or the timing 
or method of billing or payment.
    (E) Charges imposed for terminating a plan.
    (F) Charges for voluntary credit insurance, debt cancellation or 
debt suspension.
    (iii) Charges that are not imposed as part of the plan include:
    (A) Charges imposed on a cardholder by an institution other than the 
card

[[Page 24]]

issuer for the use of the other institution's ATM in a shared or 
interchange system.
    (B) A charge for a package of services that includes an open-end 
credit feature, if the fee is required whether or not the open-end 
credit feature is included and the non-credit services are not merely 
incidental to the credit feature.
    (C) Charges under Sec. 1026.4(e) disclosed as specified.
    (4) Disclosure of rates for open-end (not home-secured) plans. A 
creditor shall disclose, to the extent applicable:
    (i) For each periodic rate that may be used to calculate interest:
    (A) Rates. The rate, expressed as a periodic rate and a 
corresponding annual percentage rate.
    (B) Range of balances. The range of balances to which the rate is 
applicable; however, a creditor is not required to adjust the range of 
balances disclosure to reflect the balance below which only a minimum 
charge applies.
    (C) Type of transaction. The type of transaction to which the rate 
applies, if different rates apply to different types of transactions.
    (D) Balance computation method. An explanation of the method used to 
determine the balance to which the rate is applied.
    (ii) Variable-rate accounts. For interest rate changes that are tied 
to increases in an index or formula (variable-rate accounts) 
specifically set forth in the account agreement:
    (A) The fact that the annual percentage rate may increase.
    (B) How the rate is determined, including the margin.
    (C) The circumstances under which the rate may increase.
    (D) The frequency with which the rate may increase.
    (E) Any limitation on the amount the rate may change.
    (F) The effect(s) of an increase.
    (G) Except as specified in paragraph (b)(4)(ii)(H) of this section, 
a rate is accurate if it is a rate as of a specified date and this rate 
was in effect within the last 30 days before the disclosures are 
provided.
    (H) Creditors imposing annual percentage rates that vary according 
to an index that is not under the creditor's control that provide the 
disclosures required by paragraph (b) of this section in person at the 
time the open-end (not home-secured) plan is established in connection 
with financing the purchase of goods or services may disclose in the 
table a rate, or range of rates to the extent permitted by Sec. 
1026.6(b)(2)(i)(E), that was in effect within the last 90 days before 
the disclosures are provided, along with a reference directing the 
consumer to the account agreement or other disclosure provided with the 
account-opening table where an annual percentage rate applicable to the 
consumer's account in effect within the last 30 days before the 
disclosures are provided is disclosed.
    (iii) Rate changes not due to index or formula. For interest rate 
changes that are specifically set forth in the account agreement and not 
tied to increases in an index or formula:
    (A) The initial rate (expressed as a periodic rate and a 
corresponding annual percentage rate) required under paragraph 
(b)(4)(i)(A) of this section.
    (B) How long the initial rate will remain in effect and the specific 
events that cause the initial rate to change.
    (C) The rate (expressed as a periodic rate and a corresponding 
annual percentage rate) that will apply when the initial rate is no 
longer in effect and any limitation on the time period the new rate will 
remain in effect.
    (D) The balances to which the new rate will apply.
    (E) The balances to which the current rate at the time of the change 
will apply.
    (5) Additional disclosures for open-end (not home-secured) plans. A 
creditor shall disclose, to the extent applicable:
    (i) Voluntary credit insurance, debt cancellation or debt 
suspension. The disclosures in Sec. Sec. 1026.4(d)(1)(i) and (d)(1)(ii) 
and (d)(3)(i) through (d)(3)(iii) if the creditor offers optional credit 
insurance or debt cancellation or debt suspension coverage that is 
identified in Sec. 1026.4(b)(7) or (b)(10).
    (ii) Security interests. The fact that the creditor has or will 
acquire a security interest in the property purchased under the plan, or 
in other property identified by item or type.
    (iii) Statement of billing rights. A statement that outlines the 
consumer's

[[Page 25]]

rights and the creditor's responsibilities under Sec. Sec. 1026.12(c) 
and 1026.13 and that is substantially similar to the statement found in 
Model Form G-3(A) in appendix G to this part.

    Effective Date Note: At 81 FR 84369, Nov. 22, 2016, Sec. 1026.6 was 
amended by adding paragraphs (b)(3)(iii)(D) and (E), effective Oct. 1, 
2017. For the convenience of the user, the added text is set forth as 
follows:



Sec. 1026.6  Account-opening disclosures.

                                * * * * *

    (b) * * *
    (3) * * *
    (iii) * * *
    (D) With regard to a covered separate credit feature and an asset 
feature on a prepaid account that are both accessible by a hybrid 
prepaid-credit card as defined in Sec. 1026.61, any fee or charge 
imposed on the asset feature of the prepaid account to the extent that 
the amount of the fee or charge does not exceed comparable fees or 
charges imposed on prepaid accounts in the same prepaid account program 
that do not have a covered separate credit feature accessible by a 
hybrid prepaid-credit card.
    (E) With regard to a non-covered separate credit feature accessible 
by a prepaid card as defined in Sec. 1026.61, any fee or charge imposed 
on the asset feature of the prepaid account.

                                * * * * *



Sec. 1026.7  Periodic statement.

    The creditor shall furnish the consumer with a periodic statement 
that discloses the following items, to the extent applicable:
    (a) Rules affecting home-equity plans. The requirements of paragraph 
(a) of this section apply only to home-equity plans subject to the 
requirements of Sec. 1026.40. Alternatively, a creditor subject to this 
paragraph may, at its option, comply with any of the requirements of 
paragraph (b) of this section; however, any creditor that chooses not to 
provide a disclosure under paragraph (a)(7) of this section must comply 
with paragraph (b)(6) of this section.
    (1) Previous balance. The account balance outstanding at the 
beginning of the billing cycle.
    (2) Identification of transactions. An identification of each credit 
transaction in accordance with Sec. 1026.8.
    (3) Credits. Any credit to the account during the billing cycle, 
including the amount and the date of crediting. The date need not be 
provided if a delay in accounting does not result in any finance or 
other charge.
    (4) Periodic rates. (i) Except as provided in paragraph (a)(4)(ii) 
of this section, each periodic rate that may be used to compute the 
finance charge, the range of balances to which it is applicable, and the 
corresponding annual percentage rate. If no finance charge is imposed 
when the outstanding balance is less than a certain amount, the creditor 
is not required to disclose that fact, or the balance below which no 
finance charge will be imposed. If different periodic rates apply to 
different types of transactions, the types of transactions to which the 
periodic rates apply shall also be disclosed. For variable-rate plans, 
the fact that the periodic rate(s) may vary.
    (ii) Exception. An annual percentage rate that differs from the rate 
that would otherwise apply and is offered only for a promotional period 
need not be disclosed except in periods in which the offered rate is 
actually applied.
    (5) Balance on which finance charge computed. The amount of the 
balance to which a periodic rate was applied and an explanation of how 
that balance was determined. When a balance is determined without first 
deducting all credits and payments made during the billing cycle, the 
fact and the amount of the credits and payments shall be disclosed.
    (6) Amount of finance charge and other charges. Creditors may comply 
with paragraphs (a)(6) of this section, or with paragraph (b)(6) of this 
section, at their option.
    (i) Finance charges. The amount of any finance charge debited or 
added to the account during the billing cycle, using the term finance 
charge. The components of the finance charge shall be individually 
itemized and identified to show the amount(s) due to the application of 
any periodic rates and the amounts(s) of any other type of finance 
charge. If there is more than one periodic rate, the amount of the 
finance charge attributable to each rate need not be separately itemized 
and identified.
    (ii) Other charges. The amounts, itemized and identified by type, of 
any

[[Page 26]]

charges other than finance charges debited to the account during the 
billing cycle.
    (7) Annual percentage rate. At a creditor's option, when a finance 
charge is imposed during the billing cycle, the annual percentage 
rate(s) determined under Sec. 1026.14(c) using the term annual 
percentage rate.
    (8) Grace period. The date by which or the time period within which 
the new balance or any portion of the new balance must be paid to avoid 
additional finance charges. If such a time period is provided, a 
creditor may, at its option and without disclosure, impose no finance 
charge if payment is received after the time period's expiration.
    (9) Address for notice of billing errors. The address to be used for 
notice of billing errors. Alternatively, the address may be provided on 
the billing rights statement permitted by Sec. 1026.9(a)(2).
    (10) Closing date of billing cycle; new balance. The closing date of 
the billing cycle and the account balance outstanding on that date.
    (b) Rules affecting open-end (not home-secured) plans. The 
requirements of paragraph (b) of this section apply only to plans other 
than home-equity plans subject to the requirements of Sec. 1026.40.
    (1) Previous balance. The account balance outstanding at the 
beginning of the billing cycle.
    (2) Identification of transactions. An identification of each credit 
transaction in accordance with Sec. 1026.8.
    (3) Credits. Any credit to the account during the billing cycle, 
including the amount and the date of crediting. The date need not be 
provided if a delay in crediting does not result in any finance or other 
charge.
    (4) Periodic rates. (i) Except as provided in paragraph (b)(4)(ii) 
of this section, each periodic rate that may be used to compute the 
interest charge expressed as an annual percentage rate and using the 
term Annual Percentage Rate, along with the range of balances to which 
it is applicable. If no interest charge is imposed when the outstanding 
balance is less than a certain amount, the creditor is not required to 
disclose that fact, or the balance below which no interest charge will 
be imposed. The types of transactions to which the periodic rates apply 
shall also be disclosed. For variable-rate plans, the fact that the 
annual percentage rate may vary.
    (ii) Exception. A promotional rate, as that term is defined in Sec. 
1026.16(g)(2)(i), is required to be disclosed only in periods in which 
the offered rate is actually applied.
    (5) Balance on which finance charge computed. The amount of the 
balance to which a periodic rate was applied and an explanation of how 
that balance was determined, using the term Balance Subject to Interest 
Rate. When a balance is determined without first deducting all credits 
and payments made during the billing cycle, the fact and the amount of 
the credits and payments shall be disclosed. As an alternative to 
providing an explanation of how the balance was determined, a creditor 
that uses a balance computation method identified in Sec. 1026.60(g) 
may, at the creditor's option, identify the name of the balance 
computation method and provide a toll-free telephone number where 
consumers may obtain from the creditor more information about the 
balance computation method and how resulting interest charges were 
determined. If the method used is not identified in Sec. 1026.60(g), 
the creditor shall provide a brief explanation of the method used.
    (6) Charges imposed. (i) The amounts of any charges imposed as part 
of a plan as stated in Sec. 1026.6(b)(3), grouped together, in 
proximity to transactions identified under paragraph (b)(2) of this 
section, substantially similar to Sample G-18(A) in appendix G to this 
part.
    (ii) Interest. Finance charges attributable to periodic interest 
rates, using the term Interest Charge, must be grouped together under 
the heading Interest Charged, itemized and totaled by type of 
transaction, and a total of finance charges attributable to periodic 
interest rates, using the term Total Interest, must be disclosed for the 
statement period and calendar year to date, using a format substantially 
similar to Sample G-18(A) in appendix G to this part.
    (iii) Fees. Charges imposed as part of the plan other than charges 
attributable to periodic interest rates must be grouped together under 
the heading

[[Page 27]]

Fees, identified consistent with the feature or type, and itemized, and 
a total of charges, using the term Fees, must be disclosed for the 
statement period and calendar year to date, using a format substantially 
similar to Sample G-18(A) in appendix G to this part.
    (7) Change-in-terms and increased penalty rate summary for open-end 
(not home-secured) plans. Creditors that provide a change-in-terms 
notice required by Sec. 1026.9(c), or a rate increase notice required 
by Sec. 1026.9(g), on or with the periodic statement, must disclose the 
information in Sec. 1026.9(c)(2)(iv)(A) and (c)(2)(iv)(B) (if 
applicable) or Sec. 1026.9(g)(3)(i) on the periodic statement in 
accordance with the format requirements in Sec. 1026.9(c)(2)(iv)(D), 
and Sec. 1026.9(g)(3)(ii). See Forms G-18(F) and G-18(G) in appendix G 
to this part.
    (8) Grace period. The date by which or the time period within which 
the new balance or any portion of the new balance must be paid to avoid 
additional finance charges. If such a time period is provided, a 
creditor may, at its option and without disclosure, impose no finance 
charge if payment is received after the time period's expiration.
    (9) Address for notice of billing errors. The address to be used for 
notice of billing errors. Alternatively, the address may be provided on 
the billing rights statement permitted by Sec. 1026.9(a)(2).
    (10) Closing date of billing cycle; new balance. The closing date of 
the billing cycle and the account balance outstanding on that date. The 
new balance must be disclosed in accordance with the format requirements 
of paragraph (b)(13) of this section.
    (11) Due date; late payment costs. (i) Except as provided in 
paragraph (b)(11)(ii) of this section and in accordance with the format 
requirements in paragraph (b)(13) of this section, for a credit card 
account under an open-end (not home-secured) consumer credit plan, a 
card issuer must provide on each periodic statement:
    (A) The due date for a payment. The due date disclosed pursuant to 
this paragraph shall be the same day of the month for each billing 
cycle.
    (B) The amount of any late payment fee and any increased periodic 
rate(s) (expressed as an annual percentage rate(s)) that may be imposed 
on the account as a result of a late payment. If a range of late payment 
fees may be assessed, the card issuer may state the range of fees, or 
the highest fee and an indication that the fee imposed could be lower. 
If the rate may be increased for more than one feature or balance, the 
card issuer may state the range of rates or the highest rate that could 
apply and at the issuer's option an indication that the rate imposed 
could be lower.
    (ii) Exception. The requirements of paragraph (b)(11)(i) of this 
section do not apply to the following:
    (A) Periodic statements provided solely for charge card accounts; 
and
    (B) Periodic statements provided for a charged-off account where 
payment of the entire account balance is due immediately.
    (12) Repayment disclosures--(i) In general. Except as provided in 
paragraphs (b)(12)(ii) and (b)(12)(v) of this section, for a credit card 
account under an open-end (not home-secured) consumer credit plan, a 
card issuer must provide the following disclosures on each periodic 
statement:
    (A) The following statement with a bold heading: ``Minimum Payment 
Warning: If you make only the minimum payment each period, you will pay 
more in interest and it will take you longer to pay off your balance;''
    (B) The minimum payment repayment estimate, as described in appendix 
M1 to this part. If the minimum payment repayment estimate is less than 
2 years, the card issuer must disclose the estimate in months. 
Otherwise, the estimate must be disclosed in years and rounded to the 
nearest whole year;
    (C) The minimum payment total cost estimate, as described in 
appendix M1 to this part. The minimum payment total cost estimate must 
be rounded either to the nearest whole dollar or to the nearest cent, at 
the card issuer's option;
    (D) A statement that the minimum payment repayment estimate and the 
minimum payment total cost estimate are based on the current outstanding 
balance shown on the periodic statement. A statement that the minimum 
payment repayment estimate and the

[[Page 28]]

minimum payment total cost estimate are based on the assumption that 
only minimum payments are made and no other amounts are added to the 
balance;
    (E) A toll-free telephone number where the consumer may obtain from 
the card issuer information about credit counseling services consistent 
with paragraph (b)(12)(iv) of this section; and
    (F)(1) Except as provided in paragraph (b)(12)(i)(F)(2) of this 
section, the following disclosures:
    (i) The estimated monthly payment for repayment in 36 months, as 
described in appendix M1 to this part. The estimated monthly payment for 
repayment in 36 months must be rounded either to the nearest whole 
dollar or to the nearest cent, at the card issuer's option;
    (ii) A statement that the card issuer estimates that the consumer 
will repay the outstanding balance shown on the periodic statement in 3 
years if the consumer pays the estimated monthly payment each month for 
3 years;
    (iii) The total cost estimate for repayment in 36 months, as 
described in appendix M1 to this part. The total cost estimate for 
repayment in 36 months must be rounded either to the nearest whole 
dollar or to the nearest cent, at the card issuer's option; and
    (iv) The savings estimate for repayment in 36 months, as described 
in appendix M1 to this part. The savings estimate for repayment in 36 
months must be rounded either to the nearest whole dollar or to the 
nearest cent, at the card issuer's option.
    (2) The requirements of paragraph (b)(12)(i)(F)(1) of this section 
do not apply to a periodic statement in any of the following 
circumstances:
    (i) The minimum payment repayment estimate that is disclosed on the 
periodic statement pursuant to paragraph (b)(12)(i)(B) of this section 
after rounding is three years or less;
    (ii) The estimated monthly payment for repayment in 36 months, as 
described in appendix M1 to this part, after rounding as set forth in 
paragraph (b)(12)(i)(F)(1)(i) of this section that is calculated for a 
particular billing cycle is less than the minimum payment required for 
the plan for that billing cycle; and
    (iii) A billing cycle where an account has both a balance in a 
revolving feature where the required minimum payments for this feature 
will not amortize that balance in a fixed amount of time specified in 
the account agreement and a balance in a fixed repayment feature where 
the required minimum payment for this fixed repayment feature will 
amortize that balance in a fixed amount of time specified in the account 
agreement which is less than 36 months.
    (ii) Negative or no amortization. If negative or no amortization 
occurs when calculating the minimum payment repayment estimate as 
described in appendix M1 of this part, a card issuer must provide the 
following disclosures on the periodic statement instead of the 
disclosures set forth in paragraph (b)(12)(i) of this section:
    (A) The following statement: ``Minimum Payment Warning: Even if you 
make no more charges using this card, if you make only the minimum 
payment each month we estimate you will never pay off the balance shown 
on this statement because your payment will be less than the interest 
charged each month'';
    (B) The following statement: ``If you make more than the minimum 
payment each period, you will pay less in interest and pay off your 
balance sooner'';
    (C) The estimated monthly payment for repayment in 36 months, as 
described in appendix M1 to this part. The estimated monthly payment for 
repayment in 36 months must be rounded either to the nearest whole 
dollar or to the nearest cent, at the issuer's option;
    (D) A statement that the card issuer estimates that the consumer 
will repay the outstanding balance shown on the periodic statement in 3 
years if the consumer pays the estimated monthly payment each month for 
3 years; and
    (E) A toll-free telephone number where the consumer may obtain from 
the card issuer information about credit counseling services consistent 
with paragraph (b)(12)(iv) of this section.

[[Page 29]]

    (iii) Format requirements. A card issuer must provide the 
disclosures required by paragraph (b)(12)(i) or (b)(12)(ii) of this 
section in accordance with the format requirements of paragraph (b)(13) 
of this section, and in a format substantially similar to Samples G-
18(C)(1), G-18(C)(2) and G-18(C)(3) in appendix G to this part, as 
applicable.
    (iv) Provision of information about credit counseling services--(A) 
Required information. To the extent available from the United States 
Trustee or a bankruptcy administrator, a card issuer must provide 
through the toll-free telephone number disclosed pursuant to paragraphs 
(b)(12)(i) or (b)(12)(ii) of this section the name, street address, 
telephone number, and Web site address for at least three organizations 
that have been approved by the United States Trustee or a bankruptcy 
administrator pursuant to 11 U.S.C. 111(a)(1) to provide credit 
counseling services in, at the card issuer's option, either the state in 
which the billing address for the account is located or the state 
specified by the consumer.
    (B) Updating required information. At least annually, a card issuer 
must update the information provided pursuant to paragraph 
(b)(12)(iv)(A) of this section for consistency with the information 
available from the United States Trustee or a bankruptcy administrator.
    (v) Exemptions. Paragraph (b)(12) of this section does not apply to:
    (A) Charge card accounts that require payment of outstanding 
balances in full at the end of each billing cycle;
    (B) A billing cycle immediately following two consecutive billing 
cycles in which the consumer paid the entire balance in full, had a zero 
outstanding balance or had a credit balance; and
    (C) A billing cycle where paying the minimum payment due for that 
billing cycle will pay the entire outstanding balance on the account for 
that billing cycle.
    (13) Format requirements. The due date required by paragraph (b)(11) 
of this section shall be disclosed on the front of the first page of the 
periodic statement. The amount of the late payment fee and the annual 
percentage rate(s) required by paragraph (b)(11) of this section shall 
be stated in close proximity to the due date. The ending balance 
required by paragraph (b)(10) of this section and the disclosures 
required by paragraph (b)(12) of this section shall be disclosed closely 
proximate to the minimum payment due. The due date, late payment fee and 
annual percentage rate, ending balance, minimum payment due, and 
disclosures required by paragraph (b)(12) of this section shall be 
grouped together. Sample G-18(D) in appendix G to this part sets forth 
an example of how these terms may be grouped.
    (14) Deferred interest or similar transactions. For accounts with an 
outstanding balance subject to a deferred interest or similar program, 
the date by which that outstanding balance must be paid in full in order 
to avoid the obligation to pay finance charges on such balance must be 
disclosed on the front of any page of each periodic statement issued 
during the deferred interest period beginning with the first periodic 
statement issued during the deferred interest period that reflects the 
deferred interest or similar transaction. The disclosure provided 
pursuant to this paragraph must be substantially similar to Sample G-
18(H) in appendix G to this part.

    Effective Date Note: At 81 FR 84369, Nov. 22, 2016, Sec. 1026.7 was 
amended by revising paragraph (b)(11)(ii)(A), effective Oct. 1, 2017. 
For the convenience of the user, the revised text is set forth as 
follows:



Sec. 1026.7  Periodic statement.

                                * * * * *

    (b) * * *
    (11) * * *
    (ii) * * *
    (A) Periodic statements provided solely for charge card accounts, 
other than covered separate credit features that are charge card 
accounts accessible by hybrid prepaid-credit cards as defined in Sec. 
1026.61; and

                                * * * * *



Sec. 1026.8  Identifying transactions on periodic statements.

    The creditor shall identify credit transactions on or with the first 
periodic statement that reflects the transaction by furnishing the 
following information, as applicable:

[[Page 30]]

    (a) Sale credit. (1) Except as provided in paragraph (a)(2) of this 
section, for each credit transaction involving the sale of property or 
services, the creditor must disclose the amount and date of the 
transaction, and either:
    (i) A brief identification of the property or services purchased, 
for creditors and sellers that are the same or related; or
    (ii) The seller's name; and the city and state or foreign country 
where the transaction took place. The creditor may omit the address or 
provide any suitable designation that helps the consumer to identify the 
transaction when the transaction took place at a location that is not 
fixed; took place in the consumer's home; or was a mail, Internet, or 
telephone order.
    (2) Creditors need not comply with paragraph (a)(1) of this section 
if an actual copy of the receipt or other credit document is provided 
with the first periodic statement reflecting the transaction, and the 
amount of the transaction and either the date of the transaction to the 
consumer's account or the date of debiting the transaction are disclosed 
on the copy or on the periodic statement.
    (b) Nonsale credit. For each credit transaction not involving the 
sale of property or services, the creditor must disclose a brief 
identification of the transaction; the amount of the transaction; and at 
least one of the following dates: The date of the transaction, the date 
the transaction was debited to the consumer's account, or, if the 
consumer signed the credit document, the date appearing on the document. 
If an actual copy of the receipt or other credit document is provided 
and that copy shows the amount and at least one of the specified dates, 
the brief identification may be omitted.
    (c) Alternative creditor procedures; consumer inquiries for 
clarification or documentation. The following procedures apply to 
creditors that treat an inquiry for clarification or documentation as a 
notice of a billing error, including correcting the account in 
accordance with Sec. 1026.13(e):
    (1) Failure to disclose the information required by paragraphs (a) 
and (b) of this section is not a failure to comply with the regulation, 
provided that the creditor also maintains procedures reasonably designed 
to obtain and provide the information. This applies to transactions that 
take place outside a state, as defined in Sec. 1026.2(a)(26), whether 
or not the creditor maintains procedures reasonably adapted to obtain 
the required information.
    (2) As an alternative to the brief identification for sale or 
nonsale credit, the creditor may disclose a number or symbol that also 
appears on the receipt or other credit document given to the consumer, 
if the number or symbol reasonably identifies that transaction with that 
creditor.



Sec. 1026.9  Subsequent disclosure requirements.

    (a) Furnishing statement of billing rights--(1) Annual statement. 
The creditor shall mail or deliver the billing rights statement required 
by Sec. 1026.6(a)(5) and (b)(5)(iii) at least once per calendar year, 
at intervals of not less than 6 months nor more than 18 months, either 
to all consumers or to each consumer entitled to receive a periodic 
statement under Sec. 1026.5(b)(2) for any one billing cycle.
    (2) Alternative summary statement. As an alternative to paragraph 
(a)(1) of this section, the creditor may mail or deliver, on or with 
each periodic statement, a statement substantially similar to Model Form 
G-4 or Model Form G-4(A) in appendix G to this part, as applicable. 
Creditors offering home-equity plans subject to the requirements of 
Sec. 1026.40 may use either Model Form, at their option.
    (b) Disclosures for supplemental credit access devices and 
additional features. (1) If a creditor, within 30 days after mailing or 
delivering the account-opening disclosures under Sec. 1026.6(a)(1) or 
(b)(3)(ii)(A), as applicable, adds a credit feature to the consumer's 
account or mails or delivers to the consumer a credit access device, 
including but not limited to checks that access a credit card account, 
for which the finance charge terms are the same as those previously 
disclosed, no additional disclosures are necessary. Except as provided 
in paragraph (b)(3) of this section, after 30 days, if the creditor adds 
a credit feature or furnishes a credit access device (other than as a 
renewal,

[[Page 31]]

resupply, or the original issuance of a credit card) on the same finance 
charge terms, the creditor shall disclose, before the consumer uses the 
feature or device for the first time, that it is for use in obtaining 
credit under the terms previously disclosed.
    (2) Except as provided in paragraph (b)(3) of this section, whenever 
a credit feature is added or a credit access device is mailed or 
delivered to the consumer, and the finance charge terms for the feature 
or device differ from disclosures previously given, the disclosures 
required by Sec. 1026.6(a)(1) or (b)(3)(ii)(A), as applicable, that are 
applicable to the added feature or device shall be given before the 
consumer uses the feature or device for the first time.
    (3) Checks that access a credit card account. (i) Disclosures. For 
open-end plans not subject to the requirements of Sec. 1026.40, if 
checks that can be used to access a credit card account are provided 
more than 30 days after account-opening disclosures under Sec. 
1026.6(b) are mailed or delivered, or are provided within 30 days of the 
account-opening disclosures and the finance charge terms for the checks 
differ from the finance charge terms previously disclosed, the creditor 
shall disclose on the front of the page containing the checks the 
following terms in the form of a table with the headings, content, and 
form substantially similar to Sample G-19 in appendix G to this part:
    (A) If a promotional rate, as that term is defined in Sec. 
1026.16(g)(2)(i) applies to the checks:
    (1) The promotional rate and the time period during which the 
promotional rate will remain in effect;
    (2) The type of rate that will apply (such as whether the purchase 
or cash advance rate applies) after the promotional rate expires, and 
the annual percentage rate that will apply after the promotional rate 
expires. For a variable-rate account, a creditor must disclose an annual 
percentage rate based on the applicable index or formula in accordance 
with the accuracy requirements set forth in paragraph (b)(3)(ii) of this 
section; and
    (3) The date, if any, by which the consumer must use the checks in 
order to qualify for the promotional rate. If the creditor will honor 
checks used after such date but will apply an annual percentage rate 
other than the promotional rate, the creditor must disclose this fact 
and the type of annual percentage rate that will apply if the consumer 
uses the checks after such date.
    (B) If no promotional rate applies to the checks:
    (1) The type of rate that will apply to the checks and the 
applicable annual percentage rate. For a variable-rate account, a 
creditor must disclose an annual percentage rate based on the applicable 
index or formula in accordance with the accuracy requirements set forth 
in paragraph (b)(3)(ii) of this section.
    (2) [Reserved]
    (C) Any transaction fees applicable to the checks disclosed under 
Sec. 1026.6(b)(2)(iv); and
    (D) Whether or not a grace period is given within which any credit 
extended by use of the checks may be repaid without incurring a finance 
charge due to a periodic interest rate. When disclosing whether there is 
a grace period, the phrase ``How to Avoid Paying Interest on Check 
Transactions'' shall be used as the row heading when a grace period 
applies to credit extended by the use of the checks. When disclosing the 
fact that no grace period exists for credit extended by use of the 
checks, the phrase ``Paying Interest'' shall be used as the row heading.
    (ii) Accuracy. The disclosures in paragraph (b)(3)(i) of this 
section must be accurate as of the time the disclosures are mailed or 
delivered. A variable annual percentage rate is accurate if it was in 
effect within 60 days of when the disclosures are mailed or delivered.
    (iii) Variable rates. If any annual percentage rate required to be 
disclosed pursuant to paragraph (b)(3)(i) of this section is a variable 
rate, the card issuer shall also disclose the fact that the rate may 
vary and how the rate is determined. In describing how the applicable 
rate will be determined, the card issuer must identify the type of index 
or formula that is used in setting the rate. The value of the index and 
the amount of the margin that are used to calculate the variable rate 
shall not be disclosed in the table. A disclosure of

[[Page 32]]

any applicable limitations on rate increases shall not be included in 
the table.
    (c) Change in terms--(1) Rules affecting home-equity plans--(i) 
Written notice required. For home-equity plans subject to the 
requirements of Sec. 1026.40, whenever any term required to be 
disclosed under Sec. 1026.6(a) is changed or the required minimum 
periodic payment is increased, the creditor shall mail or deliver 
written notice of the change to each consumer who may be affected. The 
notice shall be mailed or delivered at least 15 days prior to the 
effective date of the change. The 15-day timing requirement does not 
apply if the change has been agreed to by the consumer; the notice shall 
be given, however, before the effective date of the change.
    (ii) Notice not required. For home-equity plans subject to the 
requirements of Sec. 1026.40, a creditor is not required to provide 
notice under this section when the change involves a reduction of any 
component of a finance or other charge or when the change results from 
an agreement involving a court proceeding.
    (iii) Notice to restrict credit. For home-equity plans subject to 
the requirements of Sec. 1026.40, if the creditor prohibits additional 
extensions of credit or reduces the credit limit pursuant to Sec. 
1026.40(f)(3)(i) or (f)(3)(vi), the creditor shall mail or deliver 
written notice of the action to each consumer who will be affected. The 
notice must be provided not later than three business days after the 
action is taken and shall contain specific reasons for the action. If 
the creditor requires the consumer to request reinstatement of credit 
privileges, the notice also shall state that fact.
    (2) Rules affecting open-end (not home-secured) plans--(i) Changes 
where written advance notice is required--(A) General. For plans other 
than home-equity plans subject to the requirements of Sec. 1026.40, 
except as provided in paragraphs (c)(2)(i)(B), (c)(2)(iii) and (c)(2)(v) 
of this section, when a significant change in account terms as described 
in paragraph (c)(2)(ii) of this section is made, a creditor must provide 
a written notice of the change at least 45 days prior to the effective 
date of the change to each consumer who may be affected. The 45-day 
timing requirement does not apply if the consumer has agreed to a 
particular change as described in paragraph (c)(2)(i)(B) of this 
section; for such changes, notice must be given in accordance with the 
timing requirements of paragraph (c)(2)(i)(B) of this section. Increases 
in the rate applicable to a consumer's account due to delinquency, 
default or as a penalty described in paragraph (g) of this section that 
are not due to a change in the contractual terms of the consumer's 
account must be disclosed pursuant to paragraph (g) of this section 
instead of paragraph (c)(2) of this section.
    (B) Changes agreed to by the consumer. A notice of change in terms 
is required, but it may be mailed or delivered as late as the effective 
date of the change if the consumer agrees to the particular change. This 
paragraph (c)(2)(i)(B) applies only when a consumer substitutes 
collateral or when the creditor can advance additional credit only if a 
change relatively unique to that consumer is made, such as the 
consumer's providing additional security or paying an increased minimum 
payment amount. The following are not considered agreements between the 
consumer and the creditor for purposes of this paragraph (c)(2)(i)(B): 
The consumer's general acceptance of the creditor's contract reservation 
of the right to change terms; the consumer's use of the account (which 
might imply acceptance of its terms under state law); the consumer's 
acceptance of a unilateral term change that is not particular to that 
consumer, but rather is of general applicability to consumers with that 
type of account; and the consumer's request to reopen a closed account 
or to upgrade an existing account to another account offered by the 
creditor with different credit or other features.
    (ii) Significant changes in account terms. For purposes of this 
section, a ``significant change in account terms'' means a change to a 
term required to be disclosed under Sec. 1026.6(b)(1) and (b)(2), an 
increase in the required minimum periodic payment, a change to a term 
required to be disclosed under

[[Page 33]]

Sec. 1026.6(b)(4), or the acquisition of a security interest.
    (iii) Charges not covered by Sec. 1026.6(b)(1) and (b)(2). Except 
as provided in paragraph (c)(2)(vi) of this section, if a creditor 
increases any component of a charge, or introduces a new charge, 
required to be disclosed under Sec. 1026.6(b)(3) that is not a 
significant change in account terms as described in paragraph (c)(2)(ii) 
of this section, a creditor must either, at its option:
    (A) Comply with the requirements of paragraph (c)(2)(i) of this 
section; or
    (B) Provide notice of the amount of the charge before the consumer 
agrees to or becomes obligated to pay the charge, at a time and in a 
manner that a consumer would be likely to notice the disclosure of the 
charge. The notice may be provided orally or in writing.
    (iv) Disclosure requirements--(A) Significant changes in account 
terms. If a creditor makes a significant change in account terms as 
described in paragraph (c)(2)(ii) of this section, the notice provided 
pursuant to paragraph (c)(2)(i) of this section must provide the 
following information:
    (1) A summary of the changes made to terms required by Sec. 
1026.6(b)(1) and (b)(2) or Sec. 1026.6(b)(4), a description of any 
increase in the required minimum periodic payment, and a description of 
any security interest being acquired by the creditor;
    (2) A statement that changes are being made to the account;
    (3) For accounts other than credit card accounts under an open-end 
(not home-secured) consumer credit plan subject to Sec. 
1026.9(c)(2)(iv)(B), a statement indicating the consumer has the right 
to opt out of these changes, if applicable, and a reference to 
additional information describing the opt-out right provided in the 
notice, if applicable;
    (4) The date the changes will become effective;
    (5) If applicable, a statement that the consumer may find additional 
information about the summarized changes, and other changes to the 
account, in the notice;
    (6) If the creditor is changing a rate on the account, other than a 
penalty rate, a statement that if a penalty rate currently applies to 
the consumer's account, the new rate described in the notice will not 
apply to the consumer's account until the consumer's account balances 
are no longer subject to the penalty rate;
    (7) If the change in terms being disclosed is an increase in an 
annual percentage rate, the balances to which the increased rate will be 
applied. If applicable, a statement identifying the balances to which 
the current rate will continue to apply as of the effective date of the 
change in terms; and
    (8) If the change in terms being disclosed is an increase in an 
annual percentage rate for a credit card account under an open-end (not 
home-secured) consumer credit plan, a statement of no more than four 
principal reasons for the rate increase, listed in their order of 
importance.
    (B) Right to reject for credit card accounts under an open-end (not 
home-secured) consumer credit plan. In addition to the disclosures in 
paragraph (c)(2)(iv)(A) of this section, if a card issuer makes a 
significant change in account terms on a credit card account under an 
open-end (not home-secured) consumer credit plan, the creditor must 
generally provide the following information on the notice provided 
pursuant to paragraph (c)(2)(i) of this section. This information is not 
required to be provided in the case of an increase in the required 
minimum periodic payment, an increase in a fee as a result of a 
reevaluation of a determination made under Sec. 1026.52(b)(1)(i) or an 
adjustment to the safe harbors in Sec. 1026.52(b)(1)(ii) to reflect 
changes in the Consumer Price Index, a change in an annual percentage 
rate applicable to a consumer's account, an increase in a fee previously 
reduced consistent with 50 U.S.C. app. 527 or a similar Federal or state 
statute or regulation if the amount of the increased fee does not exceed 
the amount of that fee prior to the reduction, or when the change 
results from the creditor not receiving the consumer's required minimum 
periodic payment within 60 days after the due date for that payment:
    (1) A statement that the consumer has the right to reject the change 
or changes prior to the effective date of the changes, unless the 
consumer fails to make a required minimum periodic

[[Page 34]]

payment within 60 days after the due date for that payment;
    (2) Instructions for rejecting the change or changes, and a toll-
free telephone number that the consumer may use to notify the creditor 
of the rejection; and
    (3) If applicable, a statement that if the consumer rejects the 
change or changes, the consumer's ability to use the account for further 
advances will be terminated or suspended.
    (C) Changes resulting from failure to make minimum periodic payment 
within 60 days from due date for credit card accounts under an open-end 
(not home-secured) consumer credit plan. For a credit card account under 
an open-end (not home-secured) consumer credit plan:
    (1) If the significant change required to be disclosed pursuant to 
paragraph (c)(2)(i) of this section is an increase in an annual 
percentage rate or a fee or charge required to be disclosed under Sec. 
1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) based on the consumer's 
failure to make a minimum periodic payment within 60 days from the due 
date for that payment, the notice provided pursuant to paragraph 
(c)(2)(i) of this section must state that the increase will cease to 
apply to transactions that occurred prior to or within 14 days of 
provision of the notice, if the creditor receives six consecutive 
required minimum periodic payments on or before the payment due date, 
beginning with the first payment due following the effective date of the 
increase.
    (2) If the significant change required to be disclosed pursuant to 
paragraph (c)(2)(i) of this section is an increase in a fee or charge 
required to be disclosed under Sec. 1026.6(b)(2)(ii), (b)(2)(iii), or 
(b)(2)(xii) based on the consumer's failure to make a minimum periodic 
payment within 60 days from the due date for that payment, the notice 
provided pursuant to paragraph (c)(2)(i) of this section must also state 
the reason for the increase.
    (D) Format requirements--(1) Tabular format. The summary of changes 
described in paragraph (c)(2)(iv)(A)(1) of this section must be in a 
tabular format (except for a summary of any increase in the required 
minimum periodic payment, a summary of a term required to be disclosed 
under Sec. 1026.6(b)(4) that is not required to be disclosed under 
Sec. 1026.6(b)(1) and (b)(2), or a description of any security interest 
being acquired by the creditor), with headings and format substantially 
similar to any of the account-opening tables found in G-17 in appendix G 
to this part. The table must disclose the changed term and information 
relevant to the change, if that relevant information is required by 
Sec. 1026.6(b)(1) and (b)(2). The new terms shall be described in the 
same level of detail as required when disclosing the terms under Sec. 
1026.6(b)(2).
    (2) Notice included with periodic statement. If a notice required by 
paragraph (c)(2)(i) of this section is included on or with a periodic 
statement, the information described in paragraph (c)(2)(iv)(A)(1) of 
this section must be disclosed on the front of any page of the 
statement. The summary of changes described in paragraph 
(c)(2)(iv)(A)(1) of this section must immediately follow the information 
described in paragraph (c)(2)(iv)(A)(2) through (c)(2)(iv)(A)(7) and, if 
applicable, paragraphs (c)(2)(iv)(A)(8), (c)(2)(iv)(B), and 
(c)(2)(iv)(C) of this section, and be substantially similar to the 
format shown in Sample G-20 or G-21 in appendix G to this part.
    (3) Notice provided separately from periodic statement. If a notice 
required by paragraph (c)(2)(i) of this section is not included on or 
with a periodic statement, the information described in paragraph 
(c)(2)(iv)(A)(1) of this section must, at the creditor's option, be 
disclosed on the front of the first page of the notice or segregated on 
a separate page from other information given with the notice. The 
summary of changes required to be in a table pursuant to paragraph 
(c)(2)(iv)(A)(1) of this section may be on more than one page, and may 
use both the front and reverse sides, so long as the table begins on the 
front of the first page of the notice and there is a reference on the 
first page indicating that the table continues on the following page. 
The summary of changes described in paragraph (c)(2)(iv)(A)(1) of this 
section must immediately follow the information described in paragraph 
(c)(2)(iv)(A)(2) through (c)(2)(iv)(A)(7) and, if applicable, paragraphs 
(c)(2)(iv)(A)(8),

[[Page 35]]

(c)(2)(iv)(B), and (c)(2)(iv)(C), of this section, substantially similar 
to the format shown in Sample G-20 or G-21 in appendix G to this part.
    (v) Notice not required. For open-end plans (other than home equity 
plans subject to the requirements of Sec. 1026.40) a creditor is not 
required to provide notice under this section:
    (A) When the change involves charges for documentary evidence; a 
reduction of any component of a finance or other charge; suspension of 
future credit privileges (except as provided in paragraph (c)(2)(vi) of 
this section) or termination of an account or plan; when the change 
results from an agreement involving a court proceeding; when the change 
is an extension of the grace period; or if the change is applicable only 
to checks that access a credit card account and the changed terms are 
disclosed on or with the checks in accordance with paragraph (b)(3) of 
this section;
    (B) When the change is an increase in an annual percentage rate or 
fee upon the expiration of a specified period of time, provided that:
    (1) Prior to commencement of that period, the creditor disclosed in 
writing to the consumer, in a clear and conspicuous manner, the length 
of the period and the annual percentage rate or fee that would apply 
after expiration of the period;
    (2) The disclosure of the length of the period and the annual 
percentage rate or fee that would apply after expiration of the period 
are set forth in close proximity and in equal prominence to the first 
listing of the disclosure of the rate or fee that applies during the 
specified period of time; and
    (3) The annual percentage rate or fee that applies after that period 
does not exceed the rate or fee disclosed pursuant to paragraph 
(c)(2)(v)(B)(1) of this paragraph or, if the rate disclosed pursuant to 
paragraph (c)(2)(v)(B)(1) of this section was a variable rate, the rate 
following any such increase is a variable rate determined by the same 
formula (index and margin) that was used to calculate the variable rate 
disclosed pursuant to paragraph (c)(2)(v)(B)(1);
    (C) When the change is an increase in a variable annual percentage 
rate in accordance with a credit card or other account agreement that 
provides for changes in the rate according to operation of an index that 
is not under the control of the creditor and is available to the general 
public; or
    (D) When the change is an increase in an annual percentage rate, a 
fee or charge required to be disclosed under Sec. 1026.6(b)(2)(ii), 
(b)(2)(iii), (b)(2)(viii), (b)(2)(ix), (b)(2)(ix) or (b)(2)(xii), or the 
required minimum periodic payment due to the completion of a workout or 
temporary hardship arrangement by the consumer or the consumer's failure 
to comply with the terms of such an arrangement, provided that:
    (1) The annual percentage rate or fee or charge applicable to a 
category of transactions or the required minimum periodic payment 
following any such increase does not exceed the rate or fee or charge or 
required minimum periodic payment that applied to that category of 
transactions prior to commencement of the arrangement or, if the rate 
that applied to a category of transactions prior to the commencement of 
the workout or temporary hardship arrangement was a variable rate, the 
rate following any such increase is a variable rate determined by the 
same formula (index and margin) that applied to the category of 
transactions prior to commencement of the workout or temporary hardship 
arrangement; and
    (2) The creditor has provided the consumer, prior to the 
commencement of such arrangement, with a clear and conspicuous 
disclosure of the terms of the arrangement (including any increases due 
to such completion or failure). This disclosure must generally be 
provided in writing. However, a creditor may provide the disclosure of 
the terms of the arrangement orally by telephone, provided that the 
creditor mails or delivers a written disclosure of the terms of the 
arrangement to the consumer as soon as reasonably practicable after the 
oral disclosure is provided.
    (vi) Reduction of the credit limit. For open-end plans that are not 
subject to the requirements of Sec. 1026.40, if a creditor decreases 
the credit limit on an account, advance notice of the decrease must be 
provided before an over-the-

[[Page 36]]

limit fee or a penalty rate can be imposed solely as a result of the 
consumer exceeding the newly decreased credit limit. Notice shall be 
provided in writing or orally at least 45 days prior to imposing the 
over-the-limit fee or penalty rate and shall state that the credit limit 
on the account has been or will be decreased.
    (d) Finance charge imposed at time of transaction. (1) Any person, 
other than the card issuer, who imposes a finance charge at the time of 
honoring a consumer's credit card, shall disclose the amount of that 
finance charge prior to its imposition.
    (2) The card issuer, other than the person honoring the consumer's 
credit card, shall have no responsibility for the disclosure required by 
paragraph (d)(1) of this section, and shall not consider any such charge 
for the purposes of Sec. Sec. 1026.60, 1026.6 and 1026.7.
    (e) Disclosures upon renewal of credit or charge card--(1) Notice 
prior to renewal. A card issuer that imposes any annual or other 
periodic fee to renew a credit or charge card account of the type 
subject to Sec. 1026.60, including any fee based on account activity or 
inactivity or any card issuer that has changed or amended any term of a 
cardholder's account required to be disclosed under Sec. 1026.6(b)(1) 
and (b)(2) that has not previously been disclosed to the consumer, shall 
mail or deliver written notice of the renewal to the cardholder. If the 
card issuer imposes any annual or other periodic fee for renewal, the 
notice shall be provided at least 30 days or one billing cycle, 
whichever is less, before the mailing or the delivery of the periodic 
statement on which any renewal fee is initially charged to the account. 
If the card issuer has changed or amended any term required to be 
disclosed under Sec. 1026.6(b)(1) and (b)(2) and such changed or 
amended term has not previously been disclosed to the consumer, the 
notice shall be provided at least 30 days prior to the scheduled renewal 
date of the consumer's credit or charge card. The notice shall contain 
the following information:
    (i) The disclosures contained in Sec. 1026.60(b)(1) through (b)(7) 
that would apply if the account were renewed; and
    (ii) How and when the cardholder may terminate credit availability 
under the account to avoid paying the renewal fee, if applicable.
    (2) Notification on periodic statements. The disclosures required by 
this paragraph may be made on or with a periodic statement. If any of 
the disclosures are provided on the back of a periodic statement, the 
card issuer shall include a reference to those disclosures on the front 
of the statement.
    (f) Change in credit card account insurance provider--(1) Notice 
prior to change. If a credit card issuer plans to change the provider of 
insurance for repayment of all or part of the outstanding balance of an 
open-end credit card account of the type subject to Sec. 1026.60, the 
card issuer shall mail or deliver to the cardholder written notice of 
the change not less than 30 days before the change in provider occurs. 
The notice shall also include the following items, to the extent 
applicable:
    (i) Any increase in the rate that will result from the change;
    (ii) Any substantial decrease in coverage that will result from the 
change; and
    (iii) A statement that the cardholder may discontinue the insurance.
    (2) Notice when change in provider occurs. If a change described in 
paragraph (f)(1) of this section occurs, the card issuer shall provide 
the cardholder with a written notice no later than 30 days after the 
change, including the following items, to the extent applicable:
    (i) The name and address of the new insurance provider;
    (ii) A copy of the new policy or group certificate containing the 
basic terms of the insurance, including the rate to be charged; and
    (iii) A statement that the cardholder may discontinue the insurance.
    (3) Substantial decrease in coverage. For purposes of this 
paragraph, a substantial decrease in coverage is a decrease in a 
significant term of coverage that might reasonably be expected to affect 
the cardholder's decision to continue the insurance. Significant terms 
of coverage include, for example, the following:
    (i) Type of coverage provided;

[[Page 37]]

    (ii) Age at which coverage terminates or becomes more restrictive;
    (iii) Maximum insurable loan balance, maximum periodic benefit 
payment, maximum number of payments, or other term affecting the dollar 
amount of coverage or benefits provided;
    (iv) Eligibility requirements and number and identity of persons 
covered;
    (v) Definition of a key term of coverage such as disability;
    (vi) Exclusions from or limitations on coverage; and
    (vii) Waiting periods and whether coverage is retroactive.
    (4) Combined notification. The notices required by paragraph (f)(1) 
and (2) of this section may be combined provided the timing requirement 
of paragraph (f)(1) of this section is met. The notices may be provided 
on or with a periodic statement.
    (g) Increase in rates due to delinquency or default or as a 
penalty--(1) Increases subject to this section. For plans other than 
home-equity plans subject to the requirements of Sec. 1026.40, except 
as provided in paragraph (g)(4) of this section, a creditor must provide 
a written notice to each consumer who may be affected when:
    (i) A rate is increased due to the consumer's delinquency or 
default; or
    (ii) A rate is increased as a penalty for one or more events 
specified in the account agreement, such as making a late payment or 
obtaining an extension of credit that exceeds the credit limit.
    (2) Timing of written notice. Whenever any notice is required to be 
given pursuant to paragraph (g)(1) of this section, the creditor shall 
provide written notice of the increase in rates at least 45 days prior 
to the effective date of the increase. The notice must be provided after 
the occurrence of the events described in paragraphs (g)(1)(i) and 
(g)(1)(ii) of this section that trigger the imposition of the rate 
increase.
    (3)(i) Disclosure requirements for rate increases--(A) General. If a 
creditor is increasing the rate due to delinquency or default or as a 
penalty, the creditor must provide the following information on the 
notice sent pursuant to paragraph (g)(1) of this section:
    (1) A statement that the delinquency or default rate or penalty 
rate, as applicable, has been triggered;
    (2) The date on which the delinquency or default rate or penalty 
rate will apply;
    (3) The circumstances under which the delinquency or default rate or 
penalty rate, as applicable, will cease to apply to the consumer's 
account, or that the delinquency or default rate or penalty rate will 
remain in effect for a potentially indefinite time period;
    (4) A statement indicating to which balances the delinquency or 
default rate or penalty rate will be applied;
    (5) If applicable, a description of any balances to which the 
current rate will continue to apply as of the effective date of the rate 
increase, unless a consumer fails to make a minimum periodic payment 
within 60 days from the due date for that payment; and
    (6) For a credit card account under an open-end (not home-secured) 
consumer credit plan, a statement of no more than four principal reasons 
for the rate increase, listed in their order of importance.
    (B) Rate increases resulting from failure to make minimum periodic 
payment within 60 days from due date. For a credit card account under an 
open-end (not home-secured) consumer credit plan, if the rate increase 
required to be disclosed pursuant to paragraph (g)(1) of this section is 
an increase pursuant to Sec. 1026.55(b)(4) based on the consumer's 
failure to make a minimum periodic payment within 60 days from the due 
date for that payment, the notice provided pursuant to paragraph (g)(1) 
of this section must also state that the increase will cease to apply to 
transactions that occurred prior to or within 14 days of provision of 
the notice, if the creditor receives six consecutive required minimum 
periodic payments on or before the payment due date, beginning with the 
first payment due following the effective date of the increase.
    (ii) Format requirements. (A) If a notice required by paragraph 
(g)(1) of this section is included on or with a periodic statement, the 
information described in paragraph (g)(3)(i) of this section must be in 
the form of a table and provided on the front of any page

[[Page 38]]

of the periodic statement, above the notice described in paragraph 
(c)(2)(iv) of this section if that notice is provided on the same 
statement.
    (B) If a notice required by paragraph (g)(1) of this section is not 
included on or with a periodic statement, the information described in 
paragraph (g)(3)(i) of this section must be disclosed on the front of 
the first page of the notice. Only information related to the increase 
in the rate to a penalty rate may be included with the notice, except 
that this notice may be combined with a notice described in paragraph 
(c)(2)(iv) or (g)(4) of this section.
    (4) Exception for decrease in credit limit. A creditor is not 
required to provide a notice pursuant to paragraph (g)(1) of this 
section prior to increasing the rate for obtaining an extension of 
credit that exceeds the credit limit, provided that:
    (i) The creditor provides at least 45 days in advance of imposing 
the penalty rate a notice, in writing, that includes:
    (A) A statement that the credit limit on the account has been or 
will be decreased.
    (B) A statement indicating the date on which the penalty rate will 
apply, if the outstanding balance exceeds the credit limit as of that 
date;
    (C) A statement that the penalty rate will not be imposed on the 
date specified in paragraph (g)(4)(i)(B) of this section, if the 
outstanding balance does not exceed the credit limit as of that date;
    (D) The circumstances under which the penalty rate, if applied, will 
cease to apply to the account, or that the penalty rate, if applied, 
will remain in effect for a potentially indefinite time period;
    (E) A statement indicating to which balances the penalty rate may be 
applied; and
    (F) If applicable, a description of any balances to which the 
current rate will continue to apply as of the effective date of the rate 
increase, unless the consumer fails to make a minimum periodic payment 
within 60 days from the due date for that payment; and
    (ii) The creditor does not increase the rate applicable to the 
consumer's account to the penalty rate if the outstanding balance does 
not exceed the credit limit on the date set forth in the notice and 
described in paragraph (g)(4)(i)(B) of this section.
    (iii)(A) If a notice provided pursuant to paragraph (g)(4)(i) of 
this section is included on or with a periodic statement, the 
information described in paragraph (g)(4)(i) of this section must be in 
the form of a table and provided on the front of any page of the 
periodic statement; or
    (B) If a notice required by paragraph (g)(4)(i) of this section is 
not included on or with a periodic statement, the information described 
in paragraph (g)(4)(i) of this section must be disclosed on the front of 
the first page of the notice. Only information related to the reduction 
in credit limit may be included with the notice, except that this notice 
may be combined with a notice described in paragraph (c)(2)(iv) or 
(g)(1) of this section.
    (h) Consumer rejection of certain significant changes in terms--(1) 
Right to reject. If paragraph (c)(2)(iv)(B) of this section requires 
disclosure of the consumer's right to reject a significant change to an 
account term, the consumer may reject that change by notifying the 
creditor of the rejection before the effective date of the change.
    (2) Effect of rejection. If a creditor is notified of a rejection of 
a significant change to an account term as provided in paragraph (h)(1) 
of this section, the creditor must not:
    (i) Apply the change to the account;
    (ii) Impose a fee or charge or treat the account as in default 
solely as a result of the rejection; or
    (iii) Require repayment of the balance on the account using a method 
that is less beneficial to the consumer than one of the methods listed 
in Sec. 1026.55(c)(2).
    (3) Exception. Section 1026.9(h) does not apply when the creditor 
has not received the consumer's required minimum periodic payment within 
60 days after the due date for that payment.



Sec. 1026.10  Payments.

    (a) General rule. A creditor shall credit a payment to the 
consumer's account as of the date of receipt, except

[[Page 39]]

when a delay in crediting does not result in a finance or other charge 
or except as provided in paragraph (b) of this section.
    (b) Specific requirements for payments--(1) General rule. A creditor 
may specify reasonable requirements for payments that enable most 
consumers to make conforming payments.
    (2) Examples of reasonable requirements for payments. Reasonable 
requirements for making payment may include:
    (i) Requiring that payments be accompanied by the account number or 
payment stub;
    (ii) Setting reasonable cut-off times for payments to be received by 
mail, by electronic means, by telephone, and in person (except as 
provided in paragraph (b)(3) of this section), provided that such cut-
off times shall be no earlier than 5 p.m. on the payment due date at the 
location specified by the creditor for the receipt of such payments;
    (iii) Specifying that only checks or money orders should be sent by 
mail;
    (iv) Specifying that payment is to be made in U.S. dollars; or
    (v) Specifying one particular address for receiving payments, such 
as a post office box.
    (3) In-person payments on credit card accounts--(i) General. 
Notwithstanding Sec. 1026.10(b), payments on a credit card account 
under an open-end (not home-secured) consumer credit plan made in person 
at a branch or office of a card issuer that is a financial institution 
prior to the close of business of that branch or office shall be 
considered received on the date on which the consumer makes the payment. 
A card issuer that is a financial institution shall not impose a cut-off 
time earlier than the close of business for any such payments made in 
person at any branch or office of the card issuer at which such payments 
are accepted. Notwithstanding Sec. 1026.10(b)(2)(ii), a card issuer may 
impose a cut-off time earlier than 5 p.m. for such payments, if the 
close of business of the branch or office is earlier than 5 p.m.
    (ii) Financial institution. For purposes of paragraph (b)(3) of this 
section, ``financial institution'' shall mean a bank, savings 
association, or credit union.
    (4) Nonconforming payments--(i) In general. Except as provided in 
paragraph (b)(4)(ii) of this section, if a creditor specifies, on or 
with the periodic statement, requirements for the consumer to follow in 
making payments as permitted under this Sec. 1026.10, but accepts a 
payment that does not conform to the requirements, the creditor shall 
credit the payment within five days of receipt.
    (ii) Payment methods promoted by creditor. If a creditor promotes a 
method for making payments, such payments shall be considered conforming 
payments in accordance with this paragraph (b) and shall be credited to 
the consumer's account as of the date of receipt, except when a delay in 
crediting does not result in a finance or other charge.
    (c) Adjustment of account. If a creditor fails to credit a payment, 
as required by paragraphs (a) or (b) of this section, in time to avoid 
the imposition of finance or other charges, the creditor shall adjust 
the consumer's account so that the charges imposed are credited to the 
consumer's account during the next billing cycle.
    (d) Crediting of payments when creditor does not receive or accept 
payments on due date--(1) General. Except as provided in paragraph 
(d)(2) of this section, if a creditor does not receive or accept 
payments by mail on the due date for payments, the creditor may 
generally not treat a payment received the next business day as late for 
any purpose. For purposes of this paragraph (d), the ``next business 
day'' means the next day on which the creditor accepts or receives 
payments by mail.
    (2) Payments accepted or received other than by mail. If a creditor 
accepts or receives payments made on the due date by a method other than 
mail, such as electronic or telephone payments, the creditor is not 
required to treat a payment made by that method on the next business day 
as timely, even if it does not accept mailed payments on the due date.
    (e) Limitations on fees related to method of payment. For credit 
card accounts under an open-end (not home-secured) consumer credit plan, 
a creditor may not impose a separate fee to allow consumers to make a 
payment by any

[[Page 40]]

method, such as mail, electronic, or telephone payments, unless such 
payment method involves an expedited service by a customer service 
representative of the creditor. For purposes of paragraph (e) of this 
section, the term ``creditor'' includes a third party that collects, 
receives, or processes payments on behalf of a creditor.
    (f) Changes by card issuer. If a card issuer makes a material change 
in the address for receiving payments or procedures for handling 
payments, and such change causes a material delay in the crediting of a 
payment to the consumer's account during the 60-day period following the 
date on which such change took effect, the card issuer may not impose 
any late fee or finance charge for a late payment on the credit card 
account during the 60-day period following the date on which the change 
took effect.



Sec. 1026.11  Treatment of credit balances; account termination.

    (a) Credit balances. When a credit balance in excess of $1 is 
created on a credit account (through transmittal of funds to a creditor 
in excess of the total balance due on an account, through rebates of 
unearned finance charges or insurance premiums, or through amounts 
otherwise owed to or held for the benefit of the consumer), the creditor 
shall:
    (1) Credit the amount of the credit balance to the consumer's 
account;
    (2) Refund any part of the remaining credit balance within seven 
business days from receipt of a written request from the consumer;
    (3) Make a good faith effort to refund to the consumer by cash, 
check, or money order, or credit to a deposit account of the consumer, 
any part of the credit balance remaining in the account for more than 
six months. No further action is required if the consumer's current 
location is not known to the creditor and cannot be traced through the 
consumer's last known address or telephone number.
    (b) Account termination. (1) A creditor shall not terminate an 
account prior to its expiration date solely because the consumer does 
not incur a finance charge.
    (2) Nothing in paragraph (b)(1) of this section prohibits a creditor 
from terminating an account that is inactive for three or more 
consecutive months. An account is inactive for purposes of this 
paragraph if no credit has been extended (such as by purchase, cash 
advance or balance transfer) and if the account has no outstanding 
balance.
    (c) Timely settlement of estate debts--(1) General rule. (i) 
Reasonable policies and procedures required. For credit card accounts 
under an open-end (not home-secured) consumer credit plan, card issuers 
must adopt reasonable written policies and procedures designed to ensure 
that an administrator of an estate of a deceased accountholder can 
determine the amount of and pay any balance on the account in a timely 
manner.
    (ii) Application to joint accounts. Paragraph (c) of this section 
does not apply to the account of a deceased consumer if a joint 
accountholder remains on the account.
    (2) Timely statement of balance--(i) Requirement. Upon request by 
the administrator of an estate, a card issuer must provide the 
administrator with the amount of the balance on a deceased consumer's 
account in a timely manner.
    (ii) Safe harbor. For purposes of paragraph (c)(2)(i) of this 
section, providing the amount of the balance on the account within 30 
days of receiving the request is deemed to be timely.
    (3) Limitations after receipt of request from administrator--(i) 
Limitation on fees and increases in annual percentage rates. After 
receiving a request from the administrator of an estate for the amount 
of the balance on a deceased consumer's account, a card issuer must not 
impose any fees on the account (such as a late fee, annual fee, or over-
the-limit fee) or increase any annual percentage rate, except as 
provided by Sec. 1026.55(b)(2).
    (ii) Limitation on trailing or residual interest. A card issuer must 
waive or rebate any additional finance charge due to a periodic interest 
rate if payment in full of the balance disclosed pursuant to paragraph 
(c)(2) of this section is received within 30 days after disclosure.

[[Page 41]]



Sec. 1026.12  Special credit card provisions.

    (a) Issuance of credit cards. Regardless of the purpose for which a 
credit card is to be used, including business, commercial, or 
agricultural use, no credit card shall be issued to any person except:
    (1) In response to an oral or written request or application for the 
card; or
    (2) As a renewal of, or substitute for, an accepted credit card.
    (b) Liability of cardholder for unauthorized use--(1)(i) Definition 
of unauthorized use. For purposes of this section, the term 
``unauthorized use'' means the 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.
    (ii) Limitation on amount. The liability of a cardholder for 
unauthorized use of a credit card shall not exceed the lesser of $50 or 
the amount of money, property, labor, or services obtained by the 
unauthorized use before notification to the card issuer under paragraph 
(b)(3) of this section.
    (2) Conditions of liability. A cardholder shall be liable for 
unauthorized use of a credit card only if:
    (i) The credit card is an accepted credit card;
    (ii) The card issuer has provided adequate notice of the 
cardholder's maximum potential liability and of means by which the card 
issuer may be notified of loss or theft of the card. The notice shall 
state that the cardholder's liability shall not exceed $50 (or any 
lesser amount) and that the cardholder may give oral or written 
notification, and shall describe a means of notification (for example, a 
telephone number, an address, or both); and
    (iii) The card issuer has provided a means to identify the 
cardholder on the account or the authorized user of the card.
    (3) Notification to card issuer. Notification to a card issuer is 
given when steps have been taken as may be reasonably required in the 
ordinary course of business to provide the card issuer with the 
pertinent information about the loss, theft, or possible unauthorized 
use of a credit card, regardless of whether any particular officer, 
employee, or agent of the card issuer does, in fact, receive the 
information. Notification may be given, at the option of the person 
giving it, in person, by telephone, or in writing. Notification in 
writing is considered given at the time of receipt or, whether or not 
received, at the expiration of the time ordinarily required for 
transmission, whichever is earlier.
    (4) Effect of other applicable law or agreement. If state law or an 
agreement between a cardholder and the card issuer imposes lesser 
liability than that provided in this paragraph, the lesser liability 
shall govern.
    (5) Business use of credit cards. If 10 or more credit cards are 
issued by one card issuer for use by the employees of an organization, 
this section does not prohibit the card issuer and the organization from 
agreeing to liability for unauthorized use without regard to this 
section. However, liability for unauthorized use may be imposed on an 
employee of the organization, by either the card issuer or the 
organization, only in accordance with this section.
    (c) Right of cardholder to assert claims or defenses against card 
issuer--(1) General rule. When a person who honors a credit card fails 
to resolve satisfactorily a dispute as to property or services purchased 
with the credit card in a consumer credit transaction, the cardholder 
may assert against the card issuer all claims (other than tort claims) 
and defenses arising out of the transaction and relating to the failure 
to resolve the dispute. The cardholder may withhold payment up to the 
amount of credit outstanding for the property or services that gave rise 
to the dispute and any finance or other charges imposed on that amount.
    (2) Adverse credit reports prohibited. If, in accordance with 
paragraph (c)(1) of this section, the cardholder withholds payment of 
the amount of credit outstanding for the disputed transaction, the card 
issuer shall not report that amount as delinquent until the dispute is 
settled or judgment is rendered.
    (3) Limitations--(i) General. The rights stated in paragraphs (c)(1) 
and (c)(2) of this section apply only if:
    (A) The cardholder has made a good faith attempt to resolve the 
dispute

[[Page 42]]

with the person honoring the credit card; and
    (B) The amount of credit extended to obtain the property or services 
that result in the assertion of the claim or defense by the cardholder 
exceeds $50, and the disputed transaction occurred in the same state as 
the cardholder's current designated address or, if not within the same 
state, within 100 miles from that address.
    (ii) Exclusion. The limitations stated in paragraph (c)(3)(i)(B) of 
this section shall not apply when the person honoring the credit card:
    (A) Is the same person as the card issuer;
    (B) Is controlled by the card issuer directly or indirectly;
    (C) Is under the direct or indirect control of a third person that 
also directly or indirectly controls the card issuer;
    (D) Controls the card issuer directly or indirectly;
    (E) Is a franchised dealer in the card issuer's products or 
services; or
    (F) Has obtained the order for the disputed transaction through a 
mail solicitation made or participated in by the card issuer.
    (d) Offsets by card issuer prohibited. (1) A card issuer may not 
take any action, either before or after termination of credit card 
privileges, to offset a cardholder's indebtedness arising from a 
consumer credit transaction under the relevant credit card plan against 
funds of the cardholder held on deposit with the card issuer.
    (2) This paragraph does not alter or affect the right of a card 
issuer acting under state or Federal law to do any of the following with 
regard to funds of a cardholder held on deposit with the card issuer if 
the same procedure is constitutionally available to creditors generally: 
Obtain or enforce a consensual security interest in the funds; attach or 
otherwise levy upon the funds; or obtain or enforce a court order 
relating to the funds.
    (3) This paragraph does not prohibit a plan, if authorized in 
writing by the cardholder, under which the card issuer may periodically 
deduct all or part of the cardholder's credit card debt from a deposit 
account held with the card issuer (subject to the limitations in Sec. 
1026.13(d)(1)).
    (e) Prompt notification of returns and crediting of refunds. (1) 
When a creditor other than the card issuer accepts the return of 
property or forgives a debt for services that is to be reflected as a 
credit to the consumer's credit card account, that creditor shall, 
within 7 business days from accepting the return or forgiving the debt, 
transmit a credit statement to the card issuer through the card issuer's 
normal channels for credit statements.
    (2) The card issuer shall, within 3 business days from receipt of a 
credit statement, credit the consumer's account with the amount of the 
refund.
    (3) If a creditor other than a card issuer routinely gives cash 
refunds to consumers paying in cash, the creditor shall also give credit 
or cash refunds to consumers using credit cards, unless it discloses at 
the time the transaction is consummated that credit or cash refunds for 
returns are not given. This section does not require refunds for returns 
nor does it prohibit refunds in kind.
    (f) Discounts; tie-in arrangements. No card issuer may, by contract 
or otherwise:
    (1) Prohibit any person who honors a credit card from offering a 
discount to a consumer to induce the consumer to pay by cash, check, or 
similar means rather than by use of a credit card or its underlying 
account for the purchase of property or services; or
    (2) Require any person who honors the card issuer's credit card to 
open or maintain any account or obtain any other service not essential 
to the operation of the credit card plan from the card issuer or any 
other person, as a condition of participation in a credit card plan. If 
maintenance of an account for clearing purposes is determined to be 
essential to the operation of the credit card plan, it may be required 
only if no service charges or minimum balance requirements are imposed.
    (g) Relation to Electronic Fund Transfer Act and Regulation E. For 
guidance on whether Regulation Z (12 CFR part 1026) or Regulation E (12 
CFR part 1005) applies in instances involving both

[[Page 43]]

credit and electronic fund transfer aspects, refer to Regulation E, 12 
CFR 1005.12(a) regarding issuance and liability for unauthorized use. On 
matters other than issuance and liability, this section applies to the 
credit aspects of combined credit/electronic fund transfer transactions, 
as applicable.

    Effective Date Note: At 81 FR 84369, Nov. 22, 2016, Sec. 1026.12 
was amended by revising paragraph (d), effective Oct. 1, 2017. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 1026.12  Special credit card provisions.

                                * * * * *

    (d) Offsets by card issuer prohibited--(1) General rule. A card 
issuer may not take any action, either before or after termination of 
credit card privileges, to offset a cardholder's indebtedness arising 
from a consumer credit transaction under the relevant credit card plan 
against funds of the cardholder held on deposit with the card issuer.
    (2) Rights of the card issuer. This paragraph (d) does not alter or 
affect the right of a card issuer acting under state or Federal law to 
do any of the following with regard to funds of a cardholder held on 
deposit with the card issuer if the same procedure is constitutionally 
available to creditors generally: Obtain or enforce a consensual 
security interest in the funds; attach or otherwise levy upon the funds; 
or obtain or enforce a court order relating to the funds.
    (3) Periodic deductions. (i) This paragraph (d) does not prohibit a 
plan, if authorized in writing by the cardholder, under which the card 
issuer may periodically deduct all or part of the cardholder's credit 
card debt from a deposit account held with the card issuer (subject to 
the limitations in Sec. 1026.13(d)(1)).
    (ii) With respect to a covered separate credit feature accessible by 
a hybrid prepaid-credit card as defined in Sec. 1026.61, for purposes 
of this paragraph (d)(3), ``periodically'' means no more frequently than 
once per calendar month, such as on a monthly due date disclosed on the 
applicable periodic statement in accordance with the requirements of 
Sec. 1026.7(b)(11)(i)(A) or on an earlier date in each calendar month 
in accordance with a written authorization signed by the consumer.

                                * * * * *



Sec. 1026.13  Billing error resolution.

    (a) Definition of billing error. For purposes of this section, the 
term billing error means:
    (1) A reflection on or with a periodic statement of an extension of 
credit that is not made to the consumer or to a person who has actual, 
implied, or apparent authority to use the consumer's credit card or 
open-end credit plan.
    (2) A reflection on or with a periodic statement of an extension of 
credit that is not identified in accordance with the requirements of 
Sec. Sec. 1026.7(a)(2) or (b)(2), as applicable, and 1026.8.
    (3) A reflection on or with a periodic statement of an extension of 
credit for property or services not accepted by the consumer or the 
consumer's designee, or not delivered to the consumer or the consumer's 
designee as agreed.
    (4) A reflection on a periodic statement of the creditor's failure 
to credit properly a payment or other credit issued to the consumer's 
account.
    (5) A reflection on a periodic statement of a computational or 
similar error of an accounting nature that is made by the creditor.
    (6) A reflection on a periodic statement of an extension of credit 
for which the consumer requests additional clarification, including 
documentary evidence.
    (7) The creditor's failure to mail or deliver a periodic statement 
to the consumer's last known address if that address was received by the 
creditor, in writing, at least 20 days before the end of the billing 
cycle for which the statement was required.
    (b) Billing error notice. A billing error notice is a written notice 
from a consumer that:
    (1) Is received by a creditor at the address disclosed under Sec. 
1026.7(a)(9) or (b)(9), as applicable, no later than 60 days after the 
creditor transmitted the first periodic statement that reflects the 
alleged billing error;
    (2) Enables the creditor to identify the consumer's name and account 
number; and
    (3) To the extent possible, indicates the consumer's belief and the 
reasons for the belief that a billing error exists, and the type, date, 
and amount of the error.
    (c) Time for resolution; general procedures. (1) The creditor shall 
mail or deliver written acknowledgment to the consumer within 30 days of 
receiving a

[[Page 44]]

billing error notice, unless the creditor has complied with the 
appropriate resolution procedures of paragraphs (e) and (f) of this 
section, as applicable, within the 30-day period; and
    (2) The creditor shall comply with the appropriate resolution 
procedures of paragraphs (e) and (f) of this section, as applicable, 
within 2 complete billing cycles (but in no event later than 90 days) 
after receiving a billing error notice.
    (d) Rules pending resolution. Until a billing error is resolved 
under paragraph (e) or (f) of this section, the following rules apply:
    (1) Consumer's right to withhold disputed amount; collection action 
prohibited. The consumer need not pay (and the creditor may not try to 
collect) any portion of any required payment that the consumer believes 
is related to the disputed amount (including related finance or other 
charges). If the cardholder has enrolled in an automatic payment plan 
offered by the card issuer and has agreed to pay the credit card 
indebtedness by periodic deductions from the cardholder's deposit 
account, the card issuer shall not deduct any part of the disputed 
amount or related finance or other charges if a billing error notice is 
received any time up to 3 business days before the scheduled payment 
date.
    (2) Adverse credit reports prohibited. The creditor or its agent 
shall not (directly or indirectly) make or threaten to make an adverse 
report to any person about the consumer's credit standing, or report 
that an amount or account is delinquent, because the consumer failed to 
pay the disputed amount or related finance or other charges.
    (3) Acceleration of debt and restriction of account prohibited. A 
creditor shall not accelerate any part of the consumer's indebtedness or 
restrict or close a consumer's account solely because the consumer has 
exercised in good faith rights provided by this section. A creditor may 
be subject to the forfeiture penalty under 15 U.S.C. 1666(e) for failure 
to comply with any of the requirements of this section.
    (4) Permitted creditor actions. A creditor is not prohibited from 
taking action to collect any undisputed portion of the item or bill; 
from deducting any disputed amount and related finance or other charges 
from the consumer's credit limit on the account; or from reflecting a 
disputed amount and related finance or other charges on a periodic 
statement, provided that the creditor indicates on or with the periodic 
statement that payment of any disputed amount and related finance or 
other charges is not required pending the creditor's compliance with 
this section.
    (e) Procedures if billing error occurred as asserted. If a creditor 
determines that a billing error occurred as asserted, it shall within 
the time limits in paragraph (c)(2) of this section:
    (1) Correct the billing error and credit the consumer's account with 
any disputed amount and related finance or other charges, as applicable; 
and
    (2) Mail or deliver a correction notice to the consumer.
    (f) Procedures if different billing error or no billing error 
occurred. If, after conducting a reasonable investigation, a creditor 
determines that no billing error occurred or that a different billing 
error occurred from that asserted, the creditor shall within the time 
limits in paragraph (c)(2) of this section:
    (1) Mail or deliver to the consumer an explanation that sets forth 
the reasons for the creditor's belief that the billing error alleged by 
the consumer is incorrect in whole or in part;
    (2) Furnish copies of documentary evidence of the consumer's 
indebtedness, if the consumer so requests; and
    (3) If a different billing error occurred, correct the billing error 
and credit the consumer's account with any disputed amount and related 
finance or other charges, as applicable.
    (g) Creditor's rights and duties after resolution. If a creditor, 
after complying with all of the requirements of this section, determines 
that a consumer owes all or part of the disputed amount and related 
finance or other charges, the creditor:
    (1) Shall promptly notify the consumer in writing of the time when 
payment is due and the portion of the disputed amount and related 
finance or other charges that the consumer still owes;
    (2) Shall allow any time period disclosed under Sec. 1026.6(a)(1) 
or (b)(2)(v), as

[[Page 45]]

applicable, and Sec. 1026.7(a)(8) or (b)(8), as applicable, during 
which the consumer can pay the amount due under paragraph (g)(1) of this 
section without incurring additional finance or other charges;
    (3) May report an account or amount as delinquent because the amount 
due under paragraph (g)(1) of this section remains unpaid after the 
creditor has allowed any time period disclosed under Sec. 1026.6(a)(1) 
or (b)(2)(v), as applicable, and Sec. 1026.7(a)(8) or (b)(8), as 
applicable or 10 days (whichever is longer) during which the consumer 
can pay the amount; but
    (4) May not report that an amount or account is delinquent because 
the amount due under paragraph (g)(1) of the section remains unpaid, if 
the creditor receives (within the time allowed for payment in paragraph 
(g)(3) of this section) further written notice from the consumer that 
any portion of the billing error is still in dispute, unless the 
creditor also:
    (i) Promptly reports that the amount or account is in dispute;
    (ii) Mails or delivers to the consumer (at the same time the report 
is made) a written notice of the name and address of each person to whom 
the creditor makes a report; and
    (iii) Promptly reports any subsequent resolution of the reported 
delinquency to all persons to whom the creditor has made a report.
    (h) Reassertion of billing error. A creditor that has fully complied 
with the requirements of this section has no further responsibilities 
under this section (other than as provided in paragraph (g)(4) of this 
section) if a consumer reasserts substantially the same billing error.
    (i) Relation to Electronic Fund Transfer Act and Regulation E. If an 
extension of credit is incident to an electronic fund transfer, under an 
agreement between a consumer and a financial institution to extend 
credit when the consumer's account is overdrawn or to maintain a 
specified minimum balance in the consumer's account, the creditor shall 
comply with the requirements of Regulation E, 12 CFR 1005.11 governing 
error resolution rather than those of paragraphs (a), (b), (c), (e), 
(f), and (h) of this section.

    Effective Date Note: At 81 FR 84369, Nov. 22, 2016, Sec. 1026.13 
was amended by revising paragraph (i), effective Oct. 1, 2017. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 1026.13  Billing error resolution.

                                * * * * *

    (i) Relation to Electronic Fund Transfer Act and Regulation E. A 
creditor shall comply with the requirements of Regulation E, 12 CFR 
1005.11, and 1005.18(e) as applicable, governing error resolution rather 
than those of paragraphs (a), (b), (c), (e), (f), and (h) of this 
section if:
    (1) Except with respect to a prepaid account as defined in Sec. 
1026.61, an extension of credit that is incident to an electronic fund 
transfer occurs under an agreement between the consumer and a financial 
institution to extend credit when the consumer's account is overdrawn or 
to maintain a specified minimum balance in the consumer's account; or
    (2) With regard to a covered separate credit feature and an asset 
feature of a prepaid account where both are accessible by a hybrid 
prepaid-credit card as defined in Sec. 1026.61, an extension of credit 
that is incident to an electronic fund transfer occurs when the hybrid 
prepaid-credit card accesses both funds in the asset feature of the 
prepaid account and a credit extension from the credit feature with 
respect to a particular transaction.

                                * * * * *



Sec. 1026.14  Determination of annual percentage rate.

    (a) General rule. The annual percentage rate is a measure of the 
cost of credit, expressed as a yearly rate. An annual percentage rate 
shall be considered accurate if it is not more than \1/8\th of 1 
percentage point above or below the annual percentage rate determined in 
accordance with this section. An error in disclosure of the annual 
percentage rate or finance charge shall not, in itself, be considered a 
violation of this part if:
    (1) The error resulted from a corresponding error in a calculation 
tool used in good faith by the creditor; and
    (2) Upon discovery of the error, the creditor promptly discontinues 
use of that calculation tool for disclosure purposes, and notifies the 
Bureau in writing of the error in the calculation tool.
    (b) Annual percentage rate--in general. Where one or more periodic 
rates may

[[Page 46]]

be used to compute the finance charge, the annual percentage rate(s) to 
be disclosed for purposes of Sec. Sec. 1026.60, 1026.40, 1026.6, 
1026.7(a)(4) or (b)(4), 1026.9, 1026.15, 1026.16, 1026.26, 1026.55, and 
1026.56 shall be computed by multiplying each periodic rate by the 
number of periods in a year.
    (c) Optional effective annual percentage rate for periodic 
statements for creditors offering open-end credit plans secured by a 
consumer's dwelling. A creditor offering an open-end plan subject to the 
requirements of Sec. 1026.40 need not disclose an effective annual 
percentage rate. Such a creditor may, at its option, disclose an 
effective annual percentage rate(s) pursuant to Sec. 1026.7(a)(7) and 
compute the effective annual percentage rate as follows:
    (1) Solely periodic rates imposed. If the finance charge is 
determined solely by applying one or more periodic rates, at the 
creditor's option, either:
    (i) By multiplying each periodic rate by the number of periods in a 
year; or
    (ii) By dividing the total finance charge for the billing cycle by 
the sum of the balances to which the periodic rates were applied and 
multiplying the quotient (expressed as a percentage) by the number of 
billing cycles in a year.
    (2) Minimum or fixed charge, but not transaction charge, imposed. If 
the finance charge imposed during the billing cycle is or includes a 
minimum, fixed, or other charge not due to the application of a periodic 
rate, other than a charge with respect to any specific transaction 
during the billing cycle, by dividing the total finance charge for the 
billing cycle by the amount of the balance(s) to which it is applicable 
and multiplying the quotient (expressed as a percentage) by the number 
of billing cycles in a year. If there is no balance to which the finance 
charge is applicable, an annual percentage rate cannot be determined 
under this section. Where the finance charge imposed during the billing 
cycle is or includes a loan fee, points, or similar charge that relates 
to opening, renewing, or continuing an account, the amount of such 
charge shall not be included in the calculation of the annual percentage 
rate.
    (3) Transaction charge imposed. If the finance charge imposed during 
the billing cycle is or includes a charge relating to a specific 
transaction during the billing cycle (even if the total finance charge 
also includes any other minimum, fixed, or other charge not due to the 
application of a periodic rate), by dividing the total finance charge 
imposed during the billing cycle by the total of all balances and other 
amounts on which a finance charge was imposed during the billing cycle 
without duplication, and multiplying the quotient (expressed as a 
percentage) by the number of billing cycles in a year, except that the 
annual percentage rate shall not be less than the largest rate 
determined by multiplying each periodic rate imposed during the billing 
cycle by the number of periods in a year. Where the finance charge 
imposed during the billing cycle is or includes a loan fee, points, or 
similar charge that relates to the opening, renewing, or continuing an 
account, the amount of such charge shall not be included in the 
calculation of the annual percentage rate. See appendix F to this part 
regarding determination of the denominator of the fraction under this 
paragraph.
    (4) If the finance charge imposed during the billing cycle is or 
includes a minimum, fixed, or other charge not due to the application of 
a periodic rate and the total finance charge imposed during the billing 
cycle does not exceed 50 cents for a monthly or longer billing cycle, or 
the pro rata part of 50 cents for a billing cycle shorter than monthly, 
at the creditor's option, by multiplying each applicable periodic rate 
by the number of periods in a year, notwithstanding the provisions of 
paragraphs (c)(2) and (c)(3) of this section.
    (d) Calculations where daily periodic rate applied. If the 
provisions of paragraph (c)(1)(ii) or (c)(2) of this section apply and 
all or a portion of the finance charge is determined by the application 
of one or more daily periodic rates, the annual percentage rate may be 
determined either:
    (1) By dividing the total finance charge by the average of the daily 
balances and multiplying the quotient by the number of billing cycles in 
a year; or

[[Page 47]]

    (2) By dividing the total finance charge by the sum of the daily 
balances and multiplying the quotient by 365.



Sec. 1026.15  Right of rescission.

    (a) Consumer's right to rescind. (1)(i) Except as provided in 
paragraph (a)(1)(ii) of this section, in a credit plan in which a 
security interest is or will be retained or acquired in a consumer's 
principal dwelling, each consumer whose ownership interest is or will be 
subject to the security interest shall have the right to rescind: each 
credit extension made under the plan; the plan when the plan is opened; 
a security interest when added or increased to secure an existing plan; 
and the increase when a credit limit on the plan is increased.
    (ii) As provided in section 125(e) of the Act, the consumer does not 
have the right to rescind each credit extension made under the plan if 
such extension is made in accordance with a previously established 
credit limit for the plan.
    (2) To exercise the right to rescind, the consumer shall notify the 
creditor of the rescission by mail, telegram, or other means of written 
communication. Notice is considered given when mailed, or when filed for 
telegraphic transmission, or, if sent by other means, when delivered to 
the creditor's designated place of business.
    (3) The consumer may exercise the right to rescind until midnight of 
the third business day following the occurrence described in paragraph 
(a)(1) of this section that gave rise to the right of rescission, 
delivery of the notice required by paragraph (b) of this section, or 
delivery of all material disclosures, whichever occurs last. If the 
required notice and material disclosures are not delivered, the right to 
rescind shall expire 3 years after the occurrence giving rise to the 
right of rescission, or upon transfer of all of the consumer's interest 
in the property, or upon sale of the property, whichever occurs first. 
In the case of certain administrative proceedings, the rescission period 
shall be extended in accordance with section 125(f) of the Act. The term 
material disclosures means the information that must be provided to 
satisfy the requirements in Sec. 1026.6 with regard to the method of 
determining the finance charge and the balance upon which a finance 
charge will be imposed, the annual percentage rate, the amount or method 
of determining the amount of any membership or participation fee that 
may be imposed as part of the plan, and the payment information 
described in Sec. 1026.40(d)(5)(i) and (ii) that is required under 
Sec. 1026.6(e)(2).
    (4) When more than one consumer has the right to rescind, the 
exercise of the right by one consumer shall be effective as to all 
consumers.
    (b) Notice of right to rescind. In any transaction or occurrence 
subject to rescission, a creditor shall deliver two copies of the notice 
of the right to rescind to each consumer entitled to rescind (one copy 
to each if the notice is delivered in electronic form in accordance with 
the consumer consent and other applicable provisions of the E-Sign Act). 
The notice shall identify the transaction or occurrence and clearly and 
conspicuously disclose the following:
    (1) The retention or acquisition of a security interest in the 
consumer's principal dwelling.
    (2) The consumer's right to rescind, as described in paragraph 
(a)(1) of this section.
    (3) How to exercise the right to rescind, with a form for that 
purpose, designating the address of the creditor's place of business.
    (4) The effects of rescission, as described in paragraph (d) of this 
section.
    (5) The date the rescission period expires.
    (c) Delay of creditor's performance. Unless a consumer waives the 
right to rescind under paragraph (e) of this section, no money shall be 
disbursed other than in escrow, no services shall be performed, and no 
materials delivered until after the rescission period has expired and 
the creditor is reasonably satisfied that the consumer has not 
rescinded. A creditor does not violate this section if a third party 
with no knowledge of the event activating the rescission right does not 
delay in providing materials or services, as long as the debt incurred 
for those materials or services is not secured by the property subject 
to rescission.

[[Page 48]]

    (d) Effects of rescission. (1) When a consumer rescinds a 
transaction, the security interest giving rise to the right of 
rescission becomes void, and the consumer shall not be liable for any 
amount, including any finance charge.
    (2) Within 20 calendar days after receipt of a notice of rescission, 
the creditor shall return any money or property that has been given to 
anyone in connection with the transaction and shall take any action 
necessary to reflect the termination of the security interest.
    (3) If the creditor has delivered any money or property, the 
consumer may retain possession until the creditor has met its obligation 
under paragraph (d)(2) of this section. When the creditor has complied 
with that paragraph, the consumer shall tender the money or property to 
the creditor or, where the latter would be impracticable or inequitable, 
tender its reasonable value. At the consumer's option, tender of 
property may be made at the location of the property or at the 
consumer's residence. Tender of money must be made at the creditor's 
designated place of business. If the creditor does not take possession 
of the money or property within 20 calendar days after the consumer's 
tender, the consumer may keep it without further obligation.
    (4) The procedures outlined in paragraphs (d)(2) and (3) of this 
section may be modified by court order.
    (e) Consumer's waiver of right to rescind. The consumer may modify 
or waive the right to rescind if the consumer determines that the 
extension of credit is needed to meet a bona fide personal financial 
emergency. To modify or waive the right, the consumer shall give the 
creditor a dated written statement that describes the emergency, 
specifically modifies or waives the right to rescind, and bears the 
signature of all the consumers entitled to rescind. Printed forms for 
this purpose are prohibited.
    (f) Exempt transactions. The right to rescind does not apply to the 
following:
    (1) A residential mortgage transaction.
    (2) A credit plan in which a state agency is a creditor.



Sec. 1026.16  Advertising.

    (a) Actually available terms. If an advertisement for credit states 
specific credit terms, it shall state only those terms that actually are 
or will be arranged or offered by the creditor.
    (b) Advertisement of terms that require additional disclosures. (1) 
Any term required to be disclosed under Sec. 1026.6(b)(3) set forth 
affirmatively or negatively in an advertisement for an open-end (not 
home-secured) credit plan triggers additional disclosures under this 
section. Any term required to be disclosed under Sec. 1026.6(a)(1) or 
(a)(2) set forth affirmatively or negatively in an advertisement for a 
home-equity plan subject to the requirements of Sec. 1026.40 triggers 
additional disclosures under this section. If any of the terms that 
trigger additional disclosures under this paragraph is set forth in an 
advertisement, the advertisement shall also clearly and conspicuously 
set forth the following:
    (i) Any minimum, fixed, transaction, activity or similar charge that 
is a finance charge under Sec. 1026.4 that could be imposed.
    (ii) Any periodic rate that may be applied expressed as an annual 
percentage rate as determined under Sec. 1026.14(b). If the plan 
provides for a variable periodic rate, that fact shall be disclosed.
    (iii) Any membership or participation fee that could be imposed.
    (2) If an advertisement for credit to finance the purchase of goods 
or services specified in the advertisement states a periodic payment 
amount, the advertisement shall also state the total of payments and the 
time period to repay the obligation, assuming that the consumer pays 
only the periodic payment amount advertised. The disclosure of the total 
of payments and the time period to repay the obligation must be equally 
prominent to the statement of the periodic payment amount.
    (c) Catalogs or other multiple-page advertisements; electronic 
advertisements. (1) If a catalog or other multiple-page advertisement, 
or an electronic advertisement (such as an advertisement appearing on an 
Internet Web site), gives information in a table or schedule in

[[Page 49]]

sufficient detail to permit determination of the disclosures required by 
paragraph (b) of this section, it shall be considered a single 
advertisement if:
    (i) The table or schedule is clearly and conspicuously set forth; 
and
    (ii) Any statement of terms set forth in Sec. 1026.6 appearing 
anywhere else in the catalog or advertisement clearly refers to the page 
or location where the table or schedule begins.
    (2) A catalog or other multiple-page advertisement or an electronic 
advertisement (such as an advertisement appearing on an Internet Web 
site) complies with this paragraph if the table or schedule of terms 
includes all appropriate disclosures for a representative scale of 
amounts up to the level of the more commonly sold higher-priced property 
or services offered.
    (d) Additional requirements for home-equity plans--(1) Advertisement 
of terms that require additional disclosures. If any of the terms 
required to be disclosed under Sec. 1026.6(a)(1) or (a)(2) or the 
payment terms of the plan are set forth, affirmatively or negatively, in 
an advertisement for a home-equity plan subject to the requirements of 
Sec. 1026.40, the advertisement also shall clearly and conspicuously 
set forth the following:
    (i) Any loan fee that is a percentage of the credit limit under the 
plan and an estimate of any other fees imposed for opening the plan, 
stated as a single dollar amount or a reasonable range.
    (ii) Any periodic rate used to compute the finance charge, expressed 
as an annual percentage rate as determined under Sec. 1026.14(b).
    (iii) The maximum annual percentage rate that may be imposed in a 
variable-rate plan.
    (2) Discounted and premium rates. If an advertisement states an 
initial annual percentage rate that is not based on the index and margin 
used to make later rate adjustments in a variable-rate plan, the 
advertisement also shall state with equal prominence and in close 
proximity to the initial rate:
    (i) The period of time such initial rate will be in effect; and
    (ii) A reasonably current annual percentage rate that would have 
been in effect using the index and margin.
    (3) Balloon payment. If an advertisement contains a statement of any 
minimum periodic payment and a balloon payment may result if only the 
minimum periodic payments are made, even if such a payment is uncertain 
or unlikely, the advertisement also shall state with equal prominence 
and in close proximity to the minimum periodic payment statement that a 
balloon payment may result, if applicable. A balloon payment results if 
paying the minimum periodic payments does not fully amortize the 
outstanding balance by a specified date or time, and the consumer is 
required to repay the entire outstanding balance at such time. If a 
balloon payment will occur when the consumer makes only the minimum 
payments required under the plan, an advertisement for such a program 
which contains any statement of any minimum periodic payment shall also 
state with equal prominence and in close proximity to the minimum 
periodic payment statement:
    (i) That a balloon payment will result; and
    (ii) The amount and timing of the balloon payment that will result 
if the consumer makes only the minimum payments for the maximum period 
of time that the consumer is permitted to make such payments.
    (4) Tax implications. An advertisement that states that any interest 
expense incurred under the home-equity plan is or may be tax deductible 
may not be misleading in this regard. If an advertisement distributed in 
paper form or through the Internet (rather than by radio or television) 
is for a home-equity plan secured by the consumer's principal dwelling, 
and the advertisement states that the advertised extension of credit may 
exceed the fair market value of the dwelling, the advertisement shall 
clearly and conspicuously state that:
    (i) The interest on the portion of the credit extension that is 
greater than the fair market value of the dwelling is not tax deductible 
for Federal income tax purposes; and
    (ii) The consumer should consult a tax adviser for further 
information regarding the deductibility of interest and charges.

[[Page 50]]

    (5) Misleading terms. An advertisement may not refer to a home-
equity plan as ``free money'' or contain a similarly misleading term.
    (6) Promotional rates and payments. (i) Definitions. The following 
definitions apply for purposes of paragraph (d)(6) of this section:
    (A) Promotional rate. The term ``promotional rate'' means, in a 
variable-rate plan, any annual percentage rate that is not based on the 
index and margin that will be used to make rate adjustments under the 
plan, if that rate is less than a reasonably current annual percentage 
rate that would be in effect under the index and margin that will be 
used to make rate adjustments under the plan.
    (B) Promotional payment. The term ``promotional payment'' means:
    (1) For a variable-rate plan, any minimum payment applicable for a 
promotional period that:
    (i) Is not derived by applying the index and margin to the 
outstanding balance when such index and margin will be used to determine 
other minimum payments under the plan; and
    (ii) Is less than other minimum payments under the plan derived by 
applying a reasonably current index and margin that will be used to 
determine the amount of such payments, given an assumed balance.
    (2) For a plan other than a variable-rate plan, any minimum payment 
applicable for a promotional period if that payment is less than other 
payments required under the plan given an assumed balance.
    (C) Promotional period. A ``promotional period'' means a period of 
time, less than the full term of the loan, that the promotional rate or 
promotional payment may be applicable.
    (ii) Stating the promotional period and post-promotional rate or 
payments. If any annual percentage rate that may be applied to a plan is 
a promotional rate, or if any payment applicable to a plan is a 
promotional payment, the following must be disclosed in any 
advertisement, other than television or radio advertisements, in a clear 
and conspicuous manner with equal prominence and in close proximity to 
each listing of the promotional rate or payment:
    (A) The period of time during which the promotional rate or 
promotional payment will apply;
    (B) In the case of a promotional rate, any annual percentage rate 
that will apply under the plan. If such rate is variable, the annual 
percentage rate must be disclosed in accordance with the accuracy 
standards in Sec. Sec. 1026.40 or 1026.16(b)(1)(ii) as applicable; and
    (C) In the case of a promotional payment, the amounts and time 
periods of any payments that will apply under the plan. In variable-rate 
transactions, payments that will be determined based on application of 
an index and margin shall be disclosed based on a reasonably current 
index and margin.
    (iii) Envelope excluded. The requirements in paragraph (d)(6)(ii) of 
this section do not apply to an envelope in which an application or 
solicitation is mailed, or to a banner advertisement or pop-up 
advertisement linked to an application or solicitation provided 
electronically.
    (e) Alternative disclosures--television or radio advertisements. An 
advertisement made through television or radio stating any of the terms 
requiring additional disclosures under paragraphs (b)(1) or (d)(1) of 
this section may alternatively comply with paragraphs (b)(1) or (d)(1) 
of this section by stating the information required by paragraphs 
(b)(1)(ii) or (d)(1)(ii) of this section, as applicable, and listing a 
toll-free telephone number, or any telephone number that allows a 
consumer to reverse the phone charges when calling for information, 
along with a reference that such number may be used by consumers to 
obtain the additional cost information.
    (f) Misleading terms. An advertisement may not refer to an annual 
percentage rate as ``fixed,'' or use a similar term, unless the 
advertisement also specifies a time period that the rate will be fixed 
and the rate will not increase during that period, or if no such time 
period is provided, the rate will not increase while the plan is open.
    (g) Promotional rates and fees--(1) Scope. The requirements of this 
paragraph apply to any advertisement of an open-end (not home-secured) 
plan, including promotional materials accompanying applications or 
solicitations

[[Page 51]]

subject to Sec. 1026.60(c) or accompanying applications or 
solicitations subject to Sec. 1026.60(e).
    (2) Definitions. (i) Promotional rate means any annual percentage 
rate applicable to one or more balances or transactions on an open-end 
(not home-secured) plan for a specified period of time that is lower 
than the annual percentage rate that will be in effect at the end of 
that period on such balances or transactions.
    (ii) Introductory rate means a promotional rate offered in 
connection with the opening of an account.
    (iii) Promotional period means the maximum time period for which a 
promotional rate or promotional fee may be applicable.
    (iv) Promotional fee means a fee required to be disclosed under 
Sec. 1026.6(b)(1) and (2) applicable to an open-end (not home-secured) 
plan, or to one or more balances or transactions on an open-end (not 
home-secured) plan, for a specified period of time that is lower than 
the fee that will be in effect at the end of that period for such plan 
or types of balances or transactions.
    (v) Introductory fee means a promotional fee offered in connection 
with the opening of an account.
    (3) Stating the term ``introductory''. If any annual percentage rate 
or fee that may be applied to the account is an introductory rate or 
introductory fee, the term introductory or intro must be in immediate 
proximity to each listing of the introductory rate or introductory fee 
in a written or electronic advertisement.
    (4) Stating the promotional period and post-promotional rate or fee. 
If any annual percentage rate that may be applied to the account is a 
promotional rate under paragraph (g)(2)(i) of this section or any fee 
that may be applied to the account is a promotional fee under paragraph 
(g)(2)(iv) of this section, the information in paragraphs (g)(4)(i) and, 
as applicable, (g)(4)(ii) or (iii) of this section must be stated in a 
clear and conspicuous manner in the advertisement. If the rate or fee is 
stated in a written or electronic advertisement, the information in 
paragraphs (g)(4)(i) and, as applicable, (g)(4)(ii) or (iii) of this 
section must also be stated in a prominent location closely proximate to 
the first listing of the promotional rate or promotional fee.
    (i) When the promotional rate or promotional fee will end;
    (ii) The annual percentage rate that will apply after the end of the 
promotional period. If such rate is variable, the annual percentage rate 
must comply with the accuracy standards in Sec. 1026.60(c)(2), Sec. 
1026.60(d)(3), Sec. 1026.60(e)(4), or Sec. 1026.16(b)(1)(ii), as 
applicable. If such rate cannot be determined at the time disclosures 
are given because the rate depends at least in part on a later 
determination of the consumer's creditworthiness, the advertisement must 
disclose the specific rates or the range of rates that might apply; and
    (iii) The fee that will apply after the end of the promotional 
period.
    (5) Envelope excluded. The requirements in paragraph (g)(4) of this 
section do not apply to an envelope or other enclosure in which an 
application or solicitation is mailed, or to a banner advertisement or 
pop-up advertisement, linked to an application or solicitation provided 
electronically.
    (h) Deferred interest or similar offers--(1) Scope. The requirements 
of this paragraph apply to any advertisement of an open-end credit plan 
not subject to Sec. 1026.40, including promotional materials 
accompanying applications or solicitations subject to Sec. 1026.60(c) 
or accompanying applications or solicitations subject to Sec. 
1026.60(e).
    (2) Definitions. ``Deferred interest'' means finance charges, 
accrued on balances or transactions, that a consumer is not obligated to 
pay or that will be waived or refunded to a consumer if those balances 
or transactions are paid in full by a specified date. The maximum period 
from the date the consumer becomes obligated for the balance or 
transaction until the specified date by which the consumer must pay the 
balance or transaction in full in order to avoid finance charges, or 
receive a waiver or refund of finance charges, is the ``deferred 
interest period.'' ``Deferred interest'' does not include any finance 
charges the consumer avoids paying in connection with any recurring 
grace period.

[[Page 52]]

    (3) Stating the deferred interest period. If a deferred interest 
offer is advertised, the deferred interest period must be stated in a 
clear and conspicuous manner in the advertisement. If the phrase ``no 
interest'' or similar term regarding the possible avoidance of interest 
obligations under the deferred interest program is stated, the term ``if 
paid in full'' must also be stated in a clear and conspicuous manner 
preceding the disclosure of the deferred interest period in the 
advertisement. If the deferred interest offer is included in a written 
or electronic advertisement, the deferred interest period and, if 
applicable, the term ``if paid in full'' must also be stated in 
immediate proximity to each statement of ``no interest,'' ``no 
payments,'' ``deferred interest,'' ``same as cash,'' or similar term 
regarding interest or payments during the deferred interest period.
    (4) Stating the terms of the deferred interest or similar offer. If 
any deferred interest offer is advertised, the information in paragraphs 
(h)(4)(i) and (h)(4)(ii) of this section must be stated in the 
advertisement, in language similar to Sample G-24 in appendix G to this 
part. If the deferred interest offer is included in a written or 
electronic advertisement, the information in paragraphs (h)(4)(i) and 
(h)(4)(ii) of this section must also be stated in a prominent location 
closely proximate to the first statement of ``no interest,'' ``no 
payments,'' ``deferred interest,'' ``same as cash,'' or similar term 
regarding interest or payments during the deferred interest period.
    (i) A statement that interest will be charged from the date the 
consumer becomes obligated for the balance or transaction subject to the 
deferred interest offer if the balance or transaction is not paid in 
full within the deferred interest period; and
    (ii) A statement, if applicable, that interest will be charged from 
the date the consumer incurs the balance or transaction subject to the 
deferred interest offer if the account is in default before the end of 
the deferred interest period.
    (5) Envelope excluded. The requirements in paragraph (h)(4) of this 
section do not apply to an envelope or other enclosure in which an 
application or solicitation is mailed, or to a banner advertisement or 
pop-up advertisement linked to an application or solicitation provided 
electronically.



                       Subpart C_Closed-End Credit



Sec. 1026.17  General disclosure requirements.

    (a) Form of disclosures. Except for the disclosures required by 
Sec. 1026.19(e), (f), and (g):
    (1) The creditor shall make the disclosures required by this subpart 
clearly and conspicuously in writing, in a form that the consumer may 
keep. The disclosures required by this subpart may be provided to the 
consumer in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
The disclosures required by Sec. Sec. 1026.17(g), 1026.19(b), and 
1026.24 may be provided to the consumer in electronic form without 
regard to the consumer consent or other provisions of the E-Sign Act in 
the circumstances set forth in those sections. The disclosures shall be 
grouped together, shall be segregated from everything else, and shall 
not contain any information not directly related to the disclosures 
required under Sec. 1026.18, Sec. 1026.20(c) and (d), or Sec. 
1026.47. The disclosures required by Sec. 1026.20(d) shall be provided 
as a separate document from all other written materials. The disclosures 
may include an acknowledgment of receipt, the date of the transaction, 
and the consumer's name, address, and account number. The following 
disclosures may be made together with or separately from other required 
disclosures: The creditor's identity under Sec. 1026.18(a), the 
variable rate example under Sec. 1026.18(f)(1)(iv), insurance or debt 
cancellation under Sec. 1026.18(n), and certain security interest 
charges under Sec. 1026.18(o). The itemization of the amount financed 
under Sec. 1026.18(c)(1) must be separate from the other disclosures 
under Sec. 1026.18, except for private education loan disclosures made 
in compliance with Sec. 1026.47.
    (2) Except for private education loan disclosures made in compliance 
with Sec. 1026.47, the terms ``finance charge''

[[Page 53]]

and ``annual percentage rate,'' when required to be disclosed under 
Sec. 1026.18(d) and (e) together with a corresponding amount or 
percentage rate, shall be more conspicuous than any other disclosure, 
except the creditor's identity under Sec. 1026.18(a). For private 
education loan disclosures made in compliance with Sec. 1026.47, the 
term ``annual percentage rate,'' and the corresponding percentage rate 
must be less conspicuous than the term ``finance charge'' and 
corresponding amount under Sec. 1026.18(d), the interest rate under 
Sec. Sec. 1026.47(b)(1)(i) and (c)(1), and the notice of the right to 
cancel under Sec. 1026.47(c)(4).
    (b) Time of disclosures. The creditor shall make disclosures before 
consummation of the transaction. In certain residential mortgage 
transactions, special timing requirements are set forth in Sec. 
1026.19(a). In certain variable-rate transactions, special timing 
requirements for variable-rate disclosures are set forth in Sec. Sec. 
1026.19(b) and 1026.20(c) and (d). For private education loan 
disclosures made in compliance with Sec. 1026.47, special timing 
requirements are set forth in Sec. 1026.46(d). In certain transactions 
involving mail or telephone orders or a series of sales, the timing of 
disclosures may be delayed in accordance with paragraphs (g) and (h) of 
this section. This paragraph (b) does not apply to the disclosures 
required by Sec. Sec. 1026.19(e), (f), and (g) and 1026.20(e).
    (c) Basis of disclosures and use of estimates. (1) The disclosures 
shall reflect the terms of the legal obligation between the parties.
    (2)(i) If any information necessary for an accurate disclosure is 
unknown to the creditor, the creditor shall make the disclosure based on 
the best information reasonably available at the time the disclosure is 
provided to the consumer, and shall state clearly that the disclosure is 
an estimate.
    (ii) For a transaction in which a portion of the interest is 
determined on a per-diem basis and collected at consummation, any 
disclosure affected by the per-diem interest shall be considered 
accurate if the disclosure is based on the information known to the 
creditor at the time that the disclosure documents are prepared for 
consummation of the transaction.
    (3) The creditor may disregard the effects of the following in 
making calculations and disclosures.
    (i) That payments must be collected in whole cents.
    (ii) That dates of scheduled payments and advances may be changed 
because the scheduled date is not a business day.
    (iii) That months have different numbers of days.
    (iv) The occurrence of leap year.
    (4) In making calculations and disclosures, the creditor may 
disregard any irregularity in the first period that falls within the 
limits described below and any payment schedule irregularity that 
results from the irregular first period:
    (i) For transactions in which the term is less than 1 year, a first 
period not more than 6 days shorter or 13 days longer than a regular 
period;
    (ii) For transactions in which the term is at least 1 year and less 
than 10 years, a first period not more than 11 days shorter or 21 days 
longer than a regular period; and
    (iii) For transactions in which the term is at least 10 years, a 
first period shorter than or not more than 32 days longer than a regular 
period.
    (5) If an obligation is payable on demand, the creditor shall make 
the disclosures based on an assumed maturity of 1 year. If an alternate 
maturity date is stated in the legal obligation between the parties, the 
disclosures shall be based on that date.
    (6)(i) A series of advances under an agreement to extend credit up 
to a certain amount may be considered as one transaction.
    (ii) When a multiple-advance loan to finance the construction of a 
dwelling may be permanently financed by the same creditor, the 
construction phase and the permanent phase may be treated as either one 
transaction or more than one transaction.
    (d) Multiple creditors; multiple consumers. If a transaction 
involves more than one creditor, only one set of disclosures shall be 
given and the creditors shall agree among themselves which creditor must 
comply with the requirements that this part imposes on

[[Page 54]]

any or all of them. If there is more than one consumer, the disclosures 
may be made to any consumer who is primarily liable on the obligation. 
If the transaction is rescindable under Sec. 1026.23, however, the 
disclosures shall be made to each consumer who has the right to rescind.
    (e) Effect of subsequent events. If a disclosure becomes inaccurate 
because of an event that occurs after the creditor delivers the required 
disclosures, the inaccuracy is not a violation of this part, although 
new disclosures may be required under paragraph (f) of this section, 
Sec. 1026.19, Sec. 1026.20, or Sec. 1026.48(c)(4).
    (f) Early disclosures. Except for private education loan disclosures 
made in compliance with Sec. 1026.47, if disclosures required by this 
subpart are given before the date of consummation of a transaction and a 
subsequent event makes them inaccurate, the creditor shall disclose 
before consummation (subject to the provisions of Sec. 1026.19(a)(2), 
(e), and (f)):
    (1) Any changed term unless the term was based on an estimate in 
accordance with Sec. 1026.17(c)(2) and was labeled an estimate;
    (2) All changed terms, if the annual percentage rate at the time of 
consummation varies from the annual percentage rate disclosed earlier by 
more than \1/8\ of 1 percentage point in a regular transaction, or more 
than \1/4\ of 1 percentage point in an irregular transaction, as defined 
in Sec. 1026.22(a).
    (g) Mail or telephone orders--delay in disclosures. Except for 
private education loan disclosures made in compliance with Sec. 1026.47 
and mortgage disclosures made in compliance with Sec. 1026.19(a) or 
(e), (f), and (g), if a creditor receives a purchase order or a request 
for an extension of credit by mail, telephone, or facsimile machine 
without face-to-face or direct telephone solicitation, the creditor may 
delay the disclosures until the due date of the first payment, if the 
following information for representative amounts or ranges of credit is 
made available in written form or in electronic form to the consumer or 
to the public before the actual purchase order or request:
    (1) The cash price or the principal loan amount.
    (2) The total sale price.
    (3) The finance charge.
    (4) The annual percentage rate, and if the rate may increase after 
consummation, the following disclosures:
    (i) The circumstances under which the rate may increase.
    (ii) Any limitations on the increase.
    (iii) The effect of an increase.
    (5) The terms of repayment.
    (h) Series of sales--delay in disclosures. Except for mortgage 
disclosures made in compliance with Sec. 1026.19(a) or (e), (f), and 
(g), if a credit sale is one of a series made under an agreement 
providing that subsequent sales may be added to an outstanding balance, 
the creditor may delay the required disclosures until the due date of 
the first payment for the current sale, if the following two conditions 
are met:
    (1) The consumer has approved in writing the annual percentage rate 
or rates, the range of balances to which they apply, and the method of 
treating any unearned finance charge on an existing balance.
    (2) The creditor retains no security interest in any property after 
the creditor has received payments equal to the cash price and any 
finance charge attributable to the sale of that property. For purposes 
of this provision, in the case of items purchased on different dates, 
the first purchased is deemed the first item paid for; in the case of 
items purchased on the same date, the lowest priced is deemed the first 
item paid for.
    (i) Interim student credit extensions. For transactions involving an 
interim credit extension under a student credit program for which an 
application is received prior to the mandatory compliance date of 
Sec. Sec. 1026.46, 47, and 48, the creditor need not make the following 
disclosures: the finance charge under Sec. 1026.18(d), the payment 
schedule under Sec. 1026.18(g), the total of payments under Sec. 
1026.18(h), or the total sale price under Sec. 1026.18(j) at the time 
the credit is actually extended. The creditor must make complete 
disclosures at the time the creditor and consumer agree upon the 
repayment schedule for the total obligation. At that time, a new set of

[[Page 55]]

disclosures must be made of all applicable items under Sec. 1026.18.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 11004, Feb. 14, 2013; 
78 FR 80107, Dec. 31, 2013]



Sec. 1026.18  Content of disclosures.

    For each transaction other than a mortgage transaction subject to 
Sec. 1026.19(e) and (f), the creditor shall disclose the following 
information as applicable:
    (a) Creditor. The identity of the creditor making the disclosures.
    (b) Amount financed. The amount financed, using that term, and a 
brief description such as the amount of credit provided to you or on 
your behalf. The amount financed is calculated by:
    (1) Determining the principal loan amount or the cash price 
(subtracting any downpayment);
    (2) Adding any other amounts that are financed by the creditor and 
are not part of the finance charge; and
    (3) Subtracting any prepaid finance charge.
    (c) Itemization of amount financed. (1) Except as provided in 
paragraphs (c)(2) and (c)(3) of this section, a separate written 
itemization of the amount financed, including:
    (i) The amount of any proceeds distributed directly to the consumer.
    (ii) The amount credited to the consumer's account with the 
creditor.
    (iii) Any amounts paid to other persons by the creditor on the 
consumer's behalf. The creditor shall identify those persons. The 
following payees may be described using generic or other general terms 
and need not be further identified: public officials or government 
agencies, credit reporting agencies, appraisers, and insurance 
companies.
    (iv) The prepaid finance charge.
    (2) The creditor need not comply with paragraph (c)(1) of this 
section if the creditor provides a statement that the consumer has the 
right to receive a written itemization of the amount financed, together 
with a space for the consumer to indicate whether it is desired, and the 
consumer does not request it.
    (3) Good faith estimates of settlement costs provided for 
transactions subject to the Real Estate Settlement Procedures Act (12 
U.S.C. 2601 et seq.) may be substituted for the disclosures required by 
paragraph (c)(1) of this section.
    (d) Finance charge. The finance charge, using that term, and a brief 
description such as ``the dollar amount the credit will cost you.''
    (1) Mortgage loans. In a transaction secured by real property or a 
dwelling, the disclosed finance charge and other disclosures affected by 
the disclosed finance charge (including the amount financed and the 
annual percentage rate) shall be treated as accurate if the amount 
disclosed as the finance charge:
    (i) Is understated by no more than $100; or
    (ii) Is greater than the amount required to be disclosed.
    (2) Other credit. In any other transaction, the amount disclosed as 
the finance charge shall be treated as accurate if, in a transaction 
involving an amount financed of $1,000 or less, it is not more than $5 
above or below the amount required to be disclosed; or, in a transaction 
involving an amount financed of more than $1,000, it is not more than 
$10 above or below the amount required to be disclosed.
    (e) Annual percentage rate. The annual percentage rate, using that 
term, and a brief description such as ``the cost of your credit as a 
yearly rate.'' For any transaction involving a finance charge of $5 or 
less on an amount financed of $75 or less, or a finance charge of $7.50 
or less on an amount financed of more than $75, the creditor need not 
disclose the annual percentage rate.
    (f) Variable rate. (1) Except as provided in paragraph (f)(3) of 
this section, if the annual percentage rate may increase after 
consummation in a transaction not secured by the consumer's principal 
dwelling or in a transaction secured by the consumer's principal 
dwelling with a term of one year or less, the following disclosures:
    (i) The circumstances under which the rate may increase.
    (ii) Any limitations on the increase.
    (iii) The effect of an increase.
    (iv) An example of the payment terms that would result from an 
increase.

[[Page 56]]

    (2) If the annual percentage rate may increase after consummation in 
a transaction secured by the consumer's principal dwelling with a term 
greater than one year, the following disclosures:
    (i) The fact that the transaction contains a variable-rate feature.
    (ii) A statement that variable-rate disclosures have been provided 
earlier.
    (3) Information provided in accordance with Sec. Sec. 1026.18(f)(2) 
and 1026.19(b) may be substituted for the disclosures required by 
paragraph (f)(1) of this section.
    (g) Payment schedule. Other than for a transaction that is subject 
to paragraph (s) of this section, the number, amounts, and timing of 
payments scheduled to repay the obligation.
    (1) In a demand obligation with no alternate maturity date, the 
creditor may comply with this paragraph by disclosing the due dates or 
payment periods of any scheduled interest payments for the first year.
    (2) In a transaction in which a series of payments varies because a 
finance charge is applied to the unpaid principal balance, the creditor 
may comply with this paragraph by disclosing the following information:
    (i) The dollar amounts of the largest and smallest payments in the 
series.
    (ii) A reference to the variations in the other payments in the 
series.
    (h) Total of payments. The total of payments, using that term, and a 
descriptive explanation such as ``the amount you will have paid when you 
have made all scheduled payments.'' In any transaction involving a 
single payment, the creditor need not disclose the total of payments.
    (i) Demand feature. If the obligation has a demand feature, that 
fact shall be disclosed. When the disclosures are based on an assumed 
maturity of 1 year as provided in Sec. 1026.17(c)(5), that fact shall 
also be disclosed.
    (j) Total sale price. In a credit sale, the total sale price, using 
that term, and a descriptive explanation (including the amount of any 
downpayment) such as ``the total price of your purchase on credit, 
including your downpayment of $----.'' The total sale price is the sum 
of the cash price, the items described in paragraph (b)(2), and the 
finance charge disclosed under paragraph (d) of this section.
    (k) Prepayment. (1) When an obligation includes a finance charge 
computed from time to time by application of a rate to the unpaid 
principal balance, a statement indicating whether or not a charge may be 
imposed for paying all or part of a loan's principal balance before the 
date on which the principal is due.
    (2) When an obligation includes a finance charge other than the 
finance charge described in paragraph (k)(1) of this section, a 
statement indicating whether or not the consumer is entitled to a rebate 
of any finance charge if the obligation is prepaid in full or in part.
    (l) Late payment. Any dollar or percentage charge that may be 
imposed before maturity due to a late payment, other than a deferral or 
extension charge.
    (m) Security interest. The fact that the creditor has or will 
acquire a security interest in the property purchased as part of the 
transaction, or in other property identified by item or type.
    (n) Insurance and debt cancellation. The items required by Sec. 
1026.4(d) in order to exclude certain insurance premiums and debt 
cancellation fees from the finance charge.
    (o) Certain security interest charges. The disclosures required by 
Sec. 1026.4(e) in order to exclude from the finance charge certain fees 
prescribed by law or certain premiums for insurance in lieu of 
perfecting a security interest.
    (p) Contract reference. A statement that the consumer should refer 
to the appropriate contract document for information about nonpayment, 
default, the right to accelerate the maturity of the obligation, and 
prepayment rebates and penalties. At the creditor's option, the 
statement may also include a reference to the contract for further 
information about security interests and, in a residential mortgage 
transaction, about the creditor's policy regarding assumption of the 
obligation.
    (q) Assumption policy. In a residential mortgage transaction, a 
statement whether or not a subsequent purchaser of the dwelling from the 
consumer may be permitted to assume the remaining obligation on its 
original terms.

[[Page 57]]

    (r) Required deposit. If the creditor requires the consumer to 
maintain a deposit as a condition of the specific transaction, a 
statement that the annual percentage rate does not reflect the effect of 
the required deposit. A required deposit need not include, for example:
    (1) An escrow account for items such as taxes, insurance or repairs;
    (2) A deposit that earns not less than 5 percent per year; or
    (3) Payments under a Morris Plan.
    (s) Interest rate and payment summary for mortgage transactions. For 
a closed-end transaction secured by real property or a dwelling, other 
than a transaction that is subject to Sec. 1026.19(e) and (f), the 
creditor shall disclose the following information about the interest 
rate and payments:
    (1) Form of disclosures. The information in paragraphs (s)(2)-(4) of 
this section shall be in the form of a table, with no more than five 
columns, with headings and format substantially similar to Model Clause 
H-4(E), H-4(F), H-4(G), or H-4(H) in appendix H to this part. The table 
shall contain only the information required in paragraphs (s)(2)-(4) of 
this section, shall be placed in a prominent location, and shall be in a 
minimum 10-point font.
    (2) Interest rates--(i) Amortizing loans. (A) For a fixed-rate 
mortgage, the interest rate at consummation.
    (B) For an adjustable-rate or step-rate mortgage:
    (1) The interest rate at consummation and the period of time until 
the first interest rate adjustment may occur, labeled as the 
``introductory rate and monthly payment'';
    (2) The maximum interest rate that may apply during the first five 
years after the date on which the first regular periodic payment will be 
due and the earliest date on which that rate may apply, labeled as 
``maximum during first five years''; and
    (3) The maximum interest rate that may apply during the life of the 
loan and the earliest date on which that rate may apply, labeled as 
``maximum ever.''
    (C) If the loan provides for payment increases as described in 
paragraph (s)(3)(i)(B) of this section, the interest rate in effect at 
the time the first such payment increase is scheduled to occur and the 
date on which the increase will occur, labeled as ``first adjustment'' 
if the loan is an adjustable-rate mortgage or, otherwise, labeled as 
``first increase.''
    (ii) Negative amortization loans. For a negative amortization loan:
    (A) The interest rate at consummation and, if it will adjust after 
consummation, the length of time until it will adjust, and the label 
``introductory'' or ``intro'';
    (B) The maximum interest rate that could apply when the consumer 
must begin making fully amortizing payments under the terms of the legal 
obligation;
    (C) If the minimum required payment will increase before the 
consumer must begin making fully amortizing payments, the maximum 
interest rate that could apply at the time of the first payment increase 
and the date the increase is scheduled to occur; and(D) If a second 
increase in the minimum required payment may occur before the consumer 
must begin making fully amortizing payments, the maximum interest rate 
that could apply at the time of the second payment increase and the date 
the increase is scheduled to occur.
    (iii) Introductory rate disclosure for amortizing adjustable-rate 
mortgages. For an amortizing adjustable-rate mortgage, if the interest 
rate at consummation is less than the fully-indexed rate, placed in a 
box directly beneath the table required by paragraph (s)(1) of this 
section, in a format substantially similar to Model Clause H-4(I) in 
appendix H to this part:
    (A) The interest rate that applies at consummation and the period of 
time for which it applies;
    (B) A statement that, even if market rates do not change, the 
interest rate will increase at the first adjustment and a designation of 
the place in sequence of the month or year, as applicable, of such rate 
adjustment; and
    (C) The fully-indexed rate.
    (3) Payments for amortizing loans--(i) Principal and interest 
payments. If all periodic payments will be applied to accrued interest 
and principal, for each interest rate disclosed under paragraph 
(s)(2)(i) of this section:

[[Page 58]]

    (A) The corresponding periodic principal and interest payment, 
labeled as ``principal and interest;''
    (B) If the periodic payment may increase without regard to an 
interest rate adjustment, the payment that corresponds to the first such 
increase and the earliest date on which the increase could occur;
    (C) If an escrow account will be established, an estimate of the 
amount of taxes and insurance, including any mortgage insurance or any 
functional equivalent, payable with each periodic payment; and
    (D) The sum of the amounts disclosed under paragraphs (s)(3)(i)(A) 
and (C) of this section or (s)(3)(i)(B) and (C) of this section, as 
applicable, labeled as ``total estimated monthly payment.''
    (ii) Interest-only payments. If the loan is an interest-only loan, 
for each interest rate disclosed under paragraph (s)(2)(i) of this 
section, the corresponding periodic payment and:
    (A) If the payment will be applied to only accrued interest, the 
amount applied to interest, labeled as ``interest payment,'' and a 
statement that none of the payment is being applied to principal;
    (B) If the payment will be applied to accrued interest and 
principal, an itemization of the amount of the first such payment 
applied to accrued interest and to principal, labeled as ``interest 
payment'' and ``principal payment,'' respectively;
    (C) The escrow information described in paragraph (s)(3)(i)(C) of 
this section; and
    (D) The sum of all amounts required to be disclosed under paragraphs 
(s)(3)(ii)(A) and (C) of this section or (s)(3)(ii)(B) and (C) of this 
section, as applicable, labeled as ``total estimated monthly payment.''
    (4) Payments for negative amortization loans. For negative 
amortization loans:
    (i)(A) The minimum periodic payment required until the first payment 
increase or interest rate increase, corresponding to the interest rate 
disclosed under paragraph (s)(2)(ii)(A) of this section;
    (B) The minimum periodic payment that would be due at the first 
payment increase and the second, if any, corresponding to the interest 
rates described in paragraphs (s)(2)(ii)(C) and (D) of this section; and
    (C) A statement that the minimum payment pays only some interest, 
does not repay any principal, and will cause the loan amount to 
increase;
    (ii) The fully amortizing periodic payment amount at the earliest 
time when such a payment must be made, corresponding to the interest 
rate disclosed under paragraph (s)(2)(ii)(B) of this section; and
    (iii) If applicable, in addition to the payments in paragraphs 
(s)(4)(i) and (ii) of this section, for each interest rate disclosed 
under paragraph (s)(2)(ii) of this section, the amount of the fully 
amortizing periodic payment, labeled as the ``full payment option,'' and 
a statement that these payments pay all principal and all accrued 
interest.
    (5) Balloon payments. (i) Except as provided in paragraph (s)(5)(ii) 
of this section, if the transaction will require a balloon payment, 
defined as a payment that is more than two times a regular periodic 
payment, the balloon payment shall be disclosed separately from other 
periodic payments disclosed in the table under this paragraph (s), 
outside the table and in a manner substantially similar to Model Clause 
H-4(J) in appendix H to this part.
    (ii) If the balloon payment is scheduled to occur at the same time 
as another payment required to be disclosed in the table pursuant to 
paragraph (s)(3) or (s)(4) of this section, then the balloon payment 
must be disclosed in the table.
    (6) Special disclosures for loans with negative amortization. For a 
negative amortization loan, the following information, in close 
proximity to the table required in paragraph (s)(1) of this section, 
with headings, content, and format substantially similar to Model Clause 
H-4(G) in appendix H to this part:
    (i) The maximum interest rate, the shortest period of time in which 
such interest rate could be reached, the amount of estimated taxes and 
insurance included in each payment disclosed, and a statement that the 
loan offers payment options, two of which are shown.
    (ii) The dollar amount of the increase in the loan's principal 
balance if the

[[Page 59]]

consumer makes only the minimum required payments for the maximum 
possible time and the earliest date on which the consumer must begin 
making fully amortizing payments, assuming that the maximum interest 
rate is reached at the earliest possible time.
    (7) Definitions. For purposes of this Sec. 1026.18(s):
    (i) The term ``adjustable-rate mortgage'' means a transaction 
secured by real property or a dwelling for which the annual percentage 
rate may increase after consummation.
    (ii) The term ``step-rate mortgage'' means a transaction secured by 
real property or a dwelling for which the interest rate will change 
after consummation, and the rates that will apply and the periods for 
which they will apply are known at consummation.
    (iii) The term ``fixed-rate mortgage'' means a transaction secured 
by real property or a dwelling that is not an adjustable-rate mortgage 
or a step-rate mortgage.
    (iv) The term ``interest-only'' means that, under the terms of the 
legal obligation, one or more of the periodic payments may be applied 
solely to accrued interest and not to loan principal; an ``interest-only 
loan'' is a loan that permits interest-only payments.
    (v) The term ``amortizing loan'' means a loan in which payment of 
the periodic payments does not result in an increase in the principal 
balance under the terms of the legal obligation; the term ``negative 
amortization'' means payment of periodic payments that will result in an 
increase in the principal balance under the terms of the legal 
obligation; the term ``negative amortization loan'' means a loan, other 
than a reverse mortgage subject to Sec. 1026.33, that provides for a 
minimum periodic payment that covers only a portion of the accrued 
interest, resulting in negative amortization.
    (vi) The term ``fully-indexed rate'' means the interest rate 
calculated using the index value and margin at the time of consummation.
    (t) ``No-guarantee-to-refinance'' statement--(1) Disclosure. For a 
closed-end transaction secured by real property or a dwelling, other 
than a transaction that is subject to Sec. 1026.19(e) and (f), the 
creditor shall disclose a statement that there is no guarantee the 
consumer can refinance the transaction to lower the interest rate or 
periodic payments.
    (2) Format. The statement required by paragraph (t)(1) of this 
section must be in a form substantially similar to Model Clause H-4(K) 
in appendix H to this part.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80108, Dec. 31, 2013]



Sec. 1026.19  Certain mortgage and variable-rate transactions.

    (a) Mortgage transactions subject to RESPA--(1)(i) Time of 
disclosures. In a reverse mortgage transaction subject to both Sec. 
1026.33 and the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et 
seq.) that is secured by the consumer's dwelling, the creditor shall 
provide the consumer with good faith estimates of the disclosures 
required by Sec. 1026.18 and shall deliver or place them in the mail 
not later than the third business day after the creditor receives the 
consumer's written application.
    (ii) Imposition of fees. Except as provided in paragraph (a)(1)(iii) 
of this section, neither a creditor nor any other person may impose a 
fee on a consumer in connection with the consumer's application for a 
reverse mortgage transaction subject to paragraph (a)(1)(i) of this 
section before the consumer has received the disclosures required by 
paragraph (a)(1)(i) of this section. If the disclosures are mailed to 
the consumer, the consumer is considered to have received them three 
business days after they are mailed.
    (iii) Exception to fee restriction. A creditor or other person may 
impose a fee for obtaining the consumer's credit history before the 
consumer has received the disclosures required by paragraph (a)(1)(i) of 
this section, provided the fee is bona fide and reasonable in amount.
    (2) Waiting periods for early disclosures and corrected disclosures. 
(i) The creditor shall deliver or place in the mail the good faith 
estimates required by paragraph (a)(1)(i) of this section not later than 
the seventh business day before consummation of the transaction.
    (ii) If the annual percentage rate disclosed under paragraph 
(a)(1)(i) of this

[[Page 60]]

section becomes inaccurate, as defined in Sec. 1026.22, the creditor 
shall provide corrected disclosures with all changed terms. The consumer 
must receive the corrected disclosures no later than three business days 
before consummation. If the corrected disclosures are mailed to the 
consumer or delivered to the consumer by means other than delivery in 
person, the consumer is deemed to have received the corrected 
disclosures three business days after they are mailed or delivered.
    (3) Consumer's waiver of waiting period before consummation. If the 
consumer determines that the extension of credit is needed to meet a 
bona fide personal financial emergency, the consumer may modify or waive 
the seven-business-day waiting period or the three-business-day waiting 
period required by paragraph (a)(2) of this section, after receiving the 
disclosures required by Sec. 1026.18. To modify or waive a waiting 
period, the consumer shall give the creditor a dated written statement 
that describes the emergency, specifically modifies or waives the 
waiting period, and bears the signature of all the consumers who are 
primarily liable on the legal obligation. Printed forms for this purpose 
are prohibited.
    (4) Notice. Disclosures made pursuant to paragraph (a)(1) or 
paragraph (a)(2) of this section shall contain the following statement: 
``You are not required to complete this agreement merely because you 
have received these disclosures or signed a loan application.'' The 
disclosure required by this paragraph shall be grouped together with the 
disclosures required by paragraphs (a)(1) or (a)(2) of this section.
    (b) Certain variable-rate transactions. Except as provided in 
paragraph (d) of this section, if the annual percentage rate may 
increase after consummation in a transaction secured by the consumer's 
principal dwelling with a term greater than one year, the following 
disclosures must be provided at the time an application form is provided 
or before the consumer pays a non-refundable fee, whichever is earlier 
(except that the disclosures may be delivered or placed in the mail not 
later than three business days following receipt of a consumer's 
application when the application reaches the creditor by telephone, or 
through an intermediary agent or broker):
    (1) The booklet titled Consumer Handbook on Adjustable Rate 
Mortgages, or a suitable substitute.
    (2) A loan program disclosure for each variable-rate program in 
which the consumer expresses an interest. The following disclosures, as 
applicable, shall be provided:
    (i) The fact that the interest rate, payment, or term of the loan 
can change.
    (ii) The index or formula used in making adjustments, and a source 
of information about the index or formula.
    (iii) An explanation of how the interest rate and payment will be 
determined, including an explanation of how the index is adjusted, such 
as by the addition of a margin.
    (iv) A statement that the consumer should ask about the current 
margin value and current interest rate.
    (v) The fact that the interest rate will be discounted, and a 
statement that the consumer should ask about the amount of the interest 
rate discount.
    (vi) The frequency of interest rate and payment changes.
    (vii) Any rules relating to changes in the index, interest rate, 
payment amount, and outstanding loan balance including, for example, an 
explanation of interest rate or payment limitations, negative 
amortization, and interest rate carryover.
    (viii) At the option of the creditor, either of the following:
    (A) A historical example, based on a $10,000 loan amount, 
illustrating how payments and the loan balance would have been affected 
by interest rate changes implemented according to the terms of the loan 
program disclosure. The example shall reflect the most recent 15 years 
of index values. The example shall reflect all significant loan program 
terms, such as negative amortization, interest rate carryover, interest 
rate discounts, and interest rate and payment limitations, that would 
have been affected by the index movement during the period.
    (B) The maximum interest rate and payment for a $10,000 loan 
originated at

[[Page 61]]

the initial interest rate (index value plus margin, adjusted by the 
amount of any discount or premium) in effect as of an identified month 
and year for the loan program disclosure assuming the maximum periodic 
increases in rates and payments under the program; and the initial 
interest rate and payment for that loan and a statement that the 
periodic payment may increase or decrease substantially depending on 
changes in the rate.
    (ix) An explanation of how the consumer may calculate the payments 
for the loan amount to be borrowed based on either:
    (A) The most recent payment shown in the historical example in 
paragraph (b)(2)(viii)(A) of this section; or
    (B) The initial interest rate used to calculate the maximum interest 
rate and payment in paragraph (b)(2)(viii)(B) of this section.
    (x) The fact that the loan program contains a demand feature.
    (xi) The type of information that will be provided in notices of 
adjustments and the timing of such notices.
    (xii) A statement that disclosure forms are available for the 
creditor's other variable-rate loan programs.
    (c) Electronic disclosures. For an application that is accessed by 
the consumer in electronic form, the disclosures required by paragraph 
(b) of this section may be provided to the consumer in electronic form 
on or with the application.
    (d) Information provided in accordance with variable-rate 
regulations of other Federal agencies may be substituted for the 
disclosures required by paragraph (b) of this section.
    (e) Mortgage loans secured by real property--early disclosures--(1) 
Provision of disclosures--(i) Creditor. In a closed-end consumer credit 
transaction secured by real property, other than a reverse mortgage 
subject to Sec. 1026.33, the creditor shall provide the consumer with 
good faith estimates of the disclosures in Sec. 1026.37.
    (ii) Mortgage broker. (A) If a mortgage broker receives a consumer's 
application, either the creditor or the mortgage broker shall provide a 
consumer with the disclosures required under paragraph (e)(1)(i) of this 
section in accordance with paragraph (e)(1)(iii) of this section. If the 
mortgage broker provides the required disclosures, the mortgage broker 
shall comply with all relevant requirements of this paragraph (e). The 
creditor shall ensure that such disclosures are provided in accordance 
with all requirements of this paragraph (e). Disclosures provided by a 
mortgage broker in accordance with the requirements of this paragraph 
(e) satisfy the creditor's obligation under this paragraph (e).
    (B) If a mortgage broker provides any disclosure under Sec. 
1026.19(e), the mortgage broker shall also comply with the requirements 
of Sec. 1026.25(c).
    (iii) Timing. (A) The creditor shall deliver or place in the mail 
the disclosures required under paragraph (e)(1)(i) of this section not 
later than the third business day after the creditor receives the 
consumer's application, as defined in Sec. 1026.2(a)(3).
    (B) Except as set forth in paragraph (e)(1)(iii)(C) of this section, 
the creditor shall deliver or place in the mail the disclosures required 
under paragraph (e)(1)(i) of this section not later than the seventh 
business day before consummation of the transaction.
    (C) For a transaction secured by a consumer's interest in a 
timeshare plan described in 11 U.S.C. 101(53D), paragraph (e)(1)(iii)(B) 
of this section does not apply.
    (iv) Receipt of early disclosures. If any disclosures required under 
paragraph (e)(1)(i) of this section are not provided to the consumer in 
person, the consumer is considered to have received the disclosures 
three business days after they are delivered or placed in the mail.
    (v) Consumer's waiver of waiting period before consummation. If the 
consumer determines that the extension of credit is needed to meet a 
bona fide personal financial emergency, the consumer may modify or waive 
the seven-business-day waiting period for early disclosures required 
under paragraph (e)(1)(iii)(B) of this section, after receiving the 
disclosures required under paragraph (e)(1)(i) of this section. To 
modify or waive the waiting period, the consumer shall give the creditor 
a dated written statement that describes the emergency, specifically 
modifies or waives the waiting period, and bears

[[Page 62]]

the signature of all the consumers who are primarily liable on the legal 
obligation. Printed forms for this purpose are prohibited.
    (vi) Shopping for settlement service providers--(A) Shopping 
permitted. A creditor permits a consumer to shop for a settlement 
service if the creditor permits the consumer to select the provider of 
that service, subject to reasonable requirements.
    (B) Disclosure of services. The creditor shall identify the 
settlement services for which the consumer is permitted to shop in the 
disclosures required under paragraph (e)(1)(i) of this section.
    (C) Written list of providers. If the consumer is permitted to shop 
for a settlement service, the creditor shall provide the consumer with a 
written list identifying available providers of that settlement service 
and stating that the consumer may choose a different provider for that 
service. The creditor must identify at least one available provider for 
each settlement service for which the consumer is permitted to shop. The 
creditor shall provide this written list of settlement service providers 
separately from the disclosures required by paragraph (e)(1)(i) of this 
section but in accordance with the timing requirements in paragraph 
(e)(1)(iii) of this section.
    (2) Predisclosure activity--(i) Imposition of fees on consumer--(A) 
Fee restriction. Except as provided in paragraph (e)(2)(i)(B) of this 
section, neither a creditor nor any other person may impose a fee on a 
consumer in connection with the consumer's application for a mortgage 
transaction subject to paragraph (e)(1)(i) of this section before the 
consumer has received the disclosures required under paragraph (e)(1)(i) 
of this section and indicated to the creditor an intent to proceed with 
the transaction described by those disclosures. A consumer may indicate 
an intent to proceed with a transaction in any manner the consumer 
chooses, unless a particular manner of communication is required by the 
creditor. The creditor must document this communication to satisfy the 
requirements of Sec. 1026.25.
    (B) Exception to fee restriction. A creditor or other person may 
impose a bona fide and reasonable fee for obtaining the consumer's 
credit report before the consumer has received the disclosures required 
under paragraph (e)(1)(i) of this section.
    (ii) Written information provided to consumer. If a creditor or 
other person provides a consumer with a written estimate of terms or 
costs specific to that consumer before the consumer receives the 
disclosures required under paragraph (e)(1)(i) of this section, the 
creditor or such person shall clearly and conspicuously state at the top 
of the front of the first page of the estimate in a font size that is no 
smaller than 12-point font: ``Your actual rate, payment, and costs could 
be higher. Get an official Loan Estimate before choosing a loan.'' The 
written estimate of terms or costs may not be made with headings, 
content, and format substantially similar to form H-24 or H-25 of 
appendix H to this part.
    (iii) Verification of information. The creditor or other person 
shall not require a consumer to submit documents verifying information 
related to the consumer's application before providing the disclosures 
required by paragraph (e)(1)(i) of this section.
    (3) Good faith determination for estimates of closing costs--(i) 
General rule. An estimated closing cost disclosed pursuant to paragraph 
(e) of this section is in good faith if the charge paid by or imposed on 
the consumer does not exceed the amount originally disclosed under 
paragraph (e)(1)(i) of this section, except as otherwise provided in 
paragraphs (e)(3)(ii) through (iv) of this section.
    (ii) Limited increases permitted for certain charges. An estimate of 
a charge for a third-party service or a recording fee is in good faith 
if:
    (A) The aggregate amount of charges for third-party services and 
recording fees paid by or imposed on the consumer does not exceed the 
aggregate amount of such charges disclosed under paragraph (e)(1)(i) of 
this section by more than 10 percent;
    (B) The charge for the third-party service is not paid to the 
creditor or an affiliate of the creditor; and
    (C) The creditor permits the consumer to shop for the third-party 
service, consistent with paragraph (e)(1)(vi) of this section.

[[Page 63]]

    (iii) Variations permitted for certain charges. An estimate of the 
following charges is in good faith if it is consistent with the best 
information reasonably available to the creditor at the time it is 
disclosed, regardless of whether the amount paid by the consumer exceeds 
the amount disclosed under paragraph (e)(1)(i) of this section:
    (A) Prepaid interest;
    (B) Property insurance premiums;
    (C) Amounts placed into an escrow, impound, reserve, or similar 
account;
    (D) Charges paid to third-party service providers selected by the 
consumer consistent with paragraph (e)(1)(vi)(A) of this section that 
are not on the list provided pursuant to paragraph (e)(1)(vi)(C) of this 
section; and
    (E) Charges paid for third-party services not required by the 
creditor. These charges may be paid to affiliates of the creditor.
    (iv) Revised estimates. For the purpose of determining good faith 
under paragraph (e)(3)(i) and (ii) of this section, a creditor may use a 
revised estimate of a charge instead of the estimate of the charge 
originally disclosed under paragraph (e)(1)(i) of this section if the 
revision is due to any of the following reasons:
    (A) Changed circumstance affecting settlement charges. Changed 
circumstances cause the estimated charges to increase or, in the case of 
estimated charges identified in paragraph (e)(3)(ii) of this section, 
cause the aggregate amount of such charges to increase by more than 10 
percent. For purposes of this paragraph, ``changed circumstance'' means:
    (1) An extraordinary event beyond the control of any interested 
party or other unexpected event specific to the consumer or transaction;
    (2) Information specific to the consumer or transaction that the 
creditor relied upon when providing the disclosures required under 
paragraph (e)(1)(i) of this section and that was inaccurate or changed 
after the disclosures were provided; or
    (3) New information specific to the consumer or transaction that the 
creditor did not rely on when providing the original disclosures 
required under paragraph (e)(1)(i) of this section.
    (B) Changed circumstance affecting eligibility. The consumer is 
ineligible for an estimated charge previously disclosed because a 
changed circumstance, as defined under paragraph (e)(3)(iv)(A) of this 
section, affected the consumer's creditworthiness or the value of the 
security for the loan.
    (C) Revisions requested by the consumer. The consumer requests 
revisions to the credit terms or the settlement that cause an estimated 
charge to increase.
    (D) Interest rate dependent charges. The points or lender credits 
change because the interest rate was not locked when the disclosures 
required under paragraph (e)(1)(i) of this section were provided. No 
later than three business days after the date the interest rate is 
locked, the creditor shall provide a revised version of the disclosures 
required under paragraph (e)(1)(i) of this section to the consumer with 
the revised interest rate, the points disclosed pursuant to Sec. 
1026.37(f)(1), lender credits, and any other interest rate dependent 
charges and terms.
    (E) Expiration. The consumer indicates an intent to proceed with the 
transaction more than ten business days after the disclosures required 
under paragraph (e)(1)(i) of this section are provided pursuant to 
paragraph (e)(1)(iii) of this section.
    (F) Delayed settlement date on a construction loan. In transactions 
involving new construction, where the creditor reasonably expects that 
settlement will occur more than 60 days after the disclosures required 
under paragraph (e)(1)(i) of this section are provided pursuant to 
paragraph (e)(1)(iii) of this section, the creditor may provide revised 
disclosures to the consumer if the original disclosures required under 
paragraph (e)(1)(i) of this section state clearly and conspicuously that 
at any time prior to 60 days before consummation, the creditor may issue 
revised disclosures. If no such statement is provided, the creditor may 
not issue revised disclosures, except as otherwise provided in paragraph 
(f) of this section.
    (4) Provision and receipt of revised disclosures--(i) General rule. 
Subject to the requirements of paragraph (e)(4)(ii) of this section, if 
a creditor uses a revised

[[Page 64]]

estimate pursuant to paragraph (e)(3)(iv) of this section for the 
purpose of determining good faith under paragraphs (e)(3)(i) and (ii) of 
this section, the creditor shall provide a revised version of the 
disclosures required under paragraph (e)(1)(i) of this section 
reflecting the revised estimate within three business days of receiving 
information sufficient to establish that one of the reasons for revision 
provided under paragraphs (e)(3)(iv)(A) through (C), (E) and (F) of this 
section applies.
    (ii) Relationship to disclosures required under Sec. 
1026.19(f)(1)(i). The creditor shall not provide a revised version of 
the disclosures required under paragraph (e)(1)(i) of this section on or 
after the date on which the creditor provides the disclosures required 
under paragraph (f)(1)(i) of this section. The consumer must receive a 
revised version of the disclosures required under paragraph (e)(1)(i) of 
this section not later than four business days prior to consummation. If 
the revised version of the disclosures required under paragraph 
(e)(1)(i) of this section is not provided to the consumer in person, the 
consumer is considered to have received such version three business days 
after the creditor delivers or places such version in the mail.
    (f) Mortgage loans secured by real property--final disclosures--(1) 
Provision of disclosures--(i) Scope. In a closed-end consumer credit 
transaction secured by real property, other than a reverse mortgage 
subject to Sec. 1026.33, the creditor shall provide the consumer with 
the disclosures in Sec. 1026.38 reflecting the actual terms of the 
transaction.
    (ii) Timing--(A) In general. Except as provided in paragraphs 
(f)(1)(ii)(B), (f)(2)(i), (f)(2)(iii), (f)(2)(iv), and (f)(2)(v) of this 
section, the creditor shall ensure that the consumer receives the 
disclosures required under paragraph (f)(1)(i) of this section no later 
than three business days before consummation.
    (B) Timeshares. For transactions secured by a consumer's interest in 
a timeshare plan described in 11 U.S.C. 101(53D), the creditor shall 
ensure that the consumer receives the disclosures required under 
paragraph (f)(1)(i) of this section no later than consummation.
    (iii) Receipt of disclosures. If any disclosures required under 
paragraph (f)(1)(i) of this section are not provided to the consumer in 
person, the consumer is considered to have received the disclosures 
three business days after they are delivered or placed in the mail.
    (iv) Consumer's waiver of waiting period before consummation. If the 
consumer determines that the extension of credit is needed to meet a 
bona fide personal financial emergency, the consumer may modify or waive 
the three-business-day waiting period under paragraph (f)(1)(ii)(A) or 
(f)(2)(ii) of this section, after receiving the disclosures required 
under paragraph (f)(1)(i) of this section. To modify or waive the 
waiting period, the consumer shall give the creditor a dated written 
statement that describes the emergency, specifically modifies or waives 
the waiting period, and bears the signature of all consumers who are 
primarily liable on the legal obligation. Printed forms for this purpose 
are prohibited.
    (v) Settlement agent. A settlement agent may provide a consumer with 
the disclosures required under paragraph (f)(1)(i) of this section, 
provided the settlement agent complies with all relevant requirements of 
this paragraph (f). The creditor shall ensure that such disclosures are 
provided in accordance with all requirements of this paragraph (f). 
Disclosures provided by a settlement agent in accordance with the 
requirements of this paragraph (f) satisfy the creditor's obligation 
under this paragraph (f).
    (2) Subsequent changes--(i) Changes before consummation not 
requiring a new waiting period. Except as provided in paragraph 
(f)(2)(ii), if the disclosures provided under paragraph (f)(1)(i) of 
this section become inaccurate before consummation, the creditor shall 
provide corrected disclosures reflecting any changed terms to the 
consumer so that the consumer receives the corrected disclosures at or 
before consummation. Notwithstanding the requirement to provide 
corrected disclosures at or before consummation, the creditor shall 
permit the consumer to inspect the disclosures provided under this 
paragraph, completed to set forth those items that are known to the

[[Page 65]]

creditor at the time of inspection, during the business day immediately 
preceding consummation, but the creditor may omit from inspection items 
related only to the seller's transaction.
    (ii) Changes before consummation requiring a new waiting period. If 
one of the following disclosures provided under paragraph (f)(1)(i) of 
this section becomes inaccurate in the following manner before 
consummation, the creditor shall ensure that the consumer receives 
corrected disclosures containing all changed terms in accordance with 
the requirements of paragraph (f)(1)(ii)(A) of this section:
    (A) The annual percentage rate disclosed under Sec. 1026.38(o)(4) 
becomes inaccurate, as defined in Sec. 1026.22.
    (B) The loan product is changed, causing the information disclosed 
under Sec. 1026.38(a)(5)(iii) to become inaccurate.
    (C) A prepayment penalty is added, causing the statement regarding a 
prepayment penalty required under Sec. 1026.38(b) to become inaccurate.
    (iii) Changes due to events occurring after consummation. If during 
the 30-day period following consummation, an event in connection with 
the settlement of the transaction occurs that causes the disclosures 
required under paragraph (f)(1)(i) of this section to become inaccurate, 
and such inaccuracy results in a change to an amount actually paid by 
the consumer from that amount disclosed under paragraph (f)(1)(i) of 
this section, the creditor shall deliver or place in the mail corrected 
disclosures not later than 30 days after receiving information 
sufficient to establish that such event has occurred.
    (iv) Changes due to clerical errors. A creditor does not violate 
paragraph (f)(1)(i) of this section if the disclosures provided under 
paragraph (f)(1)(i) contain non-numeric clerical errors, provided the 
creditor delivers or places in the mail corrected disclosures no later 
than 60 days after consummation.
    (v) Refunds related to the good faith analysis. If amounts paid by 
the consumer exceed the amounts specified under paragraph (e)(3)(i) or 
(ii) of this section, the creditor complies with paragraph (e)(1)(i) of 
this section if the creditor refunds the excess to the consumer no later 
than 60 days after consummation, and the creditor complies with 
paragraph (f)(1)(i) of this section if the creditor delivers or places 
in the mail corrected disclosures that reflect such refund no later than 
60 days after consummation.
    (3) Charges disclosed--(i) Actual charge. The amount imposed upon 
the consumer for any settlement service shall not exceed the amount 
actually received by the settlement service provider for that service, 
except as otherwise provided in paragraph (f)(3)(ii) of this section.
    (ii) Average charge. A creditor or settlement service provider may 
charge a consumer or seller the average charge for a settlement service 
if the following conditions are satisfied:
    (A) The average charge is no more than the average amount paid for 
that service by or on behalf of all consumers and sellers for a class of 
transactions;
    (B) The creditor or settlement service provider defines the class of 
transactions based on an appropriate period of time, geographic area, 
and type of loan;
    (C) The creditor or settlement service provider uses the same 
average charge for every transaction within the defined class; and
    (D) The creditor or settlement service provider does not use an 
average charge:
    (1) For any type of insurance;
    (2) For any charge based on the loan amount or property value; or
    (3) If doing so is otherwise prohibited by law.
    (4) Transactions involving a seller--(i) Provision to seller. In a 
closed-end consumer credit transaction secured by real property that 
involves a seller, other than a reverse mortgage subject to Sec. 
1026.33, the settlement agent shall provide the seller with the 
disclosures in Sec. 1026.38 that relate to the seller's transaction 
reflecting the actual terms of the seller's transaction.
    (ii) Timing. The settlement agent shall provide the disclosures 
required under paragraph (f)(4)(i) of this section no later than the day 
of consummation. If during the 30-day period following consummation, an 
event in connection with the settlement of the

[[Page 66]]

transaction occurs that causes disclosures required under paragraph 
(f)(4)(i) of this section to become inaccurate, and such inaccuracy 
results in a change to the amount actually paid by the seller from that 
amount disclosed under paragraph (f)(4)(i) of this section, the 
settlement agent shall deliver or place in the mail corrected 
disclosures not later than 30 days after receiving information 
sufficient to establish that such event has occurred.
    (iii) Charges disclosed. The amount imposed on the seller for any 
settlement service shall not exceed the amount actually received by the 
service provider for that service, except as otherwise provided in 
paragraph (f)(3)(ii) of this section.
    (iv) Creditor's copy. When the consumer's and seller's disclosures 
under this paragraph (f) are provided on separate documents, as 
permitted under Sec. 1026.38(t)(5), the settlement agent shall provide 
to the creditor (if the creditor is not the settlement agent) a copy of 
the disclosures provided to the seller under paragraph (f)(4)(i) of this 
section.
    (5) No fee. No fee may be imposed on any person, as a part of 
settlement costs or otherwise, by a creditor or by a servicer (as that 
term is defined under 12 U.S.C. 2605(i)(2)) for the preparation or 
delivery of the disclosures required under paragraph (f)(1)(i) of this 
section.
    (g) Special information booklet at time of application--(1) Creditor 
to provide special information booklet. Except as provided in paragraphs 
(g)(1)(ii) and (iii) of this section, the creditor shall provide a copy 
of the special information booklet (required pursuant to section 5 of 
the Real Estate Settlement Procedures Act (12 U.S.C. 2604) to help 
consumers applying for federally related mortgage loans understand the 
nature and cost of real estate settlement services) to a consumer who 
applies for a consumer credit transaction secured by real property.
    (i) The creditor shall deliver or place in the mail the special 
information booklet not later than three business days after the 
consumer's application is received. However, if the creditor denies the 
consumer's application before the end of the three-business-day period, 
the creditor need not provide the booklet. If a consumer uses a mortgage 
broker, the mortgage broker shall provide the special information 
booklet and the creditor need not do so.
    (ii) In the case of a home equity line of credit subject to Sec. 
1026.40, a creditor or mortgage broker that provides the consumer with a 
copy of the brochure entitled ``When Your Home is On the Line: What You 
Should Know About Home Equity Lines of Credit,'' or any successor 
brochure issued by the Bureau, is deemed to be in compliance with this 
section.
    (iii) The creditor or mortgage broker need not provide the booklet 
to the consumer for a consumer credit transaction secured by real 
property, the purpose of which is not the purchase of a one-to-four 
family residential property, including, but not limited to, the 
following:
    (A) Refinancing transactions;
    (B) Closed-end loans secured by a subordinate lien; and
    (C) Reverse mortgages.
    (2) Permissible changes. Creditors may not make changes to, 
deletions from, or additions to the special information booklet other 
than the changes specified in paragraphs (g)(2)(i) through (iv) of this 
section.
    (i) In the ``Complaints'' section of the booklet, ``the Bureau of 
Consumer Financial Protection'' may be substituted for ``HUD's Office of 
RESPA'' and ``the RESPA office.''
    (ii) In the ``Avoiding Foreclosure'' section of the booklet, it is 
permissible to inform homeowners that they may find information on and 
assistance in avoiding foreclosures at http://www.consumerfinance.gov. 
The reference to the HUD Web site, http://www.hud.gov/foreclosure/, in 
the ``Avoiding Foreclosure'' section of the booklet shall not be 
deleted.
    (iii) In the ``No Discrimination'' section of the appendix to the 
booklet, ``the Bureau of Consumer Financial Protection'' may be 
substituted for the reference to the ``Board of Governors of the Federal 
Reserve System.'' In the Contact Information section of the appendix to 
the booklet, the following contact information for the Bureau may be 
added: ``Bureau of Consumer Financial Protection, 1700 G Street

[[Page 67]]

NW., Washington, DC 20552; www.consumerfinance.gov/learnmore.'' The 
contact information for HUD's Office of RESPA and Interstate Land Sales 
may be removed from the ``Contact Information'' section of the appendix 
to the booklet.
    (iv) The cover of the booklet may be in any form and may contain any 
drawings, pictures or artwork, provided that the title appearing on the 
cover shall not be changed. Names, addresses, and telephone numbers of 
the creditor or others and similar information may appear on the cover, 
but no discussion of the matters covered in the booklet shall appear on 
the cover. References to HUD on the cover of the booklet may be changed 
to references to the Bureau.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80108, Dec. 31, 2013; 
80 FR 8776, Feb. 19, 2015]



Sec. 1026.20  Disclosure requirements regarding post-consummation
events.

    (a) Refinancings. A refinancing occurs when an existing obligation 
that was subject to this subpart is satisfied and replaced by a new 
obligation undertaken by the same consumer. A refinancing is a new 
transaction requiring new disclosures to the consumer. The new finance 
charge shall include any unearned portion of the old finance charge that 
is not credited to the existing obligation. The following shall not be 
treated as a refinancing:
    (1) A renewal of a single payment obligation with no change in the 
original terms.
    (2) A reduction in the annual percentage rate with a corresponding 
change in the payment schedule.
    (3) An agreement involving a court proceeding.
    (4) A change in the payment schedule or a change in collateral 
requirements as a result of the consumer's default or delinquency, 
unless the rate is increased, or the new amount financed exceeds the 
unpaid balance plus earned finance charge and premiums for continuation 
of insurance of the types described in Sec. 1026.4(d).
    (5) The renewal of optional insurance purchased by the consumer and 
added to an existing transaction, if disclosures relating to the initial 
purchase were provided as required by this subpart.
    (b) Assumptions. An assumption occurs when a creditor expressly 
agrees in writing with a subsequent consumer to accept that consumer as 
a primary obligor on an existing residential mortgage transaction. 
Before the assumption occurs, the creditor shall make new disclosures to 
the subsequent consumer, based on the remaining obligation. If the 
finance charge originally imposed on the existing obligation was an add-
on or discount finance charge, the creditor need only disclose:
    (1) The unpaid balance of the obligation assumed.
    (2) The total charges imposed by the creditor in connection with the 
assumption.
    (3) The information required to be disclosed under Sec. 1026.18(k), 
(l), (m), and (n).
    (4) The annual percentage rate originally imposed on the obligation.
    (5) The payment schedule under Sec. 1026.18(g) and the total of 
payments under Sec. 1026.18(h) based on the remaining obligation.
    (c) Rate adjustments with a corresponding change in payment. The 
creditor, assignee, or servicer of an adjustable-rate mortgage shall 
provide consumers with disclosures, as described in this paragraph (c), 
in connection with the adjustment of interest rates pursuant to the loan 
contract that results in a corresponding adjustment to the payment. To 
the extent that other provisions of this subpart C govern the 
disclosures required by this paragraph (c), those provisions apply to 
assignees and servicers as well as to creditors. The disclosures 
required by this paragraph (c) also shall be provided for an interest 
rate adjustment resulting from the conversion of an adjustable-rate 
mortgage to a fixed-rate transaction, if that interest rate adjustment 
results in a corresponding payment change.
    (1) Coverage--(i) In general. For purposes of this paragraph (c), an 
adjustable-rate mortgage or ``ARM'' is a closed-end consumer credit 
transaction secured by the consumer's principal dwelling in which the 
annual percentage rate may increase after consummation.

[[Page 68]]

    (ii) Exemptions. The requirements of this paragraph (c) do not apply 
to:
    (A) ARMs with terms of one year or less;
    (B) The first interest rate adjustment to an ARM if the first 
payment at the adjusted level is due within 210 days after consummation 
and the new interest rate disclosed at consummation pursuant to Sec. 
1026.20(d) was not an estimate; or
    (C) The creditor, assignee or servicer of an adjustable-rate 
mortgage when the servicer on the loan is subject to the Fair Debt 
Collections Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) with regard 
to the loan and the consumer has sent a notification pursuant to FDCPA 
section 805(c) (15 U.S.C. 1692c(c)).
    (2) Timing and content. Except as otherwise provided in paragraph 
(c)(2) of this section, the disclosures required by this paragraph (c) 
shall be provided to consumers at least 60, but no more than 120, days 
before the first payment at the adjusted level is due. The disclosures 
shall be provided to consumers at least 25, but no more than 120, days 
before the first payment at the adjusted level is due for ARMs with 
uniformly scheduled interest rate adjustments occurring every 60 days or 
more frequently and for ARMs originated prior to January 10, 2015 in 
which the loan contract requires the adjusted interest rate and payment 
to be calculated based on the index figure available as of a date that 
is less than 45 days prior to the adjustment date. The disclosures shall 
be provided to consumers as soon as practicable, but not less than 25 
days before the first payment at the adjusted level is due, for the 
first adjustment to an ARM if it occurs within 60 days of consummation 
and the new interest rate disclosed at consummation pursuant to Sec. 
1026.20(d) was an estimate. The disclosures required by this paragraph 
(c) shall include:
    (i) A statement providing:
    (A) An explanation that under the terms of the consumer's 
adjustable-rate mortgage, the specific time period in which the current 
interest rate has been in effect is ending and the interest rate and 
mortgage payment will change;
    (B) The effective date of the interest rate adjustment and when 
additional future interest rate adjustments are scheduled to occur; and
    (C) Any other changes to loan terms, features, or options taking 
effect on the same date as the interest rate adjustment, such as the 
expiration of interest-only or payment-option features.
    (ii) A table containing the following information:
    (A) The current and new interest rates;
    (B) The current and new payments and the date the first new payment 
is due; and
    (C) For interest-only or negatively-amortizing payments, the amount 
of the current and new payment allocated to principal, interest, and 
taxes and insurance in escrow, as applicable. The current payment 
allocation disclosed shall be the payment allocation for the last 
payment prior to the date of the disclosure. The new payment allocation 
disclosed shall be the expected payment allocation for the first payment 
for which the new interest rate will apply.
    (iii) An explanation of how the interest rate is determined, 
including:
    (A) The specific index or formula used in making interest rate 
adjustments and a source of information about the index or formula; and
    (B) The type and amount of any adjustment to the index, including 
any margin and an explanation that the margin is the addition of a 
certain number of percentage points to the index, and any application of 
previously foregone interest rate increases from past interest rate 
adjustments.
    (iv) Any limits on the interest rate or payment increases at each 
interest rate adjustment and over the life of the loan, as applicable, 
including the extent to which such limits result in the creditor, 
assignee, or servicer foregoing any increase in the interest rate and 
the earliest date that such foregone interest rate increases may apply 
to future interest rate adjustments, subject to those limits.
    (v) An explanation of how the new payment is determined, including:
    (A) The index or formula used;
    (B) Any adjustment to the index or formula, such as the addition of 
a margin or the application of any previously

[[Page 69]]

foregone interest rate increases from past interest rate adjustments;
    (C) The loan balance expected on the date of the interest rate 
adjustment; and
    (D) The length of the remaining loan term expected on the date of 
the interest rate adjustment and any change in the term of the loan 
caused by the adjustment.
    (vi) If applicable, a statement that the new payment will not be 
allocated to pay loan principal and will not reduce the loan balance. If 
the new payment will result in negative amortization, a statement that 
the new payment will not be allocated to pay loan principal and will pay 
only part of the loan interest, thereby adding to the balance of the 
loan. If the new payment will result in negative amortization as a 
result of the interest rate adjustment, the statement shall set forth 
the payment required to amortize fully the remaining balance at the new 
interest rate over the remainder of the loan term.
    (vii) The circumstances under which any prepayment penalty, as 
defined in Sec. 1026.32(b)(6)(i), may be imposed, such as when paying 
the loan in full or selling or refinancing the principal dwelling; the 
time period during which such a penalty may be imposed; and a statement 
that the consumer may contact the servicer for additional information, 
including the maximum amount of the penalty.
    (3) Format. (i) The disclosures required by this paragraph (c) shall 
be provided in the form of a table and in the same order as, and with 
headings and format substantially similar to, forms H-4(D)(1) and (2) in 
appendix H to this part; and
    (ii) The disclosures required by paragraph (c)(2)(ii) of this 
section shall be in the form of a table located within the table 
described in paragraph (c)(3)(i) of this section. These disclosures 
shall appear in the same order as, and with headings and format 
substantially similar to, the table inside the larger table in forms H-
4(D)(1) and (2) in appendix H to this part.
    (d) Initial rate adjustment. The creditor, assignee, or servicer of 
an adjustable-rate mortgage shall provide consumers with disclosures, as 
described in this paragraph (d), in connection with the initial interest 
rate adjustment pursuant to the loan contract. To the extent that other 
provisions of this subpart C govern the disclosures required by this 
paragraph (d), those provisions apply to assignees and servicers as well 
as to creditors. The disclosures required by this paragraph (d) shall be 
provided as a separate document from other documents provided by the 
creditor, assignee, or servicer. The disclosures shall be provided to 
consumers at least 210, but no more than 240, days before the first 
payment at the adjusted level is due. If the first payment at the 
adjusted level is due within the first 210 days after consummation, the 
disclosures shall be provided at consummation.
    (1) Coverage--(i) In general. For purposes of this paragraph (d), an 
adjustable-rate mortgage or ``ARM'' is a closed-end consumer credit 
transaction secured by the consumer's principal dwelling in which the 
annual percentage rate may increase after consummation.
    (ii) Exemptions. The requirements of this paragraph (d) do not apply 
to ARMs with terms of one year or less.
    (2) Content. If the new interest rate (or the new payment calculated 
from the new interest rate) is not known as of the date of the 
disclosure, an estimate shall be disclosed and labeled as such. This 
estimate shall be based on the calculation of the index reported in the 
source of information described in paragraph (d)(2)(iv)(A) of this 
section within fifteen business days prior to the date of the 
disclosure. The disclosures required by this paragraph (d) shall 
include:
    (i) The date of the disclosure.
    (ii) A statement providing:
    (A) An explanation that under the terms of the consumer's 
adjustable-rate mortgage, the specific time period in which the current 
interest rate has been in effect is ending and that any change in the 
interest rate may result in a change in the mortgage payment;
    (B) The effective date of the interest rate adjustment and when 
additional future interest rate adjustments are scheduled to occur; and
    (C) Any other changes to loan terms, features, or options taking 
effect on

[[Page 70]]

the same date as the interest rate adjustment, such as the expiration of 
interest-only or payment-option features.
    (iii) A table containing the following information:
    (A) The current and new interest rates;
    (B) The current and new payments and the date the first new payment 
is due; and
    (C) For interest-only or negatively-amortizing payments, the amount 
of the current and new payment allocated to principal, interest, and 
taxes and insurance in escrow, as applicable. The current payment 
allocation disclosed shall be the payment allocation for the last 
payment prior to the date of the disclosure. The new payment allocation 
disclosed shall be the expected payment allocation for the first payment 
for which the new interest rate will apply.
    (iv) An explanation of how the interest rate is determined, 
including:
    (A) The specific index or formula used in making interest rate 
adjustments and a source of information about the index or formula; and
    (B) The type and amount of any adjustment to the index, including 
any margin and an explanation that the margin is the addition of a 
certain number of percentage points to the index.
    (v) Any limits on the interest rate or payment increases at each 
interest rate adjustment and over the life of the loan, as applicable, 
including the extent to which such limits result in the creditor, 
assignee, or servicer foregoing any increase in the interest rate and 
the earliest date that such foregone interest rate increases may apply 
to future interest rate adjustments, subject to those limits.
    (vi) An explanation of how the new payment is determined, including:
    (A) The index or formula used;
    (B) Any adjustment to the index or formula, such as the addition of 
a margin;
    (C) The loan balance expected on the date of the interest rate 
adjustment;
    (D) The length of the remaining loan term expected on the date of 
the interest rate adjustment and any change in the term of the loan 
caused by the adjustment; and
    (E) If the new interest rate or new payment provided is an estimate, 
a statement that another disclosure containing the actual new interest 
rate and new payment will be provided to the consumer between two and 
four months before the first payment at the adjusted level is due for 
interest rate adjustments that result in a corresponding payment change.
    (vii) If applicable, a statement that the new payment will not be 
allocated to pay loan principal and will not reduce the loan balance. If 
the new payment will result in negative amortization, a statement that 
the new payment will not be allocated to pay loan principal and will pay 
only part of the loan interest, thereby adding to the balance of the 
loan. If the new payment will result in negative amortization as a 
result of the interest rate adjustment, the statement shall set forth 
the payment required to amortize fully the remaining balance at the new 
interest rate over the remainder of the loan term.
    (viii) The circumstances under which any prepayment penalty, as 
defined in Sec. 1026.32(b)(6)(i), may be imposed, such as when paying 
the loan in full or selling or refinancing the principal dwelling; the 
time period during which such a penalty may be imposed; and a statement 
that the consumer may contact the servicer for additional information, 
including the maximum amount of the penalty.
    (ix) The telephone number of the creditor, assignee, or servicer for 
consumers to call if they anticipate not being able to make their new 
payments.
    (x) The following alternatives to paying at the new rate that 
consumers may be able to pursue and a brief explanation of each 
alternative, expressed in simple and clear terms:
    (A) Refinancing the loan with the current or another creditor or 
assignee;
    (B) Selling the property and using the proceeds to pay the loan in 
full;
    (C) Modifying the terms of the loan with the creditor, assignee, or 
servicer; and
    (D) Arranging payment forbearance with the creditor, assignee, or 
servicer.

[[Page 71]]

    (xi) The Web site to access either the Bureau list or the HUD list 
of homeownership counselors and counseling organizations, the HUD toll-
free telephone number to access the HUD list of homeownership counselors 
and counseling organizations, and the Bureau Web site to access contact 
information for State housing finance authorities (as defined in Sec. 
1301 of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989).
    (3) Format. (i) Except for the disclosures required by paragraph 
(d)(2)(i) of this section, the disclosures required by this paragraph 
(d) shall be provided in the form of a table and in the same order as, 
and with headings and format substantially similar to, forms H-4(D)(3) 
and (4) in appendix H to this part;
    (ii) The disclosures required by paragraph (d)(2)(i) of this section 
shall appear outside of and above the table required in paragraph 
(d)(3)(i) of this section; and
    (iii) The disclosures required by paragraph (d)(2)(iii) of this 
section shall be in the form of a table located within the table 
described in paragraph (d)(3)(i) of this section. These disclosures 
shall appear in the same order as, and with headings and format 
substantially similar to, the table inside the larger table in forms H-
4(D)(3) and (4) in appendix H to this part.
    (e) Escrow account cancellation notice for certain mortgage 
transactions--(1) Scope. In a closed-end consumer credit transaction 
secured by a first lien on real property or a dwelling, other than a 
reverse mortgage subject to Sec. 1026.33, for which an escrow account 
was established in connection with the transaction and will be 
cancelled, the creditor or servicer shall disclose the information 
specified in paragraph (e)(2) of this section in accordance with the 
form requirements in paragraph (e)(4) of this section, and the timing 
requirements in paragraph (e)(5) of this section. For purposes of this 
paragraph (e), the term ``escrow account'' has the same meaning as under 
12 CFR 1024.17(b), and the term ``servicer'' has the same meaning as 
under 12 CFR 1024.2(b).
    (2) Content requirements. If an escrow account was established in 
connection with a transaction subject to this paragraph (e) and the 
escrow account will be cancelled, the creditor or servicer shall clearly 
and conspicuously disclose, under the heading ``Escrow Closing Notice,'' 
the following information:
    (i) A statement informing the consumer of the date on which the 
consumer will no longer have an escrow account; a statement that an 
escrow account may also be called an impound or trust account; a 
statement of the reason why the escrow account will be closed; a 
statement that without an escrow account, the consumer must pay all 
property costs, such as taxes and homeowner's insurance, directly, 
possibly in one or two large payments a year; and a table, titled ``Cost 
to you,'' that contains an itemization of the amount of any fee the 
creditor or servicer imposes on the consumer in connection with the 
closure of the consumer's escrow account, labeled ``Escrow Closing 
Fee,'' and a statement that the fee is for closing the escrow account.
    (ii) Under the reference ``In the future'':
    (A) A statement of the consequences if the consumer fails to pay 
property costs, including the actions that a State or local government 
may take if property taxes are not paid and the actions the creditor or 
servicer may take if the consumer does not pay some or all property 
costs, such as adding amounts to the loan balance, adding an escrow 
account to the loan, or purchasing a property insurance policy on the 
consumer's behalf that may be more expensive and provide fewer benefits 
than a policy that the consumer could obtain directly;
    (B) A statement with a telephone number that the consumer can use to 
request additional information about the cancellation of the escrow 
account;
    (C) A statement of whether the creditor or servicer offers the 
option of keeping the escrow account open and, as applicable, a 
telephone number the consumer can use to request that the account be 
kept open; and
    (D) A statement of whether there is a cut-off date by which the 
consumer can request that the account be kept open.
    (3) Optional information. The creditor or servicer may, at its 
option, include

[[Page 72]]

its name or logo, the consumer's name, phone number, mailing address and 
property address, the issue date of the notice, the loan number, or the 
consumer's account number on the notice required by this paragraph (e). 
Except for the name and logo of the creditor or servicer, the 
information described in this paragraph may be placed between the 
heading required by paragraph (e)(2) of this section and the disclosures 
required by paragraphs (e)(2)(i) and (ii) of this section. The name and 
logo may be placed above the heading required by paragraph (e)(2) of 
this section.
    (4) Form of disclosures. The disclosures required by paragraph 
(e)(2) of this section shall be provided in a minimum 10-point font, 
grouped together on the front side of a one-page document, separate from 
all other materials, with the headings, content, order, and format 
substantially similar to model form H-29 in appendix H to this part. The 
disclosure of the heading required by paragraph (e)(2) of this section 
shall be more conspicuous than, and shall precede, the other disclosures 
required by paragraph (e)(2) of this section.
    (5) Timing--(i) Cancellation upon consumer's request. If the 
creditor or servicer cancels the escrow account at the consumer's 
request, the creditor or servicer shall ensure that the consumer 
receives the disclosures required by paragraph (e)(2) of this section no 
later than three business days before the closure of the consumer's 
escrow account.
    (ii) Cancellations other than upon the consumer's request. If the 
creditor or servicer cancels the escrow account and the cancellation is 
not at the consumer's request, the creditor or servicer shall ensure 
that the consumer receives the disclosures required by paragraph (e)(2) 
of this section no later than 30 business days before the closure of the 
consumer's escrow account.
    (iii) Receipt of disclosure. If the disclosures required by 
paragraph (e)(2) of this section are not provided to the consumer in 
person, the consumer is considered to have received the disclosures 
three business days after they are delivered or placed in the mail.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 11004, Feb. 14, 2013; 
78 FR 63005, Oct. 23, 2013; 78 FR 80111, Dec. 31, 2013]

    Effective Date Note: At 81 FR 72388, Oct. 19, 2016, Sec. 1026.20 
was amended by adding paragraph (f), effective Apr. 19, 2018. For the 
convenience of the user, the added text is set forth as follows:



Sec. 1026.20  Disclosure requirements regarding post-consummation 
          events.

                                * * * * *

    (f) Successor in interest. If, upon confirmation, a servicer 
provides a confirmed successor in interest who is not liable on the 
mortgage loan obligation with a written notice and acknowledgment form 
in accordance with Regulation X, Sec. 1024.32(c)(1) of this chapter, 
the servicer is not required to provide to the confirmed successor in 
interest any written disclosure required by paragraphs (c), (d), and (e) 
of this section unless and until the confirmed successor in interest 
either assumes the mortgage loan obligation under State law or has 
provided the servicer an executed acknowledgment in accordance with 
Regulation X, Sec. 1024.32(c)(1)(iv) of this chapter, that the 
confirmed successor in interest has not revoked.



Sec. 1026.21  Treatment of credit balances.

    When a credit balance in excess of $1 is created in connection with 
a transaction (through transmittal of funds to a creditor in excess of 
the total balance due on an account, through rebates of unearned finance 
charges or insurance premiums, or through amounts otherwise owed to or 
held for the benefit of a consumer), the creditor shall:
    (a) Credit the amount of the credit balance to the consumer's 
account;
    (b) Refund any part of the remaining credit balance, upon the 
written request of the consumer; and
    (c) Make a good faith effort to refund to the consumer by cash, 
check, or money order, or credit to a deposit account of the consumer, 
any part of the credit balance remaining in the account for more than 6 
months, except that no further action is required if the consumer's 
current location is not known to the creditor and cannot be traced 
through the consumer's last known address or telephone number.



Sec. 1026.22  Determination of annual percentage rate.

    (a) Accuracy of annual percentage rate. (1) The annual percentage 
rate is a measure of the cost of credit, expressed as a yearly rate, 
that relates the amount and timing of value received

[[Page 73]]

by the consumer to the amount and timing of payments made. The annual 
percentage rate shall be determined in accordance with either the 
actuarial method or the United States Rule method. Explanations, 
equations and instructions for determining the annual percentage rate in 
accordance with the actuarial method are set forth in appendix J to this 
part. An error in disclosure of the annual percentage rate or finance 
charge shall not, in itself, be considered a violation of this part if:
    (i) The error resulted from a corresponding error in a calculation 
tool used in good faith by the creditor; and
    (ii) Upon discovery of the error, the creditor promptly discontinues 
use of that calculation tool for disclosure purposes and notifies the 
Bureau in writing of the error in the calculation tool.
    (2) As a general rule, the annual percentage rate shall be 
considered accurate if it is not more than \1/8\ of 1 percentage point 
above or below the annual percentage rate determined in accordance with 
paragraph (a)(1) of this section.
    (3) In an irregular transaction, the annual percentage rate shall be 
considered accurate if it is not more than \1/4\ of 1 percentage point 
above or below the annual percentage rate determined in accordance with 
paragraph (a)(1) of this section. For purposes of this paragraph (a)(3), 
an irregular transaction is one that includes one or more of the 
following features: multiple advances, irregular payment periods, or 
irregular payment amounts (other than an irregular first period or an 
irregular first or final payment).
    (4) Mortgage loans. If the annual percentage rate disclosed in a 
transaction secured by real property or a dwelling varies from the 
actual rate determined in accordance with paragraph (a)(1) of this 
section, in addition to the tolerances applicable under paragraphs 
(a)(2) and (3) of this section, the disclosed annual percentage rate 
shall also be considered accurate if:
    (i) The rate results from the disclosed finance charge; and
    (ii)(A) The disclosed finance charge would be considered accurate 
under Sec. 1026.18(d)(1) or Sec. 1026.38(o)(2), as applicable; or
    (B) For purposes of rescission, if the disclosed finance charge 
would be considered accurate under Sec. 1026.23(g) or (h), whichever 
applies.
    (5) Additional tolerance for mortgage loans. In a transaction 
secured by real property or a dwelling, in addition to the tolerances 
applicable under paragraphs (a)(2) and (3) of this section, if the 
disclosed finance charge is calculated incorrectly but is considered 
accurate under Sec. 1026.18(d)(1) or Sec. 1026.38(o)(2), as 
applicable, or Sec. 1026.23(g) or (h), the disclosed annual percentage 
rate shall be considered accurate:
    (i) If the disclosed finance charge is understated, and the 
disclosed annual percentage rate is also understated but it is closer to 
the actual annual percentage rate than the rate that would be considered 
accurate under paragraph (a)(4) of this section;
    (ii) If the disclosed finance charge is overstated, and the 
disclosed annual percentage rate is also overstated but it is closer to 
the actual annual percentage rate than the rate that would be considered 
accurate under paragraph (a)(4) of this section.
    (b) Computation tools. (1) The Regulation Z Annual Percentage Rate 
Tables produced by the Bureau may be used to determine the annual 
percentage rate, and any rate determined from those tables in accordance 
with the accompanying instructions complies with the requirements of 
this section. Volume I of the tables applies to single advance 
transactions involving up to 480 monthly payments or 104 weekly 
payments. It may be used for regular transactions and for transactions 
with any of the following irregularities: an irregular first period, an 
irregular first payment, and an irregular final payment. Volume II of 
the tables applies to transactions involving multiple advances and any 
type of payment or period irregularity.
    (2) Creditors may use any other computation tool in determining the 
annual percentage rate if the rate so determined equals the rate 
determined in accordance with appendix J to this part, within the degree 
of accuracy set forth in paragraph (a) of this section.

[[Page 74]]

    (c) Single add-on rate transactions. If a single add-on rate is 
applied to all transactions with maturities up to 60 months and if all 
payments are equal in amount and period, a single annual percentage rate 
may be disclosed for all those transactions, so long as it is the 
highest annual percentage rate for any such transaction.
    (d) Certain transactions involving ranges of balances. For purposes 
of disclosing the annual percentage rate referred to in Sec. 
1026.17(g)(4) (Mail or telephone orders--delay in disclosures) and (h) 
(Series of sales--delay in disclosures), if the same finance charge is 
imposed on all balances within a specified range of balances, the annual 
percentage rate computed for the median balance may be disclosed for all 
the balances. However, if the annual percentage rate computed for the 
median balance understates the annual percentage rate computed for the 
lowest balance by more than 8 percent of the latter rate, the annual 
percentage rate shall be computed on whatever lower balance will produce 
an annual percentage rate that does not result in an understatement of 
more than 8 percent of the rate determined on the lowest balance.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80112, Dec. 31, 2013; 
80 FR 80229, Dec. 24, 2015]



Sec. 1026.23  Right of rescission.

    (a) Consumer's right to rescind. (1) In a credit transaction in 
which a security interest is or will be retained or acquired in a 
consumer's principal dwelling, each consumer whose ownership interest is 
or will be subject to the security interest shall have the right to 
rescind the transaction, except for transactions described in paragraph 
(f) of this section. For purposes of this section, the addition to an 
existing obligation of a security interest in a consumer's principal 
dwelling is a transaction. The right of rescission applies only to the 
addition of the security interest and not the existing obligation. The 
creditor shall deliver the notice required by paragraph (b) of this 
section but need not deliver new material disclosures. Delivery of the 
required notice shall begin the rescission period.
    (2) To exercise the right to rescind, the consumer shall notify the 
creditor of the rescission by mail, telegram or other means of written 
communication. Notice is considered given when mailed, when filed for 
telegraphic transmission or, if sent by other means, when delivered to 
the creditor's designated place of business.
    (3)(i) The consumer may exercise the right to rescind until midnight 
of the third business day following consummation, delivery of the notice 
required by paragraph (b) of this section, or delivery of all material 
disclosures, whichever occurs last. If the required notice or material 
disclosures are not delivered, the right to rescind shall expire 3 years 
after consummation, upon transfer of all of the consumer's interest in 
the property, or upon sale of the property, whichever occurs first. In 
the case of certain administrative proceedings, the rescission period 
shall be extended in accordance with section 125(f) of the Act.
    (ii) For purposes of this paragraph (a)(3), the term ``material 
disclosures'' means the required disclosures of the annual percentage 
rate, the finance charge, the amount financed, the total of payments, 
the payment schedule, and the disclosures and limitations referred to in 
Sec. Sec. 1026.32(c) and (d) and 1026.43(g).
    (4) When more than one consumer in a transaction has the right to 
rescind, the exercise of the right by one consumer shall be effective as 
to all consumers.
    (b)(1) Notice of right to rescind. In a transaction subject to 
rescission, a creditor shall deliver two copies of the notice of the 
right to rescind to each consumer entitled to rescind (one copy to each 
if the notice is delivered in electronic form in accordance with the 
consumer consent and other applicable provisions of the E-Sign Act). The 
notice shall be on a separate document that identifies the transaction 
and shall clearly and conspicuously disclose the following:
    (i) The retention or acquisition of a security interest in the 
consumer's principal dwelling.
    (ii) The consumer's right to rescind the transaction.

[[Page 75]]

    (iii) How to exercise the right to rescind, with a form for that 
purpose, designating the address of the creditor's place of business.
    (iv) The effects of rescission, as described in paragraph (d) of 
this section.
    (v) The date the rescission period expires.
    (2) Proper form of notice. To satisfy the disclosure requirements of 
paragraph (b)(1) of this section, the creditor shall provide the 
appropriate model form in appendix H of this part or a substantially 
similar notice.
    (c) Delay of creditor's performance. Unless a consumer waives the 
right of rescission under paragraph (e) of this section, no money shall 
be disbursed other than in escrow, no services shall be performed and no 
materials delivered until the rescission period has expired and the 
creditor is reasonably satisfied that the consumer has not rescinded.
    (d) Effects of rescission. (1) When a consumer rescinds a 
transaction, the security interest giving rise to the right of 
rescission becomes void and the consumer shall not be liable for any 
amount, including any finance charge.
    (2) Within 20 calendar days after receipt of a notice of rescission, 
the creditor shall return any money or property that has been given to 
anyone in connection with the transaction and shall take any action 
necessary to reflect the termination of the security interest.
    (3) If the creditor has delivered any money or property, the 
consumer may retain possession until the creditor has met its obligation 
under paragraph (d)(2) of this section. When the creditor has complied 
with that paragraph, the consumer shall tender the money or property to 
the creditor or, where the latter would be impracticable or inequitable, 
tender its reasonable value. At the consumer's option, tender of 
property may be made at the location of the property or at the 
consumer's residence. Tender of money must be made at the creditor's 
designated place of business. If the creditor does not take possession 
of the money or property within 20 calendar days after the consumer's 
tender, the consumer may keep it without further obligation.
    (4) The procedures outlined in paragraphs (d)(2) and (3) of this 
section may be modified by court order.
    (e) Consumer's waiver of right to rescind. The consumer may modify 
or waive the right to rescind if the consumer determines that the 
extension of credit is needed to meet a bona fide personal financial 
emergency. To modify or waive the right, the consumer shall give the 
creditor a dated written statement that describes the emergency, 
specifically modifies or waives the right to rescind, and bears the 
signature of all the consumers entitled to rescind. Printed forms for 
this purpose are prohibited.
    (f) Exempt transactions. The right to rescind does not apply to the 
following:
    (1) A residential mortgage transaction.
    (2) A refinancing or consolidation by the same creditor of an 
extension of credit already secured by the consumer's principal 
dwelling. The right of rescission shall apply, however, to the extent 
the new amount financed exceeds the unpaid principal balance, any earned 
unpaid finance charge on the existing debt, and amounts attributed 
solely to the costs of the refinancing or consolidation.
    (3) A transaction in which a state agency is a creditor.
    (4) An advance, other than an initial advance, in a series of 
advances or in a series of single-payment obligations that is treated as 
a single transaction under Sec. 1026.17(c)(6), if the notice required 
by paragraph (b) of this section and all material disclosures have been 
given to the consumer.
    (5) A renewal of optional insurance premiums that is not considered 
a refinancing under Sec. 1026.20(a)(5).
    (g) Tolerances for accuracy--(1) One-half of 1 percent tolerance. 
Except as provided in paragraphs (g)(2) and (h)(2) of this section, the 
finance charge and other disclosures affected by the finance charge 
(such as the amount financed and the annual percentage rate) shall be 
considered accurate for purposes of this section if the disclosed 
finance charge:
    (i) Is understated by no more than \1/2\ of 1 percent of the face 
amount of the note or $100, whichever is greater; or

[[Page 76]]

    (ii) Is greater than the amount required to be disclosed.
    (2) One percent tolerance. In a refinancing of a residential 
mortgage transaction with a new creditor (other than a transaction 
covered by Sec. 1026.32), if there is no new advance and no 
consolidation of existing loans, the finance charge and other 
disclosures affected by the finance charge (such as the amount financed 
and the annual percentage rate) shall be considered accurate for 
purposes of this section if the disclosed finance charge:
    (i) Is understated by no more than 1 percent of the face amount of 
the note or $100, whichever is greater; or
    (ii) Is greater than the amount required to be disclosed.
    (h) Special rules for foreclosures--(1) Right to rescind. After the 
initiation of foreclosure on the consumer's principal dwelling that 
secures the credit obligation, the consumer shall have the right to 
rescind the transaction if:
    (i) A mortgage broker fee that should have been included in the 
finance charge was not included; or
    (ii) The creditor did not provide the properly completed appropriate 
model form in appendix H of this part, or a substantially similar notice 
of rescission.
    (2) Tolerance for disclosures. After the initiation of foreclosure 
on the consumer's principal dwelling that secures the credit obligation, 
the finance charge and other disclosures affected by the finance charge 
(such as the amount financed and the annual percentage rate) shall be 
considered accurate for purposes of this section if the disclosed 
finance charge:
    (i) Is understated by no more than $35; or
    (ii) Is greater than the amount required to be disclosed.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 30745, May 23, 2013; 78 
FR 60440, Oct. 1, 2013]



Sec. 1026.24  Advertising.

    (a) Actually available terms. If an advertisement for credit states 
specific credit terms, it shall state only those terms that actually are 
or will be arranged or offered by the creditor.
    (b) Clear and conspicuous standard. Disclosures required by this 
section shall be made clearly and conspicuously.
    (c) Advertisement of rate of finance charge. If an advertisement 
states a rate of finance charge, it shall state the rate as an ``annual 
percentage rate,'' using that term. If the annual percentage rate may be 
increased after consummation, the advertisement shall state that fact. 
If an advertisement is for credit not secured by a dwelling, the 
advertisement shall not state any other rate, except that a simple 
annual rate or periodic rate that is applied to an unpaid balance may be 
stated in conjunction with, but not more conspicuously than, the annual 
percentage rate. If an advertisement is for credit secured by a 
dwelling, the advertisement shall not state any other rate, except that 
a simple annual rate that is applied to an unpaid balance may be stated 
in conjunction with, but not more conspicuously than, the annual 
percentage rate.
    (d) Advertisement of terms that require additional disclosures--(1) 
Triggering terms. If any of the following terms is set forth in an 
advertisement, the advertisement shall meet the requirements of 
paragraph (d)(2) of this section:
    (i) The amount or percentage of any downpayment.
    (ii) The number of payments or period of repayment.
    (iii) The amount of any payment.
    (iv) The amount of any finance charge.
    (2) Additional terms. An advertisement stating any of the terms in 
paragraph (d)(1) of this section shall state the following terms, as 
applicable (an example of one or more typical extensions of credit with 
a statement of all the terms applicable to each may be used):
    (i) The amount or percentage of the downpayment.
    (ii) The terms of repayment, which reflect the repayment obligations 
over the full term of the loan, including any balloon payment.
    (iii) The ``annual percentage rate,'' using that term, and, if the 
rate may be increased after consummation, that fact.
    (e) Catalogs or other multiple-page advertisements; electronic 
advertisements. (1)

[[Page 77]]

If a catalog or other multiple-page advertisement, or an electronic 
advertisement (such as an advertisement appearing on an Internet Web 
site), gives information in a table or schedule in sufficient detail to 
permit determination of the disclosures required by paragraph (d)(2) of 
this section, it shall be considered a single advertisement if:
    (i) The table or schedule is clearly and conspicuously set forth; 
and
    (ii) Any statement of the credit terms in paragraph (d)(1) of this 
section appearing anywhere else in the catalog or advertisement clearly 
refers to the page or location where the table or schedule begins.
    (2) A catalog or other multiple-page advertisement or an electronic 
advertisement (such as an advertisement appearing on an Internet Web 
site) complies with paragraph (d)(2) of this section if the table or 
schedule of terms includes all appropriate disclosures for a 
representative scale of amounts up to the level of the more commonly 
sold higher-priced property or services offered.
    (f) Disclosure of rates and payments in advertisements for credit 
secured by a dwelling--(1) Scope. The requirements of this paragraph 
apply to any advertisement for credit secured by a dwelling, other than 
television or radio advertisements, including promotional materials 
accompanying applications.
    (2) Disclosure of rates--(i) In general. If an advertisement for 
credit secured by a dwelling states a simple annual rate of interest and 
more than one simple annual rate of interest will apply over the term of 
the advertised loan, the advertisement shall disclose in a clear and 
conspicuous manner:
    (A) Each simple annual rate of interest that will apply. In 
variable-rate transactions, a rate determined by adding an index and 
margin shall be disclosed based on a reasonably current index and 
margin;
    (B) The period of time during which each simple annual rate of 
interest will apply; and
    (C) The annual percentage rate for the loan. If such rate is 
variable, the annual percentage rate shall comply with the accuracy 
standards in Sec. Sec. 1026.17(c) and 1026.22.
    (ii) Clear and conspicuous requirement. For purposes of paragraph 
(f)(2)(i) of this section, clearly and conspicuously disclosed means 
that the required information in paragraphs (f)(2)(i)(A) through (C) 
shall be disclosed with equal prominence and in close proximity to any 
advertised rate that triggered the required disclosures. The required 
information in paragraph (f)(2)(i)(C) may be disclosed with greater 
prominence than the other information.
    (3) Disclosure of payments--(i) In general. In addition to the 
requirements of paragraph (c) of this section, if an advertisement for 
credit secured by a dwelling states the amount of any payment, the 
advertisement shall disclose in a clear and conspicuous manner:
    (A) The amount of each payment that will apply over the term of the 
loan, including any balloon payment. In variable-rate transactions, 
payments that will be determined based on the application of the sum of 
an index and margin shall be disclosed based on a reasonably current 
index and margin;
    (B) The period of time during which each payment will apply; and
    (C) In an advertisement for credit secured by a first lien on a 
dwelling, the fact that the payments do not include amounts for taxes 
and insurance premiums, if applicable, and that the actual payment 
obligation will be greater.
    (ii) Clear and conspicuous requirement. For purposes of paragraph 
(f)(3)(i) of this section, a clear and conspicuous disclosure means that 
the required information in paragraphs (f)(3)(i)(A) and (B) shall be 
disclosed with equal prominence and in close proximity to any advertised 
payment that triggered the required disclosures, and that the required 
information in paragraph (f)(3)(i)(C) shall be disclosed with prominence 
and in close proximity to the advertised payments.
    (4) Envelope excluded. The requirements in paragraphs (f)(2) and 
(f)(3) of this section do not apply to an envelope in which an 
application or solicitation is mailed, or to a banner advertisement or 
pop-up advertisement linked to an application or solicitation provided 
electronically.

[[Page 78]]

    (g) Alternative disclosures--television or radio advertisements. An 
advertisement made through television or radio stating any of the terms 
requiring additional disclosures under paragraph (d)(2) of this section 
may comply with paragraph (d)(2) of this section either by:
    (1) Stating clearly and conspicuously each of the additional 
disclosures required under paragraph (d)(2) of this section; or
    (2) Stating clearly and conspicuously the information required by 
paragraph (d)(2)(iii) of this section and listing a toll-free telephone 
number, or any telephone number that allows a consumer to reverse the 
phone charges when calling for information, along with a reference that 
such number may be used by consumers to obtain additional cost 
information.
    (h) Tax implications. If an advertisement distributed in paper form 
or through the Internet (rather than by radio or television) is for a 
loan secured by the consumer's principal dwelling, and the advertisement 
states that the advertised extension of credit may exceed the fair 
market value of the dwelling, the advertisement shall clearly and 
conspicuously state that:
    (1) The interest on the portion of the credit extension that is 
greater than the fair market value of the dwelling is not tax deductible 
for Federal income tax purposes; and
    (2) The consumer should consult a tax adviser for further 
information regarding the deductibility of interest and charges.
    (i) Prohibited acts or practices in advertisements for credit 
secured by a dwelling. The following acts or practices are prohibited in 
advertisements for credit secured by a dwelling:
    (1) Misleading advertising of ``fixed'' rates and payments. Using 
the word ``fixed'' to refer to rates, payments, or the credit 
transaction in an advertisement for variable-rate transactions or other 
transactions where the payment will increase, unless:
    (i) In the case of an advertisement solely for one or more variable-
rate transactions,
    (A) The phrase ``Adjustable-Rate Mortgage,'' ``Variable-Rate 
Mortgage,'' or ``ARM'' appears in the advertisement before the first use 
of the word ``fixed'' and is at least as conspicuous as any use of the 
word ``fixed'' in the advertisement; and
    (B) Each use of the word ``fixed'' to refer to a rate or payment is 
accompanied by an equally prominent and closely proximate statement of 
the time period for which the rate or payment is fixed, and the fact 
that the rate may vary or the payment may increase after that period;
    (ii) In the case of an advertisement solely for non-variable-rate 
transactions where the payment will increase (e.g., a stepped-rate 
mortgage transaction with an initial lower payment), each use of the 
word ``fixed'' to refer to the payment is accompanied by an equally 
prominent and closely proximate statement of the time period for which 
the payment is fixed, and the fact that the payment will increase after 
that period; or
    (iii) In the case of an advertisement for both variable-rate 
transactions and non-variable-rate transactions,
    (A) The phrase ``Adjustable-Rate Mortgage,'' ``Variable-Rate 
Mortgage,'' or ``ARM'' appears in the advertisement with equal 
prominence as any use of the term ``fixed,'' ``Fixed-Rate Mortgage,'' or 
similar terms; and
    (B) Each use of the word ``fixed'' to refer to a rate, payment, or 
the credit transaction either refers solely to the transactions for 
which rates are fixed and complies with paragraph (i)(1)(ii) of this 
section, if applicable, or, if it refers to the variable-rate 
transactions, is accompanied by an equally prominent and closely 
proximate statement of the time period for which the rate or payment is 
fixed, and the fact that the rate may vary or the payment may increase 
after that period.
    (2) Misleading comparisons in advertisements. Making any comparison 
in an advertisement between actual or hypothetical credit payments or 
rates and any payment or simple annual rate that will be available under 
the advertised product for a period less than the full term of the loan, 
unless:
    (i) In general. The advertisement includes a clear and conspicuous 
comparison to the information required to be disclosed under Sec. 
1026.24(f)(2) and (3); and

[[Page 79]]

    (ii) Application to variable-rate transactions. If the advertisement 
is for a variable-rate transaction, and the advertised payment or simple 
annual rate is based on the index and margin that will be used to make 
subsequent rate or payment adjustments over the term of the loan, the 
advertisement includes an equally prominent statement in close proximity 
to the payment or rate that the payment or rate is subject to adjustment 
and the time period when the first adjustment will occur.
    (3) Misrepresentations about government endorsement. Making any 
statement in an advertisement that the product offered is a ``government 
loan program'', ``government-supported loan'', or is otherwise endorsed 
or sponsored by any Federal, state, or local government entity, unless 
the advertisement is for an FHA loan, VA loan, or similar loan program 
that is, in fact, endorsed or sponsored by a Federal, state, or local 
government entity.
    (4) Misleading use of the current lender's name. Using the name of 
the consumer's current lender in an advertisement that is not sent by or 
on behalf of the consumer's current lender, unless the advertisement:
    (i) Discloses with equal prominence the name of the person or 
creditor making the advertisement; and
    (ii) Includes a clear and conspicuous statement that the person 
making the advertisement is not associated with, or acting on behalf of, 
the consumer's current lender.
    (5) Misleading claims of debt elimination. Making any misleading 
claim in an advertisement that the mortgage product offered will 
eliminate debt or result in a waiver or forgiveness of a consumer's 
existing loan terms with, or obligations to, another creditor.
    (6) Misleading use of the term ``counselor''. Using the term 
``counselor'' in an advertisement to refer to a for-profit mortgage 
broker or mortgage creditor, its employees, or persons working for the 
broker or creditor that are involved in offering, originating or selling 
mortgages.
    (7) Misleading foreign-language advertisements. Providing 
information about some trigger terms or required disclosures, such as an 
initial rate or payment, only in a foreign language in an advertisement, 
but providing information about other trigger terms or required 
disclosures, such as information about the fully-indexed rate or fully 
amortizing payment, only in English in the same advertisement.



                         Subpart D_Miscellaneous



Sec. 1026.25  Record retention.

    (a) General rule. A creditor shall retain evidence of compliance 
with this part (other than advertising requirements under Sec. Sec. 
1026.16 and 1026.24, and other than the requirements under Sec. 
1026.19(e) and (f)) for two years after the date disclosures are 
required to be made or action is required to be taken. The 
administrative agencies responsible for enforcing the regulation may 
require creditors under their jurisdictions to retain records for a 
longer period if necessary to carry out their enforcement 
responsibilities under section 108 of the Act.
    (b) Inspection of records. A creditor shall permit the agency 
responsible for enforcing this part with respect to that creditor to 
inspect its relevant records for compliance.
    (c) Records related to certain requirements for mortgage loans--(1) 
Records related to requirements for loans secured by real property--(i) 
General rule. Except as provided under paragraph (c)(1)(ii) of this 
section, a creditor shall retain evidence of compliance with the 
requirements of Sec. 1026.19(e) and (f) for three years after the later 
of the date of consummation, the date disclosures are required to be 
made, or the date the action is required to be taken.
    (ii) Closing disclosures. (A) A creditor shall retain each completed 
disclosure required under Sec. 1026.19(f)(1)(i) or (f)(4)(i), and all 
documents related to such disclosures, for five years after 
consummation, notwithstanding paragraph (c)(1)(ii)(B) of this section.
    (B) If a creditor sells, transfers, or otherwise disposes of its 
interest in a mortgage loan subject to Sec. 1026.19(f) and does not 
service the mortgage loan, the creditor shall provide a copy of the 
disclosures required under Sec. 1026.19(f)(1)(i) or (f)(4)(i) to the 
owner or servicer of the mortgage as a part of the transfer of the loan 
file. Such owner or servicer

[[Page 80]]

shall retain such disclosures for the remainder of the five-year period 
described under paragraph (c)(1)(ii)(A) of this section.
    (C) The Bureau shall have the right to require provision of copies 
of records related to the disclosures required under Sec. 
1026.19(f)(1)(i) and (f)(4)(i).
    (2) Records related to requirements for loan originator 
compensation. Notwithstanding paragraph (a) of this section, for 
transactions subject to Sec. 1026.36:
    (i) A creditor shall maintain records sufficient to evidence all 
compensation it pays to a loan originator, as defined in Sec. 
1026.36(a)(1), and the compensation agreement that governs those 
payments for three years after the date of payment.
    (ii) A loan originator organization, as defined in Sec. 
1026.36(a)(1)(iii), shall maintain records sufficient to evidence all 
compensation it receives from a creditor, a consumer, or another person; 
all compensation it pays to any individual loan originator, as defined 
in Sec. 1026.36(a)(1)(ii); and the compensation agreement that governs 
each such receipt or payment, for three years after the date of each 
such receipt or payment.
    (3) Records related to minimum standards for transactions secured by 
a dwelling. Notwithstanding paragraph (a) of this section, a creditor 
shall retain evidence of compliance with Sec. 1026.43 of this 
regulation for three years after consummation of a transaction covered 
by that section.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 6583, Jan. 30, 2013; 78 
FR 11410, Feb. 15, 2013; 78 FR 60382, Oct. 1, 2013; 78 FR 80112, Dec. 
31, 2013]



Sec. 1026.26  Use of annual percentage rate in oral disclosures.

    (a) Open-end credit. In an oral response to a consumer's inquiry 
about the cost of open-end credit, only the annual percentage rate or 
rates shall be stated, except that the periodic rate or rates also may 
be stated. If the annual percentage rate cannot be determined in advance 
because there are finance charges other than a periodic rate, the 
corresponding annual percentage rate shall be stated, and other cost 
information may be given.
    (b) Closed-end credit. In an oral response to a consumer's inquiry 
about the cost of closed-end credit, only the annual percentage rate 
shall be stated, except that a simple annual rate or periodic rate also 
may be stated if it is applied to an unpaid balance. If the annual 
percentage rate cannot be determined in advance, the annual percentage 
rate for a sample transaction shall be stated, and other cost 
information for the consumer's specific transaction may be given.



Sec. 1026.27  Language of disclosures.

    Disclosures required by this part may be made in a language other 
than English, provided that the disclosures are made available in 
English upon the consumer's request. This requirement for providing 
English disclosures on request does not apply to advertisements subject 
to Sec. Sec. 1026.16 and 1026.24.



Sec. 1026.28  Effect on state laws.

    (a) Inconsistent disclosure requirements. (1) Except as provided in 
paragraph (d) of this section, State law requirements that are 
inconsistent with the requirements contained in chapter 1 (General 
Provisions), chapter 2 (Credit Transactions), or chapter 3 (Credit 
Advertising) of the Act and the implementing provisions of this part are 
preempted to the extent of the inconsistency. A State law is 
inconsistent if it requires a creditor to make disclosures or take 
actions that contradict the requirements of the Federal law. A State law 
is contradictory if it requires the use of the same term to represent a 
different amount or a different meaning than the Federal law, or if it 
requires the use of a term different from that required in the Federal 
law to describe the same item. A creditor, State, or other interested 
party may request the Bureau to determine whether a State law 
requirement is inconsistent. After the Bureau determines that a State 
law is inconsistent, a creditor may not make disclosures using the 
inconsistent term or form. A determination as to whether a State law is 
inconsistent with the requirements of sections 4 and 5 of RESPA (other 
than the RESPA section 5(c) requirements regarding provision of a list 
of certified homeownership counselors) and

[[Page 81]]

Sec. Sec. 1026.19(e) and (f), 1026.37, and 1026.38 shall be made in 
accordance with this section and not 12 CFR 1024.13.
    (2)(i) State law requirements are inconsistent with the requirements 
contained in sections 161 (Correction of billing errors) or 162 
(Regulation of credit reports) of the Act and the implementing 
provisions of this part and are preempted if they provide rights, 
responsibilities, or procedures for consumers or creditors that are 
different from those required by the Federal law. However, a state law 
that allows a consumer to inquire about an open-end credit account and 
imposes on the creditor an obligation to respond to such inquiry after 
the time allowed in the Federal law for the consumer to submit written 
notice of a billing error shall not be preempted in any situation where 
the time period for making written notice under this part has expired. 
If a creditor gives written notice of a consumer's rights under such 
state law, the notice shall state that reliance on the longer time 
period available under state law may result in the loss of important 
rights that could be preserved by acting more promptly under Federal 
law; it shall also explain that the state law provisions apply only 
after expiration of the time period for submitting a proper written 
notice of a billing error under the Federal law. If the state 
disclosures are made on the same side of a page as the required Federal 
disclosures, the state disclosures shall appear under a demarcation line 
below the Federal disclosures, and the Federal disclosures shall be 
identified by a heading indicating that they are made in compliance with 
Federal law.
    (ii) State law requirements are inconsistent with the requirements 
contained in chapter 4 (Credit billing) of the Act (other than section 
161 or 162) and the implementing provisions of this part and are 
preempted if the creditor cannot comply with state law without violating 
Federal law.
    (iii) A state may request the Bureau to determine whether its law is 
inconsistent with chapter 4 of the Act and its implementing provisions.
    (b) Equivalent disclosure requirements. If the Bureau determines 
that a disclosure required by state law (other than a requirement 
relating to the finance charge, annual percentage rate, or the 
disclosures required under Sec. 1026.32) is substantially the same in 
meaning as a disclosure required under the Act or this part, creditors 
in that state may make the state disclosure in lieu of the Federal 
disclosure. A creditor, state, or other interested party may request the 
Bureau to determine whether a state disclosure is substantially the same 
in meaning as a Federal disclosure.
    (c) Request for determination. The procedures under which a request 
for a determination may be made under this section are set forth in 
appendix A.
    (d) Special rule for credit and charge cards. State law requirements 
relating to the disclosure of credit information in any credit or charge 
card application or solicitation that is subject to the requirements of 
section 127(c) of chapter 2 of the Act (Sec. 1026.60 of the regulation) 
or in any renewal notice for a credit or charge card that is subject to 
the requirements of section 127(d) of chapter 2 of the Act (Sec. 
1026.9(e) of the regulation) are preempted. State laws relating to the 
enforcement of section 127(c) and (d) of the Act are not preempted.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80112, Dec. 31, 2013]



Sec. 1026.29  State exemptions.

    (a) General rule. Any state may apply to the Bureau to exempt a 
class of transactions within the state from the requirements of chapter 
2 (Credit transactions) or chapter 4 (Credit billing) of the Act and the 
corresponding provisions of this part. The Bureau shall grant an 
exemption if it determines that:
    (1) The state law is substantially similar to the Federal law or, in 
the case of chapter 4, affords the consumer greater protection than the 
Federal law; and
    (2) There is adequate provision for enforcement.
    (b) Civil liability. (1) No exemptions granted under this section 
shall extend to the civil liability provisions of sections 130 and 131 
of the Act.
    (2) If an exemption has been granted, the disclosures required by 
the applicable state law (except any additional requirements not imposed 
by Federal

[[Page 82]]

law) shall constitute the disclosures required by the Act.
    (c) Applications. The procedures under which a state may apply for 
an exemption under this section are set forth in appendix B to this 
part.



Sec. 1026.30  Limitation on rates.

    A creditor shall include in any consumer credit contract secured by 
a dwelling and subject to the Act and this part the maximum interest 
rate that may be imposed during the term of the obligation when:
    (a) In the case of closed-end credit, the annual percentage rate may 
increase after consummation, or
    (b) In the case of open-end credit, the annual percentage rate may 
increase during the plan.



     Subpart E_Special Rules for Certain Home Mortgage Transactions



Sec. 1026.31  General rules.

    (a) Relation to other subparts in this part. The requirements and 
limitations of this subpart are in addition to and not in lieu of those 
contained in other subparts of this part.
    (b) Form of disclosures. The creditor shall make the disclosures 
required by this subpart clearly and conspicuously in writing, in a form 
that the consumer may keep. The disclosures required by this subpart may 
be provided to the consumer in electronic form, subject to compliance 
with the consumer consent and other applicable provisions of the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act) 
(15 U.S.C. 7001 et seq.).
    (c) Timing of disclosure--(1) Disclosures for high-cost mortgages. 
The creditor shall furnish the disclosures required by Sec. 1026.32 at 
least three business days prior to consummation or account opening of a 
high-cost mortgage as defined in Sec. 1026.32(a).
    (i) Change in terms. After complying with this paragraph (c)(1) and 
prior to consummation or account opening, if the creditor changes any 
term that makes the disclosures inaccurate, new disclosures shall be 
provided in accordance with the requirements of this subpart.
    (ii) Telephone disclosures. A creditor may provide new disclosures 
required by paragraph (c)(1)(i) of this section by telephone if the 
consumer initiates the change and if, prior to or at consummation or 
account opening:
    (A) The creditor provides new written disclosures; and
    (B) The consumer and creditor sign a statement that the new 
disclosures were provided by telephone at least three days prior to 
consummation or account opening, as applicable.
    (iii) Consumer's waiver of waiting period before consummation or 
account opening. The consumer may, after receiving the disclosures 
required by this paragraph (c)(1), modify or waive the three-day waiting 
period between delivery of those disclosures and consummation or account 
opening if the consumer determines that the extension of credit is 
needed to meet a bona fide personal financial emergency. To modify or 
waive the right, the consumer shall give the creditor a dated written 
statement that describes the emergency, specifically modifies or waives 
the waiting period, and bears the signature of all the consumers 
entitled to the waiting period. Printed forms for this purpose are 
prohibited, except when creditors are permitted to use printed forms 
pursuant to Sec. 1026.23(e)(2).
    (2) Disclosures for reverse mortgages. The creditor shall furnish 
the disclosures required by Sec. 1026.33 at least three business days 
prior to:
    (i) Consummation of a closed-end credit transaction; or
    (ii) The first transaction under an open-end credit plan.
    (d) Basis of disclosures and use of estimates--(1) Legal Obligation. 
Disclosures shall reflect the terms of the legal obligation between the 
parties.
    (2) Estimates. If any information necessary for an accurate 
disclosure is unknown to the creditor, the creditor shall make the 
disclosure based on the best information reasonably available at the 
time the disclosure is provided, and shall state clearly that the 
disclosure is an estimate.

[[Page 83]]

    (3) Per-diem interest. For a transaction in which a portion of the 
interest is determined on a per-diem basis and collected at 
consummation, any disclosure affected by the per-diem interest shall be 
considered accurate if the disclosure is based on the information known 
to the creditor at the time that the disclosure documents are prepared.
    (e) Multiple creditors; multiple consumers. If a transaction 
involves more than one creditor, only one set of disclosures shall be 
given and the creditors shall agree among themselves which creditor must 
comply with the requirements that this part imposes on any or all of 
them. If there is more than one consumer, the disclosures may be made to 
any consumer who is primarily liable on the obligation. If the 
transaction is rescindable under Sec. 1026.15 or Sec. 1026.23, 
however, the disclosures shall be made to each consumer who has the 
right to rescind.
    (f) Effect of subsequent events. If a disclosure becomes inaccurate 
because of an event that occurs after the creditor delivers the required 
disclosures, the inaccuracy is not a violation of Regulation Z (12 CFR 
part 1026), although new disclosures may be required for mortgages 
covered by Sec. 1026.32 under paragraph (c) of this section, Sec. 
1026.9(c), Sec. 1026.19, or Sec. 1026.20.
    (g) Accuracy of annual percentage rate. For purposes of section 
1026.32, the annual percentage rate shall be considered accurate, and 
may be used in determining whether a transaction is covered by section 
1026.32, if it is accurate according to the requirements and within the 
tolerances under section 1026.22 for closed-end credit transactions or 
1026.6(a) for open-end credit plans. The finance charge tolerances for 
rescission under section 1026.23(g) or (h) shall not apply for this 
purpose.
    (h) Corrections and unintentional violations. A creditor or assignee 
in a high-cost mortgage, as defined in Sec. 1026.32(a), who, when 
acting in good faith, failed to comply with any requirement under 
section 129 of the Act will not be deemed to have violated such 
requirement if the creditor or assignee satisfies either of the 
following sets of conditions:
    (1)(i) Within 30 days of consummation or account opening and prior 
to the institution of any action, the consumer is notified of or 
discovers the violation;
    (ii) Appropriate restitution is made within a reasonable time; and
    (iii) Within a reasonable time, whatever adjustments are necessary 
are made to the loan or credit plan to either, at the choice of the 
consumer:
    (A) Make the loan or credit plan satisfy the requirements of 15 
U.S.C. 1631-1651; or
    (B) Change the terms of the loan or credit plan in a manner 
beneficial to the consumer so that the loan or credit plan will no 
longer be a high-cost mortgage.
    (2)(i) Within 60 days of the creditor's discovery or receipt of 
notification of an unintentional violation or bona fide error and prior 
to the institution of any action, the consumer is notified of the 
compliance failure;
    (ii) Appropriate restitution is made within a reasonable time; and
    (iii) Within a reasonable time, whatever adjustments are necessary 
are made to the loan or credit plan to either, at the choice of the 
consumer:
    (A) Make the loan or credit plan satisfy the requirements of 15 
U.S.C. 1631-1651; or
    (B) Change the terms of the loan or credit plan in a manner 
beneficial to the consumer so that the loan or credit plan will no 
longer be a high-cost mortgage.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 6962, Jan. 31, 2013; 78 
FR 60440, Oct. 1, 2013]



Sec. 1026.32  Requirements for high-cost mortgages.

    (a) Coverage. (1) The requirements of this section apply to a high-
cost mortgage, which is any consumer credit transaction that is secured 
by the consumer's principal dwelling, other than as provided in 
paragraph (a)(2) of this section, and in which:
    (i) The annual percentage rate applicable to the transaction, as 
determined in accordance with paragraph (a)(3) of this section, will 
exceed the average prime offer rate, as defined in Sec. 1026.35(a)(2), 
for a comparable transaction by more than:

[[Page 84]]

    (A) 6.5 percentage points for a first-lien transaction, other than 
as described in paragraph (a)(1)(i)(B) of this section;
    (B) 8.5 percentage points for a first-lien transaction if the 
dwelling is personal property and the loan amount is less than $50,000; 
or
    (C) 8.5 percentage points for a subordinate-lien transaction; or
    (ii) The transaction's total points and fees, as defined in 
paragraphs (b)(1) and (2) of this section, will exceed:
    (A) 5 percent of the total loan amount for a transaction with a loan 
amount of $20,000 or more; the $20,000 figure shall be adjusted annually 
on January 1 by the annual percentage change in the Consumer Price Index 
that was reported on the preceding June 1; or
    (B) The lesser of 8 percent of the total loan amount or $1,000 for a 
transaction with a loan amount of less than $20,000; the $1,000 and 
$20,000 figures shall be adjusted annually on January 1 by the annual 
percentage change in the Consumer Price Index that was reported on the 
preceding June 1; or
    (iii) Under the terms of the loan contract or open-end credit 
agreement, the creditor can charge a prepayment penalty, as defined in 
paragraph (b)(6) of this section, more than 36 months after consummation 
or account opening, or prepayment penalties that can exceed, in total, 
more than 2 percent of the amount prepaid.
    (2) Exemptions. This section does not apply to the following:
    (i) A reverse mortgage transaction subject to Sec. 1026.33;
    (ii) A transaction to finance the initial construction of a 
dwelling;
    (iii) A transaction originated by a Housing Finance Agency, where 
the Housing Finance Agency is the creditor for the transaction; or
    (iv) A transaction originated pursuant to the United States 
Department of Agriculture's Rural Development Section 502 Direct Loan 
Program.
    (3) Determination of annual percentage rate. For purposes of 
paragraph (a)(1)(i) of this section, a creditor shall determine the 
annual percentage rate for a closed- or open-end credit transaction 
based on the following:
    (i) For a transaction in which the annual percentage rate will not 
vary during the term of the loan or credit plan, the interest rate in 
effect as of the date the interest rate for the transaction is set;
    (ii) For a transaction in which the interest rate may vary during 
the term of the loan or credit plan in accordance with an index, the 
interest rate that results from adding the maximum margin permitted at 
any time during the term of the loan or credit plan to the value of the 
index rate in effect as of the date the interest rate for the 
transaction is set, or the introductory interest rate, whichever is 
greater; and
    (iii) For a transaction in which the interest rate may or will vary 
during the term of the loan or credit plan, other than a transaction 
described in paragraph (a)(3)(ii) of this section, the maximum interest 
rate that may be imposed during the term of the loan or credit plan.
    (b) Definitions. For purposes of this subpart, the following 
definitions apply:
    (1) In connection with a closed-end credit transaction, points and 
fees means the following fees or charges that are known at or before 
consummation:
    (i) All items included in the finance charge under Sec. 1026.4(a) 
and (b), except that the following items are excluded:
    (A) Interest or the time-price differential;
    (B) Any premium or other charge imposed in connection with any 
Federal or State agency program for any guaranty or insurance that 
protects the creditor against the consumer's default or other credit 
loss;
    (C) For any guaranty or insurance that protects the creditor against 
the consumer's default or other credit loss and that is not in 
connection with any Federal or State agency program:
    (1) If the premium or other charge is payable after consummation, 
the entire amount of such premium or other charge; or
    (2) If the premium or other charge is payable at or before 
consummation, the portion of any such premium or other charge that is 
not in excess of the amount payable under policies in effect at the time 
of origination under

[[Page 85]]

section 203(c)(2)(A) of the National Housing Act (12 U.S.C. 
1709(c)(2)(A)), provided that the premium or charge is required to be 
refundable on a pro rata basis and the refund is automatically issued 
upon notification of the satisfaction of the underlying mortgage loan;
    (D) Any bona fide third-party charge not retained by the creditor, 
loan originator, or an affiliate of either, unless the charge is 
required to be included in points and fees under paragraph (b)(1)(i)(C), 
(iii), or (iv) of this section;
    (E) Up to two bona fide discount points paid by the consumer in 
connection with the transaction, if the interest rate without any 
discount does not exceed:
    (1) The average prime offer rate, as defined in Sec. 1026.35(a)(2), 
by more than one percentage point; or
    (2) For purposes of paragraph (a)(1)(ii) of this section, for 
transactions that are secured by personal property, the average rate for 
a loan insured under Title I of the National Housing Act (12 U.S.C. 1702 
et seq.) by more than one percentage point; and
    (F) If no discount points have been excluded under paragraph 
(b)(1)(i)(E) of this section, then up to one bona fide discount point 
paid by the consumer in connection with the transaction, if the interest 
rate without any discount does not exceed:
    (1) The average prime offer rate, as defined in Sec. 1026.35(a)(2), 
by more than two percentage points; or
    (2) For purposes of paragraph (a)(1)(ii) of this section, for 
transactions that are secured by personal property, the average rate for 
a loan insured under Title I of the National Housing Act (12 U.S.C. 1702 
et seq.) by more than two percentage points;
    (ii) All compensation paid directly or indirectly by a consumer or 
creditor to a loan originator, as defined in Sec. 1026.36(a)(1), that 
can be attributed to that transaction at the time the interest rate is 
set unless:
    (A) That compensation is paid by a consumer to a mortgage broker, as 
defined in Sec. 1026.36(a)(2), and already has been included in points 
and fees under paragraph (b)(1)(i) of this section;
    (B) That compensation is paid by a mortgage broker, as defined in 
Sec. 1026.36(a)(2), to a loan originator that is an employee of the 
mortgage broker;
    (C) That compensation is paid by a creditor to a loan originator 
that is an employee of the creditor; or
    (D) That compensation is paid by a retailer of manufactured homes to 
its employee.
    (iii) All items listed in Sec. 1026.4(c)(7) (other than amounts 
held for future payment of taxes), unless:
    (A) The charge is reasonable;
    (B) The creditor receives no direct or indirect compensation in 
connection with the charge; and
    (C) The charge is not paid to an affiliate of the creditor;
    (iv) Premiums or other charges payable at or before consummation for 
any credit life, credit disability, credit unemployment, or credit 
property insurance, or any other life, accident, health, or loss-of-
income insurance for which the creditor is a beneficiary, or any 
payments directly or indirectly for any debt cancellation or suspension 
agreement or contract;
    (v) The maximum prepayment penalty, as defined in paragraph 
(b)(6)(i) of this section, that may be charged or collected under the 
terms of the mortgage loan; and
    (vi) The total prepayment penalty, as defined in paragraph (b)(6)(i) 
or (ii) of this section, as applicable, incurred by the consumer if the 
consumer refinances the existing mortgage loan, or terminates an 
existing open-end credit plan in connection with obtaining a new 
mortgage loan, with the current holder of the existing loan or plan, a 
servicer acting on behalf of the current holder, or an affiliate of 
either.
    (2) In connection with an open-end credit plan, points and fees 
means the following fees or charges that are known at or before account 
opening:
    (i) All items included in the finance charge under Sec. 1026.4(a) 
and (b), except that the following items are excluded:
    (A) Interest or the time-price differential;
    (B) Any premium or other charge imposed in connection with any 
Federal or State agency program for any guaranty or insurance that 
protects the creditor against the consumer's default or other credit 
loss;

[[Page 86]]

    (C) For any guaranty or insurance that protects the creditor against 
the consumer's default or other credit loss and that is not in 
connection with any Federal or State agency program:
    (1) If the premium or other charge is payable after account opening, 
the entire amount of such premium or other charge; or
    (2) If the premium or other charge is payable at or before account 
opening, the portion of any such premium or other charge that is not in 
excess of the amount payable under policies in effect at the time of 
account opening under section 203(c)(2)(A) of the National Housing Act 
(12 U.S.C. 1709(c)(2)(A)), provided that the premium or charge is 
required to be refundable on a pro rata basis and the refund is 
automatically issued upon notification of the satisfaction of the 
underlying mortgage transaction;
    (D) Any bona fide third-party charge not retained by the creditor, 
loan originator, or an affiliate of either, unless the charge is 
required to be included in points and fees under paragraphs 
(b)(2)(i)(C), (b)(2)(iii) or (b)(2)(iv) of this section;
    (E) Up to two bona fide discount points payable by the consumer in 
connection with the transaction, provided that the conditions specified 
in paragraph (b)(1)(i)(E) of this section are met; and
    (F) Up to one bona fide discount point payable by the consumer in 
connection with the transaction, provided that no discount points have 
been excluded under paragraph (b)(2)(i)(E) of this section and the 
conditions specified in paragraph (b)(1)(i)(F) of this section are met;
    (ii) All compensation paid directly or indirectly by a consumer or 
creditor to a loan originator, as defined in Sec. 1026.36(a)(1), that 
can be attributed to that transaction at the time the interest rate is 
set unless:
    (A) That compensation is paid by a consumer to a mortgage broker, as 
defined in Sec. 1026.36(a)(2), and already has been included in points 
and fees under paragraph (b)(2)(i) of this section;
    (B) That compensation is paid by a mortgage broker, as defined in 
Sec. 1026.36(a)(2), to a loan originator that is an employee of the 
mortgage broker;
    (C) That compensation is paid by a creditor to a loan originator 
that is an employee of the creditor; or
    (D) That compensation is paid by a retailer of manufactured homes to 
its employee.
    (iii) All items listed in Sec. 1026.4(c)(7) (other than amounts 
held for future payment of taxes) unless:
    (A) The charge is reasonable;
    (B) The creditor receives no direct or indirect compensation in 
connection with the charge; and
    (C) The charge is not paid to an affiliate of the creditor;
    (iv) Premiums or other charges payable at or before account opening 
for any credit life, credit disability, credit unemployment, or credit 
property insurance, or any other life, accident, health, or loss-of-
income insurance for which the creditor is a beneficiary, or any 
payments directly or indirectly for any debt cancellation or suspension 
agreement or contract;
    (v) The maximum prepayment penalty, as defined in paragraph 
(b)(6)(ii) of this section, that may be charged or collected under the 
terms of the open-end credit plan;
    (vi) The total prepayment penalty, as defined in paragraph (b)(6)(i) 
or (ii) of this section, as applicable, incurred by the consumer if the 
consumer refinances an existing closed-end credit transaction with an 
open-end credit plan, or terminates an existing open-end credit plan in 
connection with obtaining a new open-end credit plan, with the current 
holder of the existing transaction or plan, a servicer acting on behalf 
of the current holder, or an affiliate of either;
    (vii) Any fees charged for participation in an open-end credit plan, 
payable at or before account opening, as described in Sec. 
1026.4(c)(4); and
    (viii) Any transaction fee, including any minimum fee or per-
transaction fee, that will be charged for a draw on the credit line, 
where the creditor must assume that the consumer will make at least one 
draw during the term of the plan.
    (3) Bona fide discount point--(i) Closed-end credit. The term bona 
fide discount point means an amount equal to 1 percent of the loan 
amount paid by the consumer that reduces the interest

[[Page 87]]

rate or time-price differential applicable to the transaction based on a 
calculation that is consistent with established industry practices for 
determining the amount of reduction in the interest rate or time-price 
differential appropriate for the amount of discount points paid by the 
consumer.
    (ii) Open-end credit. The term bona fide discount point means an 
amount equal to 1 percent of the credit limit for the plan when the 
account is opened, paid by the consumer, and that reduces the interest 
rate or time-price differential applicable to the transaction based on a 
calculation that is consistent with established industry practices for 
determining the amount of reduction in the interest rate or time-price 
differential appropriate for the amount of discount points paid by the 
consumer. See comment 32(b)(3)(i)-1 for additional guidance in 
determining whether a discount point is bona fide.
    (4) Total loan amount--(i) Closed-end credit. The total loan amount 
for a closed-end credit transaction is calculated by taking the amount 
financed, as determined according to Sec. 1026.18(b), and deducting any 
cost listed in Sec. 1026.32(b)(1)(iii), (iv), or (vi) that is both 
included as points and fees under Sec. 1026.32(b)(1) and financed by 
the creditor.
    (ii) Open-end credit. The total loan amount for an open-end credit 
plan is the credit limit for the plan when the account is opened.
    (5) Affiliate means any company that controls, is controlled by, or 
is under common control with another company, as set forth in the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).
    (6) Prepayment penalty--(i) Closed-end credit transactions. For a 
closed-end credit transaction, prepayment penalty means a charge imposed 
for paying all or part of the transaction's principal before the date on 
which the principal is due, other than a waived, bona fide third-party 
charge that the creditor imposes if the consumer prepays all of the 
transaction's principal sooner than 36 months after consummation, 
provided, however, that interest charged consistent with the monthly 
interest accrual amortization method is not a prepayment penalty for 
extensions of credit insured by the Federal Housing Administration that 
are consummated before January 21, 2015.
    (ii) Open-end credit. For an open-end credit plan, prepayment 
penalty means a charge imposed by the creditor if the consumer 
terminates the open-end credit plan prior to the end of its term, other 
than a waived, bona fide third-party charge that the creditor imposes if 
the consumer terminates the open-end credit plan sooner than 36 months 
after account opening.
    (c) Disclosures. In addition to other disclosures required by this 
part, in a mortgage subject to this section, the creditor shall disclose 
the following in conspicuous type size:
    (1) Notices. The following statement: ``You are not required to 
complete this agreement merely because you have received these 
disclosures or have signed a loan application. If you obtain this loan, 
the lender will have a mortgage on your home. You could lose your home, 
and any money you have put into it, if you do not meet your obligations 
under the loan.''
    (2) Annual percentage rate. The annual percentage rate.
    (3) Regular payment; minimum periodic payment example; balloon 
payment. (i) For a closed-end credit transaction, the amount of the 
regular monthly (or other periodic) payment and the amount of any 
balloon payment provided in the credit contract, if permitted under 
paragraph (d)(1) of this section. The regular payment disclosed under 
this paragraph shall be treated as accurate if it is based on an amount 
borrowed that is deemed accurate and is disclosed under paragraph (c)(5) 
of this section.
    (ii) For an open-end credit plan:
    (A) An example showing the first minimum periodic payment for the 
draw period, the first minimum periodic payment for any repayment 
period, and the balance outstanding at the beginning of any repayment 
period. The example must be based on the following assumptions:
    (1) The consumer borrows the full credit line, as disclosed in 
paragraph (c)(5) of this section, at account opening and does not obtain 
any additional extensions of credit;

[[Page 88]]

    (2) The consumer makes only minimum periodic payments during the 
draw period and any repayment period; and
    (3) The annual percentage rate used to calculate the example 
payments remains the same during the draw period and any repayment 
period. The creditor must provide the minimum periodic payment example 
based on the annual percentage rate for the plan, as described in 
paragraph (c)(2) of this section, except that if an introductory annual 
percentage rate applies, the creditor must use the rate that will apply 
to the plan after the introductory rate expires.
    (B) If the credit contract provides for a balloon payment under the 
plan as permitted under paragraph (d)(1) of this section, a disclosure 
of that fact and an example showing the amount of the balloon payment 
based on the assumptions described in paragraph (c)(3)(ii)(A) of this 
section.
    (C) A statement that the example payments show the first minimum 
periodic payments at the current annual percentage rate if the consumer 
borrows the maximum credit available when the account is opened and does 
not obtain any additional extensions of credit, or a substantially 
similar statement.
    (D) A statement that the example payments are not the consumer's 
actual payments and that the actual minimum periodic payments will 
depend on the amount the consumer borrows, the interest rate applicable 
to that period, and whether the consumer pays more than the required 
minimum periodic payment, or a substantially similar statement.
    (4) Variable-rate. For variable-rate transactions, a statement that 
the interest rate and monthly payment may increase, and the amount of 
the single maximum monthly payment, based on the maximum interest rate 
required to be included in the contract by Sec. 1026.30.
    (5) Amount borrowed; credit limit. (i) For a closed-end credit 
transaction, the total amount the consumer will borrow, as reflected by 
the face amount of the note. Where the amount borrowed includes financed 
charges that are not prohibited under Sec. 1026.34(a)(10), that fact 
shall be stated, grouped together with the disclosure of the amount 
borrowed. The disclosure of the amount borrowed shall be treated as 
accurate if it is not more than $100 above or below the amount required 
to be disclosed.
    (ii) For an open-end credit plan, the credit limit for the plan when 
the account is opened.
    (d) Limitations. A high-cost mortgage shall not include the 
following terms:
    (1)(i) Balloon payment. Except as provided by paragraphs (d)(1)(ii) 
and (iii) of this section, a payment schedule with a payment that is 
more than two times a regular periodic payment.
    (ii) Exceptions. The limitations in paragraph (d)(1)(i) of this 
section do not apply to:
    (A) A mortgage transaction with a payment schedule that is adjusted 
to the seasonal or irregular income of the consumer;
    (B) A loan with maturity of 12 months or less, if the purpose of the 
loan is a ``bridge'' loan connected with the acquisition or construction 
of a dwelling intended to become the consumer's principal dwelling; or
    (C) A loan that meets the criteria set forth in Sec. Sec. 
1026.43(f)(1)(i) through (vi) and 1026.43(f)(2), or the conditions set 
forth in Sec. 1026.43(e)(6).
    (iii) Open-end credit plans. If the terms of an open-end credit plan 
provide for a repayment period during which no further draws may be 
taken, the limitations in paragraph (d)(1)(i) of this section do not 
apply to any adjustment in the regular periodic payment that results 
solely from the credit plan's transition from the draw period to the 
repayment period. If the terms of an open-end credit plan do not provide 
for any repayment period, the limitations in paragraph (d)(1)(i) of this 
section apply to all periods of the credit plan.
    (2) Negative amortization. A payment schedule with regular periodic 
payments that cause the principal balance to increase.
    (3) Advance payments. A payment schedule that consolidates more than 
two periodic payments and pays them in advance from the proceeds.
    (4) Increased interest rate. An increase in the interest rate after 
default.

[[Page 89]]

    (5) Rebates. A refund calculated by a method less favorable than the 
actuarial method (as defined by section 933(d) of the Housing and 
Community Development Act of 1992, 15 U.S.C. 1615(d)), for rebates of 
interest arising from a loan acceleration due to default.
    (6) Prepayment penalties. A prepayment penalty, as defined in 
paragraph (b)(6) of this section.
    (7) [Reserved]
    (8) Acceleration of debt. A demand feature that permits the creditor 
to accelerate the indebtedness by terminating the high-cost mortgage in 
advance of the original maturity date and to demand repayment of the 
entire outstanding balance, except in the following circumstances:
    (i) There is fraud or material misrepresentation by the consumer in 
connection with the loan or open-end credit agreement;
    (ii) The consumer fails to meet the repayment terms of the agreement 
for any outstanding balance that results in a default in payment under 
the loan; or
    (iii) There is any action or inaction by the consumer that adversely 
affects the creditor's security for the loan, or any right of the 
creditor in such security.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 6583, Jan. 30, 2013; 78 
FR 6962, Jan. 31, 2013; 78 FR 35502, June 12, 2013; 78 FR 60440, Oct. 1, 
2013]



Sec. 1026.33  Requirements for reverse mortgages.

    (a) Definition. For purposes of this subpart, reverse mortgage 
transaction means a nonrecourse consumer credit obligation in which:
    (1) A mortgage, deed of trust, or equivalent consensual security 
interest securing one or more advances is created in the consumer's 
principal dwelling; and
    (2) Any principal, interest, or shared appreciation or equity is due 
and payable (other than in the case of default) only after:
    (i) The consumer dies;
    (ii) The dwelling is transferred; or
    (iii) The consumer ceases to occupy the dwelling as a principal 
dwelling.
    (b) Content of disclosures. In addition to other disclosures 
required by this part, in a reverse mortgage transaction the creditor 
shall provide the following disclosures in a form substantially similar 
to the model form found in paragraph (d) of appendix K of this part:
    (1) Notice. A statement that the consumer is not obligated to 
complete the reverse mortgage transaction merely because the consumer 
has received the disclosures required by this section or has signed an 
application for a reverse mortgage loan.
    (2) Total annual loan cost rates. A good-faith projection of the 
total cost of the credit, determined in accordance with paragraph (c) of 
this section and expressed as a table of ``total annual loan cost 
rates,'' using that term, in accordance with appendix K of this part.
    (3) Itemization of pertinent information. An itemization of loan 
terms, charges, the age of the youngest borrower and the appraised 
property value.
    (4) Explanation of table. An explanation of the table of total 
annual loan cost rates as provided in the model form found in paragraph 
(d) of appendix K of this part.
    (c) Projected total cost of credit. The projected total cost of 
credit shall reflect the following factors, as applicable:
    (1) Costs to consumer. All costs and charges to the consumer, 
including the costs of any annuity the consumer purchases as part of the 
reverse mortgage transaction.
    (2) Payments to consumer. All advances to and for the benefit of the 
consumer, including annuity payments that the consumer will receive from 
an annuity that the consumer purchases as part of the reverse mortgage 
transaction.
    (3) Additional creditor compensation. Any shared appreciation or 
equity in the dwelling that the creditor is entitled by contract to 
receive.
    (4) Limitations on consumer liability. Any limitation on the 
consumer's liability (such as nonrecourse limits and equity conservation 
agreements).
    (5) Assumed annual appreciation rates. Each of the following assumed 
annual appreciation rates for the dwelling:
    (i) 0 percent.
    (ii) 4 percent.

[[Page 90]]

    (iii) 8 percent.
    (6) Assumed loan period. (i) Each of the following assumed loan 
periods, as provided in appendix L of this part:
    (A) Two years.
    (B) The actuarial life expectancy of the consumer to become 
obligated on the reverse mortgage transaction (as of that consumer's 
most recent birthday). In the case of multiple consumers, the period 
shall be the actuarial life expectancy of the youngest consumer (as of 
that consumer's most recent birthday).
    (C) The actuarial life expectancy specified by paragraph 
(c)(6)(i)(B) of this section, multiplied by a factor of 1.4 and rounded 
to the nearest full year.
    (ii) At the creditor's option, the actuarial life expectancy 
specified by paragraph (c)(6)(i)(B) of this section, multiplied by a 
factor of .5 and rounded to the nearest full year.



Sec. 1026.34  Prohibited acts or practices in connection with high-
cost mortgages.

    (a) Prohibited acts or practices for high-cost mortgages--(1) Home 
improvement contracts. A creditor shall not pay a contractor under a 
home improvement contract from the proceeds of a high-cost mortgage, 
other than:
    (i) By an instrument payable to the consumer or jointly to the 
consumer and the contractor; or
    (ii) At the election of the consumer, through a third-party escrow 
agent in accordance with terms established in a written agreement signed 
by the consumer, the creditor, and the contractor prior to the 
disbursement.
    (2) Notice to assignee. A creditor may not sell or otherwise assign 
a high-cost mortgage without furnishing the following statement to the 
purchaser or assignee: ``Notice: This is a mortgage subject to special 
rules under the Federal Truth in Lending Act. Purchasers or assignees of 
this mortgage could be liable for all claims and defenses with respect 
to the mortgage that the consumer could assert against the creditor.''
    (3) Refinancings within one-year period. Within one year of having 
extended a high-cost mortgage, a creditor shall not refinance any high-
cost mortgage to the same consumer into another high-cost mortgage, 
unless the refinancing is in the consumer's interest. An assignee 
holding or servicing a high-cost mortgage shall not, for the remainder 
of the one-year period following the date of origination of the credit, 
refinance any high-cost mortgage to the same consumer into another high-
cost mortgage, unless the refinancing is in the consumer's interest. A 
creditor (or assignee) is prohibited from engaging in acts or practices 
to evade this provision, including a pattern or practice of arranging 
for the refinancing of its own loans by affiliated or unaffiliated 
creditors.
    (4) Repayment ability for high-cost mortgages. In connection with an 
open-end, high-cost mortgage, a creditor shall not open a plan for a 
consumer where credit is or will be extended without regard to the 
consumer's repayment ability as of account opening, including the 
consumer's current and reasonably expected income, employment, assets 
other than the collateral, and current obligations including any 
mortgage-related obligations that are required by another credit 
obligation undertaken prior to or at account opening, and are secured by 
the same dwelling that secures the high-cost mortgage transaction. The 
requirements set forth in Sec. 1026.34(a)(4)(i) through (iv) apply to 
open-end high-cost mortgages, but do not apply to closed-end high-cost 
mortgages. In connection with a closed-end, high-cost mortgage, a 
creditor must comply with the repayment ability requirements set forth 
in Sec. 1026.43. Temporary or ``bridge'' loans with terms of twelve 
months or less, such as a loan to purchase a new dwelling where the 
consumer plans to sell a current dwelling within twelve months, are 
exempt from this repayment ability requirement.
    (i) Mortgage-related obligations. For purposes of this paragraph 
(a)(4), mortgage-related obligations are property taxes; premiums and 
similar charges identified in Sec. 1026.4(b)(5), (7), (8), and (10) 
that are required by the creditor; fees and special assessments imposed 
by a condominium, cooperative, or homeowners association; ground rent; 
and leasehold payments.

[[Page 91]]

    (ii) Basis for determination of repayment ability. Under this 
paragraph (a)(4) a creditor must determine the consumer's repayment 
ability in connection with an open-end, high cost mortgage as follows:
    (A) A creditor must verify amounts of income or assets that it 
relies on to determine repayment ability, including expected income or 
assets, by the consumer's Internal Revenue Service Form W-2, tax 
returns, payroll receipts, financial institution records, or other 
third-party documents that provide reasonably reliable evidence of the 
consumer's income or assets.
    (B) A creditor must verify the consumer's current obligations, 
including any mortgage-related obligations that are required by another 
credit obligation undertaken prior to or at account opening, and are 
secured by the same dwelling that secures the high-cost mortgage 
transaction.
    (iii) Presumption of compliance. For an open-end, high cost 
mortgage, a creditor is presumed to have complied with this paragraph 
(a)(4) with respect to a transaction if the creditor:
    (A) Determines the consumer's repayment ability as provided in 
paragraph (a)(4)(ii);
    (B) Determines the consumer's repayment ability taking into account 
current obligations and mortgage-related obligations as defined in 
paragraph (a)(4)(i) of this section, and using the largest required 
minimum periodic payment based on the following assumptions:
    (1) The consumer borrows the full credit line at account opening 
with no additional extensions of credit;
    (2) The consumer makes only required minimum periodic payments 
during the draw period and any repayment period;
    (3) If the annual percentage rate may increase during the plan, the 
maximum annual percentage rate that is included in the contract, as 
required by Sec. 1026.30, applies to the plan at account opening and 
will apply during the draw period and any repayment period.
    (C) Assesses the consumer's repayment ability taking into account at 
least one of the following: The ratio of total current obligations, 
including any mortgage-related obligations that are required by another 
credit obligation undertaken prior to or at account opening, and are 
secured by the same dwelling that secures the high-cost mortgage 
transaction, to income, or the income the consumer will have after 
paying current obligations.
    (iv) Exclusions from presumption of compliance. Notwithstanding the 
previous paragraph, no presumption of compliance is available for an 
open-end, high-cost mortgage transaction for which the regular periodic 
payments when aggregated do not fully amortize the outstanding principal 
balance except as otherwise provided by Sec. 1026.32(d)(1)(ii).
    (5) Pre-loan counseling--(i) Certification of counseling required. A 
creditor shall not extend a high-cost mortgage to a consumer unless the 
creditor receives written certification that the consumer has obtained 
counseling on the advisability of the mortgage from a counselor that is 
approved to provide such counseling by the Secretary of the U.S. 
Department of Housing and Urban Development or, if permitted by the 
Secretary, by a State housing finance authority.
    (ii) Timing of counseling. The counseling required under this 
paragraph (a)(5) must occur after:
    (A) The consumer receives either the disclosure required by section 
5(c) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 
2604(c)) or the disclosures required by Sec. 1026.40; or
    (B) The consumer receives the disclosures required by Sec. 
1026.32(c), for transactions in which neither of the disclosures listed 
in paragraph (a)(5)(ii)(A) of this section are provided.
    (iii) Affiliation prohibited. The counseling required under this 
paragraph (a)(5) shall not be provided by a counselor who is employed by 
or affiliated with the creditor.
    (iv) Content of certification. The certification of counseling 
required under paragraph (a)(5)(i) must include:
    (A) The name(s) of the consumer(s) who obtained counseling;
    (B) The date(s) of counseling;
    (C) The name and address of the counselor;
    (D) A statement that the consumer(s) received counseling on the 
advisability of the high-cost mortgage based on the

[[Page 92]]

terms provided in either the disclosure required by section 5(c) of the 
Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604(c)) or the 
disclosures required by Sec. 1026.40.
    (E) For transactions for which neither of the disclosures listed in 
paragraph (a)(5)(ii)(A) of this section are provided, a statement that 
the consumer(s) received counseling on the advisability of the high-cost 
mortgage based on the terms provided in the disclosures required by 
Sec. 1026.32(c); and
    (F) A statement that the counselor has verified that the consumer(s) 
received the disclosures required by either Sec. 1026.32(c) or the Real 
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.) with 
respect to the transaction.
    (v) Counseling fees. A creditor may pay the fees of a counselor or 
counseling organization for providing counseling required under this 
paragraph (a)(5) but may not condition the payment of such fees on the 
consummation or account-opening of a mortgage transaction. If the 
consumer withdraws the application that would result in the extension of 
a high-cost mortgage, a creditor may not condition the payment of such 
fees on the receipt of certification from the counselor required by 
paragraph (a)(5)(i) of this section. A creditor may, however, confirm 
that a counselor has provided counseling to the consumer pursuant to 
this paragraph (a)(5) prior to paying the fee of a counselor or 
counseling organization.
    (vi) Steering prohibited. A creditor that extends a high-cost 
mortgage shall not steer or otherwise direct a consumer to choose a 
particular counselor or counseling organization for the counseling 
required under this paragraph (a)(5).
    (6) Recommended default. A creditor or mortgage broker, as defined 
in section 1026.36(a)(2), may not recommend or encourage default on an 
existing loan or other debt prior to and in connection with the 
consummation or account opening of a high-cost mortgage that refinances 
all or any portion of such existing loan or debt.
    (7) Modification and deferral fees. A creditor, successor-in-
interest, assignee, or any agent of such parties may not charge a 
consumer any fee to modify, renew, extend or amend a high-cost mortgage, 
or to defer any payment due under the terms of such mortgage.
    (8) Late fees--(i) General. Any late payment charge imposed in 
connection with a high-cost mortgage must be specifically permitted by 
the terms of the loan contract or open-end credit agreement and may not 
exceed 4 percent of the amount of the payment past due. No such charge 
may be imposed more than once for a single late payment.
    (ii) Timing. A late payment charge may be imposed in connection with 
a high-cost mortgage only if the payment is not received by the end of 
the 15-day period beginning on the date the payment is due or, in the 
case of a high-cost mortgage on which interest on each installment is 
paid in advance, the end of the 30-day period beginning on the date the 
payment is due.
    (iii) Multiple late charges assessed on payment subsequently paid. A 
late payment charge may not be imposed in connection with a high-cost 
mortgage payment if any delinquency is attributable only to a late 
payment charge imposed on an earlier payment, and the payment otherwise 
is a full payment for the applicable period and is paid by the due date 
or within any applicable grace period.
    (iv) Failure to make required payment. The terms of a high-cost 
mortgage agreement may provide that any payment shall first be applied 
to any past due balance. If the consumer fails to make a timely payment 
by the due date and subsequently resumes making payments but has not 
paid all past due payments, the creditor may impose a separate late 
payment charge for any payment(s) outstanding (without deduction due to 
late fees or related fees) until the default is cured.
    (9) Payoff statements--(i) Fee prohibition. In general, a creditor 
or servicer (as defined in 12 CFR 1024.2(b)) may not charge a fee for 
providing to a consumer, or a person authorized by the consumer to 
obtain such information, a statement of the amount due to pay off the 
outstanding balance of a high-cost mortgage.
    (ii) Processing fee. A creditor or servicer may charge a processing 
fee to cover the cost of providing a payoff statement, as described in 
paragraph

[[Page 93]]

(a)(9)(i) of this section, by fax or courier, provided that such fee may 
not exceed an amount that is comparable to fees imposed for similar 
services provided in connection with consumer credit transactions that 
are secured by the consumer's principal dwelling and are not high-cost 
mortgages. A creditor or servicer shall make a payoff statement 
available to a consumer, or a person authorized by the consumer to 
obtain such information, by a method other than by fax or courier and 
without charge pursuant to paragraph (a)(9)(i) of this section.
    (iii) Processing fee disclosure. Prior to charging a processing fee 
for provision of a payoff statement by fax or courier, as permitted 
pursuant to paragraph (a)(9)(ii) of this section, a creditor or servicer 
shall disclose to a consumer or a person authorized by the consumer to 
obtain the consumer's payoff statement that payoff statements, as 
described in paragraph (a)(9)(i) of this section, are available by a 
method other than by fax or courier without charge.
    (iv) Fees permitted after multiple requests. A creditor or servicer 
that has provided a payoff statement, as described in paragraph 
(a)(9)(i) of this section, to a consumer, or a person authorized by the 
consumer to obtain such information, without charge, other than the 
processing fee permitted under paragraph (a)(9)(ii) of this section, 
four times during a calendar year, may thereafter charge a reasonable 
fee for providing such statements during the remainder of the calendar 
year. Fees for payoff statements provided to a consumer, or a person 
authorized by the consumer to obtain such information, in a subsequent 
calendar year are subject to the requirements of this section.
    (v) Timing of delivery of payoff statements. A payoff statement, as 
described in paragraph (a)(9)(i) of this section, for a high-cost 
mortgage shall be provided by a creditor or servicer within five 
business days after receiving a request for such statement by a consumer 
or a person authorized by the consumer to obtain such statement.
    (10) Financing of points and fees. A creditor that extends credit 
under a high-cost mortgage may not finance charges that are required to 
be included in the calculation of points and fees, as that term is 
defined in Sec. 1026.32(b)(1) and (2). Credit insurance premiums or 
debt cancellation or suspension fees that are required to be included in 
points and fees under Sec. 1026.32(b)(1)(iv) or (2)(iv) shall not be 
considered financed by the creditor when they are calculated and paid in 
full on a monthly basis.
    (b) Prohibited acts or practices for dwelling-secured loans; 
structuring loans to evade high-cost mortgage requirements. A creditor 
shall not structure any transaction that is otherwise a high-cost 
mortgage in a form, for the purpose, and with the intent to evade the 
requirements of a high-cost mortgage subject to this subpart, including 
by dividing any loan transaction into separate parts.

[78 FR 6964, Jan. 31, 2013, as amended at 78 FR 30745, May 23, 2013; 78 
FR 63005, Oct. 23, 2013]



Sec. 1026.35  Requirements for higher-priced mortgage loans.

    (a) Definitions. For purposes of this section:
    (1) ``Higher-priced mortgage loan'' means a closed-end consumer 
credit transaction secured by the consumer's principal dwelling with an 
annual percentage rate that exceeds the average prime offer rate for a 
comparable transaction as of the date the interest rate is set:
    (i) By 1.5 or more percentage points for loans secured by a first 
lien with a principal obligation at consummation that does not exceed 
the limit in effect as of the date the transaction's interest rate is 
set for the maximum principal obligation eligible for purchase by 
Freddie Mac;
    (ii) By 2.5 or more percentage points for loans secured by a first 
lien with a principal obligation at consummation that exceeds the limit 
in effect as of the date the transaction's interest rate is set for the 
maximum principal obligation eligible for purchase by Freddie Mac; or
    (iii) By 3.5 or more percentage points for loans secured by a 
subordinate lien.
    (2) ``Average prime offer rate'' means an annual percentage rate 
that is derived from average interest rates,

[[Page 94]]

points, and other loan pricing terms currently offered to consumers by a 
representative sample of creditors for mortgage transactions that have 
low-risk pricing characteristics. The Bureau publishes average prime 
offer rates for a broad range of types of transactions in a table 
updated at least weekly as well as the methodology the Bureau uses to 
derive these rates.
    (b) Escrow accounts--(1) Requirement to escrow for property taxes 
and insurance. Except as provided in paragraph (b)(2) of this section, a 
creditor may not extend a higher-priced mortgage loan secured by a first 
lien on a consumer's principal dwelling unless an escrow account is 
established before consummation for payment of property taxes and 
premiums for mortgage-related insurance required by the creditor, such 
as insurance against loss of or damage to property, or against liability 
arising out of the ownership or use of the property, or insurance 
protecting the creditor against the consumer's default or other credit 
loss. For purposes of this paragraph (b), the term ``escrow account'' 
has the same meaning as under Regulation X (12 CFR 1024.17(b)), as 
amended.
    (2) Exemptions. Notwithstanding paragraph (b)(1) of this section:
    (i) An escrow account need not be established for:
    (A) A transaction secured by shares in a cooperative;
    (B) A transaction to finance the initial construction of a dwelling;
    (C) A temporary or ``bridge'' loan with a loan term of twelve months 
or less, such as a loan to purchase a new dwelling where the consumer 
plans to sell a current dwelling within twelve months; or
    (D) A reverse mortgage transaction subject to Sec. 1026.33.
    (ii) Insurance premiums described in paragraph (b)(1) of this 
section need not be included in escrow accounts for loans secured by 
dwellings in condominiums, planned unit developments, or other common 
interest communities in which dwelling ownership requires participation 
in a governing association, where the governing association has an 
obligation to the dwelling owners to maintain a master policy insuring 
all dwellings.
    (iii) Except as provided in paragraph (b)(2)(v) of this section, an 
escrow account need not be established for a transaction if, at the time 
of consummation:
    (A) During the preceding calendar year, or, if the application for 
the transaction was received before April 1 of the current calendar 
year, during either of the two preceding calendar years, the creditor 
extended a covered transaction, as defined by Sec. 1026.43(b)(1), 
secured by a first lien on a property that is located in an area that is 
either ``rural'' or ``underserved,'' as set forth in paragraph 
(b)(2)(iv) of this section;
    (B) During the preceding calendar year, or, if the application for 
the transaction was received before April 1 of the current calendar 
year, during either of the two preceding calendar years, the creditor 
and its affiliates together extended no more than 2,000 covered 
transactions, as defined by Sec. 1026.43(b)(1), secured by first liens, 
that were sold, assigned, or otherwise transferred to another person, or 
that were subject at the time of consummation to a commitment to be 
acquired by another person;
    (C) As of the preceding December 31st, or, if the application for 
the transaction was received before April 1 of the current calendar 
year, as of either of the two preceding December 31sts, the creditor and 
its affiliates that regularly extended covered transactions, as defined 
by Sec. 1026.43(b)(1), secured by first liens, together, had total 
assets of less than $2,000,000,000; this asset threshold shall adjust 
automatically each year, based on the year-to-year change in the average 
of the Consumer Price Index for Urban Wage Earners and Clerical Workers, 
not seasonally adjusted, for each 12-month period ending in November, 
with rounding to the nearest million dollars (see comment 35(b)(2)(iii)-
1.iii for the applicable threshold); and
    (D) Neither the creditor nor its affiliate maintains an escrow 
account of the type described in paragraph (b)(1) of this section for 
any extension of consumer credit secured by real property or a dwelling 
that the creditor or its affiliate currently services, other than:
    (1) Escrow accounts established for first-lien higher-priced 
mortgage loans

[[Page 95]]

for which applications were received on or after April 1, 2010, and 
before May 1, 2016; or
    (2) Escrow accounts established after consummation as an 
accommodation to distressed consumers to assist such consumers in 
avoiding default or foreclosure.
    (iv) For purposes of paragraph (b)(2)(iii)(A) of this section:
    (A) An area is ``rural'' during a calendar year if it is:
    (1) A county that is neither in a metropolitan statistical area nor 
in a micropolitan statistical area that is adjacent to a metropolitan 
statistical area, as those terms are defined by the U.S. Office of 
Management and Budget and as they are applied under currently applicable 
Urban Influence Codes (UICs), established by the United States 
Department of Agriculture's Economic Research Service (USDA-ERS);
    (2) A census block that is not in an urban area, as defined by the 
U.S. Census Bureau using the latest decennial census of the United 
States; or
    (3) A county or a census block that has been designated as rural by 
the Bureau pursuant to the application process established under section 
89002 of the Helping Expand Lending Practices in Rural Communities Act, 
Public Law 114-94, title LXXXIX (2015). The provisions of this paragraph 
(b)(2)(iv)(A)(3) shall cease to have any force or effect on December 4, 
2017.
    (B) An area is ``underserved'' during a calendar year if, according 
to Home Mortgage Disclosure Act (HMDA) data for the preceding calendar 
year, it is a county in which no more than two creditors extended 
covered transactions, as defined in Sec. 1026.43(b)(1), secured by 
first liens on properties in the county five or more times.
    (C) A property shall be deemed to be in an area that is rural or 
underserved in a particular calendar year if the property is:
    (1) Located in a county that appears on the lists published by the 
Bureau of counties that are rural or underserved, as defined by Sec. 
1026.35(b)(2)(iv)(A)(1) or Sec. 1026.35(b)(2)(iv)(B), for that calendar 
year,
    (2) Designated as rural or underserved for that calendar year by any 
automated tool that the Bureau provides on its public Web site, or
    (3) Not designated as located in an urban area, as defined by the 
most recent delineation of urban areas announced by the Census Bureau, 
by any automated address search tool that the U.S. Census Bureau 
provides on its public Web site for that purpose and that specifically 
indicates the urban or rural designations of properties.
    (v) Notwithstanding paragraph (b)(2)(iii) of this section, an escrow 
account must be established pursuant to paragraph (b)(1) of this section 
for any first-lien higher-priced mortgage loan that, at consummation, is 
subject to a commitment to be acquired by a person that does not satisfy 
the conditions in paragraph (b)(2)(iii) of this section, unless 
otherwise exempted by this paragraph (b)(2).
    (3) Cancellation--(i) General. Except as provided in paragraph 
(b)(3)(ii) of this section, a creditor or servicer may cancel an escrow 
account required in paragraph (b)(1) of this section only upon the 
earlier of:
    (A) Termination of the underlying debt obligation; or
    (B) Receipt no earlier than five years after consummation of a 
consumer's request to cancel the escrow account.
    (ii) Delayed cancellation. Notwithstanding paragraph (b)(3)(i) of 
this section, a creditor or servicer shall not cancel an escrow account 
pursuant to a consumer's request described in paragraph (b)(3)(i)(B) of 
this section unless the following conditions are satisfied:
    (A) The unpaid principal balance is less than 80 percent of the 
original value of the property securing the underlying debt obligation; 
and
    (B) The consumer currently is not delinquent or in default on the 
underlying debt obligation.
    (c) Appraisals--(1) Definitions. For purposes of this section:
    (i) Certified or licensed appraiser means a person who is certified 
or licensed by the State agency in the State in which the property that 
secures the transaction is located, and who performs the appraisal in 
conformity with the Uniform Standards of Professional Appraisal Practice 
and the requirements applicable to appraisers in title XI of

[[Page 96]]

the Financial Institutions Reform, Recovery, and Enforcement Act of 
1989, as amended (12 U.S.C. 3331 et seq.), and any implementing 
regulations in effect at the time the appraiser signs the appraiser's 
certification.
    (ii) Credit risk means the financial risk that a consumer will 
default on a loan.
    (iii) Manufactured home has the same meaning as in 24 CFR 3280.2.
    (iv) Manufacturer's invoice means a document issued by a 
manufacturer and provided with a manufactured home to a retail dealer 
that separately details the wholesale (base) prices at the factory for 
specific models or series of manufactured homes and itemized options 
(large appliances, built-in items and equipment), plus actual itemized 
charges for freight from the factory to the dealer's lot or the homesite 
(including any rental of wheels and axles) and for any sales taxes to be 
paid by the dealer. The invoice may recite such prices and charges on an 
itemized basis or by stating an aggregate price or charge, as 
appropriate, for each category.
    (v) National Registry means the database of information about State 
certified and licensed appraisers maintained by the Appraisal 
Subcommittee of the Federal Financial Institutions Examination Council.
    (vi) New manufactured home means a manufactured home that has not 
been previously occupied.
    (vii) State agency means a ``State appraiser certifying and 
licensing agency'' recognized in accordance with section 1118(b) of the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 
U.S.C. 3347(b)) and any implementing regulations.
    (2) Exemptions. Unless otherwise specified, the requirements in 
paragraph (c)(3) through (6) of this section do not apply to the 
following types of transactions:
    (i) A loan that satisfies the criteria of a qualified mortgage as 
defined pursuant to 15 U.S.C. 1639c;
    (ii) An extension of credit for which the amount of credit extended 
is equal to or less than the applicable threshold amount, which is 
adjusted every year to reflect increases in the Consumer Price Index for 
Urban Wage Earners and Clerical Workers, as applicable, and published in 
the official staff commentary to this paragraph (c)(2)(ii);
    (iii) A transaction secured by a mobile home, boat, or trailer.
    (iv) A transaction to finance the initial construction of a 
dwelling.
    (v) A loan with a maturity of 12 months or less, if the purpose of 
the loan is a ``bridge'' loan connected with the acquisition of a 
dwelling intended to become the consumer's principal dwelling.
    (vi) A reverse-mortgage transaction subject to 12 CFR 1026.33(a).
    (vii) An extension of credit that is a refinancing secured by a 
first lien, with refinancing defined as in Sec. 1026.20(a) (except that 
the creditor need not be the original creditor or a holder or servicer 
of the original obligation), provided that the refinancing meets the 
following criteria:
    (A) Either--
    (1) The credit risk of the refinancing is retained by the person 
that held the credit risk of the existing obligation and there is no 
commitment, at consummation, to transfer the credit risk to another 
person; or
    (2) The refinancing is insured or guaranteed by the same Federal 
government agency that insured or guaranteed the existing obligation;
    (B) The regular periodic payments under the refinance loan do not--
    (1) Cause the principal balance to increase;
    (2) Allow the consumer to defer repayment of principal; or
    (3) Result in a balloon payment, as defined in Sec. 
1026.18(s)(5)(i); and
    (C) The proceeds from the refinancing are used solely to satisfy the 
existing obligation and amounts attributed solely to the costs of the 
refinancing; and
    (viii) A transaction secured by:
    (A) A new manufactured home and land, but the exemption shall only 
apply to the requirement in paragraph (c)(3)(i) of this section that the 
appraiser conduct a physical visit of the interior of the new 
manufactured home; or
    (B) A manufactured home and not land, for which the creditor obtains 
one of the following and provides a copy to

[[Page 97]]

the consumer no later than three business days prior to consummation of 
the transaction--
    (1) For a new manufactured home, the manufacturer's invoice for the 
manufactured home securing the transaction, provided that the date of 
manufacture is no earlier than 18 months prior to the creditor's receipt 
of the consumer's application for credit;
    (2) A cost estimate of the value of the manufactured home securing 
the transaction obtained from an independent cost service provider; or
    (3) A valuation, as defined in Sec. 1026.42(b)(3), of the 
manufactured home performed by a person who has no direct or indirect 
interest, financial or otherwise, in the property or transaction for 
which the valuation is performed and has training in valuing 
manufactured homes.
    (3) Appraisals required--(i) In general. Except as provided in 
paragraph (c)(2) of this section, a creditor shall not extend a higher-
priced mortgage loan to a consumer without obtaining, prior to 
consummation, a written appraisal of the property to be mortgaged. The 
appraisal must be performed by a certified or licensed appraiser who 
conducts a physical visit of the interior of the property that will 
secure the transaction.
    (ii) Safe harbor. A creditor obtains a written appraisal that meets 
the requirements for an appraisal required under paragraph (c)(3)(i) of 
this section if the creditor:
    (A) Orders that the appraiser perform the appraisal in conformity 
with the Uniform Standards of Professional Appraisal Practice and title 
XI of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989, as amended (12 U.S.C. 3331 et seq.), and any implementing 
regulations in effect at the time the appraiser signs the appraiser's 
certification;
    (B) Verifies through the National Registry that the appraiser who 
signed the appraiser's certification was a certified or licensed 
appraiser in the State in which the appraised property is located as of 
the date the appraiser signed the appraiser's certification;
    (C) Confirms that the elements set forth in appendix N to this part 
are addressed in the written appraisal; and
    (D) Has no actual knowledge contrary to the facts or certifications 
contained in the written appraisal.
    (4) Additional appraisal for certain higher-priced mortgage loans--
(i) In general. Except as provided in paragraphs (c)(2) and (c)(4)(vii) 
of this section, a creditor shall not extend a higher-priced mortgage 
loan to a consumer to finance the acquisition of the consumer's 
principal dwelling without obtaining, prior to consummation, two written 
appraisals, if:
    (A) The seller acquired the property 90 or fewer days prior to the 
date of the consumer's agreement to acquire the property and the price 
in the consumer's agreement to acquire the property exceeds the seller's 
acquisition price by more than 10 percent; or
    (B) The seller acquired the property 91 to 180 days prior to the 
date of the consumer's agreement to acquire the property and the price 
in the consumer's agreement to acquire the property exceeds the seller's 
acquisition price by more than 20 percent.
    (ii) Different certified or licensed appraisers. The two appraisals 
required under paragraph (c)(4)(i) of this section may not be performed 
by the same certified or licensed appraiser.
    (iii) Relationship to general appraisal requirements. If two 
appraisals must be obtained under paragraph (c)(4)(i) of this section, 
each appraisal shall meet the requirements of paragraph (c)(3)(i) of 
this section.
    (iv) Required analysis in the additional appraisal. One of the two 
required appraisals must include an analysis of:
    (A) The difference between the price at which the seller acquired 
the property and the price that the consumer is obligated to pay to 
acquire the property, as specified in the consumer's agreement to 
acquire the property from the seller;
    (B) Changes in market conditions between the date the seller 
acquired the property and the date of the consumer's agreement to 
acquire the property; and
    (C) Any improvements made to the property between the date the 
seller acquired the property and the date of the consumer's agreement to 
acquire the property.

[[Page 98]]

    (v) No charge for the additional appraisal. If the creditor must 
obtain two appraisals under paragraph (c)(4)(i) of this section, the 
creditor may charge the consumer for only one of the appraisals.
    (vi) Creditor's determination of prior sale date and price--(A) 
Reasonable diligence. A creditor must obtain two written appraisals 
under paragraph (c)(4)(i) of this section unless the creditor can 
demonstrate by exercising reasonable diligence that the requirement to 
obtain two appraisals does not apply. A creditor acts with reasonable 
diligence if the creditor bases its determination on information 
contained in written source documents, such as the documents listed in 
Appendix O to this part.
    (B) Inability to determine prior sale date or price--modified 
requirements for additional appraisal. If, after exercising reasonable 
diligence, a creditor cannot determine whether the conditions in 
paragraphs (c)(4)(i)(A) and (c)(4)(i)(B) are present and therefore must 
obtain two written appraisals in accordance with paragraphs (c)(4)(i) 
through (v) of this section, one of the two appraisals shall include an 
analysis of the factors in paragraph (c)(4)(iv) of this section only to 
the extent that the information necessary for the appraiser to perform 
the analysis can be determined.
    (vii) Exemptions from the additional appraisal requirement. The 
additional appraisal required under paragraph (c)(4)(i) of this section 
shall not apply to extensions of credit that finance a consumer's 
acquisition of property:
    (A) From a local, State or Federal government agency;
    (B) From a person who acquired title to the property through 
foreclosure, deed-in-lieu of foreclosure, or other similar judicial or 
non-judicial procedure as a result of the person's exercise of rights as 
the holder of a defaulted mortgage loan;
    (C) From a non-profit entity as part of a local, State, or Federal 
government program under which the non-profit entity is permitted to 
acquire title to single-family properties for resale from a seller who 
acquired title to the property through the process of foreclosure, deed-
in-lieu of foreclosure, or other similar judicial or non-judicial 
procedure;
    (D) From a person who acquired title to the property by inheritance 
or pursuant to a court order of dissolution of marriage, civil union, or 
domestic partnership, or of partition of joint or marital assets to 
which the seller was a party;
    (E) From an employer or relocation agency in connection with the 
relocation of an employee;
    (F) From a servicemember, as defined in 50 U.S.C. App. 511(1), who 
received a deployment or permanent change of station order after the 
servicemember purchased the property;
    (G) Located in an area designated by the President as a federal 
disaster area, if and for as long as the Federal financial institutions 
regulatory agencies, as defined in 12 U.S.C. 3350(6), waive the 
requirements in title XI of the Financial Institutions Reform, Recovery, 
and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq.), and 
any implementing regulations in that area; or
    (H) Located in a rural county, as defined in 12 CFR 
1026.35(b)(2)(iv)(A).
    (5) Required disclosure--(i) In general. Except as provided in 
paragraph (c)(2) of this section, a creditor shall disclose the 
following statement, in writing, to a consumer who applies for a higher-
priced mortgage loan: ``We may order an appraisal to determine the 
property's value and charge you for this appraisal. We will give you a 
copy of any appraisal, even if your loan does not close. You can pay for 
an additional appraisal for your own use at your own cost.'' Compliance 
with the disclosure requirement in Regulation B, 12 CFR 1002.14(a)(2), 
satisfies the requirements of this paragraph.
    (ii) Timing of disclosure. The disclosure required by paragraph 
(c)(5)(i) of this section shall be delivered or placed in the mail no 
later than the third business day after the creditor receives the 
consumer's application for a higher-priced mortgage loan subject to 
paragraph (c) of this section. In the case of a loan that is not a 
higher-priced mortgage loan subject to paragraph (c) of this section at 
the time of application, but becomes a higher-

[[Page 99]]

priced mortgage loan subject to paragraph (c) of this section after 
application, the disclosure shall be delivered or placed in the mail not 
later than the third business day after the creditor determines that the 
loan is a higher-priced mortgage loan subject to paragraph (c) of this 
section.
    (6) Copy of appraisals--(i) In general. Except as provided in 
paragraph (c)(2) of this section, a creditor shall provide to the 
consumer a copy of any written appraisal performed in connection with a 
higher-priced mortgage loan pursuant to paragraphs (c)(3) and (c)(4) of 
this section.
    (ii) Timing. A creditor shall provide to the consumer a copy of each 
written appraisal pursuant to paragraph (c)(6)(i) of this section:
    (A) No later than three business days prior to consummation of the 
loan; or
    (B) In the case of a loan that is not consummated, no later than 30 
days after the creditor determines that the loan will not be 
consummated.
    (iii) Form of copy. Any copy of a written appraisal required by 
paragraph (c)(6)(i) of this section may be provided to the applicant in 
electronic form, subject to compliance with the consumer consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (iv) No charge for copy of appraisal. A creditor shall not charge 
the consumer for a copy of a written appraisal required to be provided 
to the consumer pursuant to paragraph (c)(6)(i) of this section.
    (7) Relation to other rules. The rules in this paragraph (c) were 
adopted jointly by the Federal Reserve Board (Board), the Office of the 
Comptroller of the Currency (OCC), the Federal Deposit Insurance 
Corporation, the National Credit Union Administration, the Federal 
Housing Finance Agency, and the Bureau. These rules are substantively 
identical to the Board's and the OCC's higher-priced mortgage loan 
appraisal rules published separately in 12 CFR 226.43 (for the Board) 
and in 12 CFR part 34, subpart G and 12 CFR part 164, subpart B (for the 
OCC).
    (d) Evasion; open-end credit. In connection with credit secured by a 
consumer's principal dwelling that does not meet the definition of open-
end credit in Sec. 1026.2(a)(20), a creditor shall not structure a 
home-secured loan as an open-end plan to evade the requirements of this 
section.

[78 FR 4753, Jan. 22, 2013, as amended at 78 FR 10442, Feb. 13, 2013; 78 
FR 30745, May 23, 2013; 78 FR 44718, July 24, 2013; 78 FR 60441, Oct. 1, 
2013; 78 FR 78585, 78586, Dec. 26, 2013; 80 FR 59967, Oct. 2, 2015; 81 
FR 16082, Mar. 25, 2016]



Sec. 1026.36  Prohibited acts or practices and certain requirements
for credit secured by a dwelling.

    (a) Definitions--(1) Loan originator. (i) For purposes of this 
section, the term ``loan originator'' means a person who, in expectation 
of direct or indirect compensation or other monetary gain or for direct 
or indirect compensation or other monetary gain, performs any of the 
following activities: takes an application, offers, arranges, assists a 
consumer in obtaining or applying to obtain, negotiates, or otherwise 
obtains or makes an extension of consumer credit for another person; or 
through advertising or other means of communication represents to the 
public that such person can or will perform any of these activities. The 
term ``loan originator'' includes an employee, agent, or contractor of 
the creditor or loan originator organization if the employee, agent, or 
contractor meets this definition. The term ``loan originator'' includes 
a creditor that engages in loan origination activities if the creditor 
does not finance the transaction at consummation out of the creditor's 
own resources, including by drawing on a bona fide warehouse line of 
credit or out of deposits held by the creditor. All creditors that 
engage in any of the foregoing loan origination activities are loan 
originators for purposes of paragraphs (f) and (g) of this section. The 
term does not include:
    (A) A person who does not take a consumer credit application or 
offer or negotiate credit terms available from a creditor, but who 
performs purely administrative or clerical tasks on behalf of a person 
who does engage in such activities.

[[Page 100]]

    (B) An employee of a manufactured home retailer who does not take a 
consumer credit application, offer or negotiate credit terms available 
from a creditor, or advise a consumer on credit terms (including rates, 
fees, and other costs) available from a creditor.
    (C) A person that performs only real estate brokerage activities and 
is licensed or registered in accordance with applicable State law, 
unless such person is compensated by a creditor or loan originator or by 
any agent of such creditor or loan originator for a particular consumer 
credit transaction subject to this section.
    (D) A seller financer that meets the criteria in paragraph (a)(4) or 
(a)(5) of this section, as applicable.
    (E) A servicer or servicer's employees, agents, and contractors who 
offer or negotiate terms for purposes of renegotiating, modifying, 
replacing, or subordinating principal of existing mortgages where 
consumers are behind in their payments, in default, or have a reasonable 
likelihood of defaulting or falling behind. This exception does not 
apply, however, to a servicer or servicer's employees, agents, and 
contractors who offer or negotiate a transaction that constitutes a 
refinancing under Sec. 1026.20(a) or obligates a different consumer on 
the existing debt.
    (ii) An ``individual loan originator'' is a natural person who meets 
the definition of ``loan originator'' in paragraph (a)(1)(i) of this 
section.
    (iii) A ``loan originator organization'' is any loan originator, as 
defined in paragraph (a)(1)(i) of this section, that is not an 
individual loan originator.
    (2) Mortgage broker. For purposes of this section, a mortgage broker 
with respect to a particular transaction is any loan originator that is 
not an employee of the creditor.
    (3) Compensation. The term ``compensation'' includes salaries, 
commissions, and any financial or similar incentive.
    (4) Seller financers; three properties. A person (as defined in 
Sec. 1026.2(a)(22)) that meets all of the following criteria is not a 
loan originator under paragraph (a)(1) of this section:
    (i) The person provides seller financing for the sale of three or 
fewer properties in any 12-month period to purchasers of such 
properties, each of which is owned by the person and serves as security 
for the financing.
    (ii) The person has not constructed, or acted as a contractor for 
the construction of, a residence on the property in the ordinary course 
of business of the person.
    (iii) The person provides seller financing that meets the following 
requirements:
    (A) The financing is fully amortizing.
    (B) The financing is one that the person determines in good faith 
the consumer has a reasonable ability to repay.
    (C) The financing has a fixed rate or an adjustable rate that is 
adjustable after five or more years, subject to reasonable annual and 
lifetime limitations on interest rate increases. If the financing 
agreement has an adjustable rate, the rate is determined by the addition 
of a margin to an index rate and is subject to reasonable rate 
adjustment limitations. The index the adjustable rate is based on is a 
widely available index such as indices for U.S. Treasury securities or 
LIBOR.
    (5) Seller financers; one property. A natural person, estate, or 
trust that meets all of the following criteria is not a loan originator 
under paragraph (a)(1) of this section:
    (i) The natural person, estate, or trust provides seller financing 
for the sale of only one property in any 12-month period to purchasers 
of such property, which is owned by the natural person, estate, or trust 
and serves as security for the financing.
    (ii) The natural person, estate, or trust has not constructed, or 
acted as a contractor for the construction of, a residence on the 
property in the ordinary course of business of the person.
    (iii) The natural person, estate, or trust provides seller financing 
that meets the following requirements:
    (A) The financing has a repayment schedule that does not result in 
negative amortization.
    (B) The financing has a fixed rate or an adjustable rate that is 
adjustable after five or more years, subject to reasonable annual and 
lifetime limitations on interest rate increases. If the financing 
agreement has an adjustable

[[Page 101]]

rate, the rate is determined by the addition of a margin to an index 
rate and is subject to reasonable rate adjustment limitations. The index 
the adjustable rate is based on is a widely available index such as 
indices for U.S. Treasury securities or LIBOR.
    (6) Credit terms. For purposes of this section, the term ``credit 
terms'' includes rates, fees, and other costs. Credit terms are selected 
based on the consumer's financial characteristics when those terms are 
selected based on any factors that may influence a credit decision, such 
as debts, income, assets, or credit history.
    (b) Scope. Paragraphs (c)(1) and (2) of this section apply to 
closed-end consumer credit transactions secured by a consumer's 
principal dwelling. Paragraph (c)(3) of this section applies to a 
consumer credit transaction secured by a dwelling. Paragraphs (d) 
through (i) of this section apply to closed-end consumer credit 
transactions secured by a dwelling. This section does not apply to a 
home equity line of credit subject to Sec. 1026.40, except that 
paragraphs (h) and (i) of this section apply to such credit when secured 
by the consumer's principal dwelling and paragraph (c)(3) applies to 
such credit when secured by a dwelling. Paragraphs (d) through (i) of 
this section do not apply to a loan that is secured by a consumer's 
interest in a timeshare plan described in 11 U.S.C. 101(53D).
    (c) Servicing practices. For purposes of this paragraph (c), the 
terms ``servicer'' and ``servicing'' have the same meanings as provided 
in 12 CFR 1024.2(b).
    (1) Payment processing. In connection with a consumer credit 
transaction secured by a consumer's principal dwelling:
    (i) Periodic payments. No servicer shall fail to credit a periodic 
payment to the consumer's loan account as of the date of receipt, except 
when a delay in crediting does not result in any charge to the consumer 
or in the reporting of negative information to a consumer reporting 
agency, or except as provided in paragraph (c)(1)(iii) of this section. 
A periodic payment, as used in this paragraph (c), is an amount 
sufficient to cover principal, interest, and escrow (if applicable) for 
a given billing cycle. A payment qualifies as a periodic payment even if 
it does not include amounts required to cover late fees, other fees, or 
non-escrow payments a servicer has advanced on a consumer's behalf.
    (ii) Partial payments. Any servicer that retains a partial payment, 
meaning any payment less than a periodic payment, in a suspense or 
unapplied funds account shall:
    (A) Disclose to the consumer the total amount of funds held in such 
suspense or unapplied funds account on the periodic statement as 
required by Sec. 1026.41(d)(3), if a periodic statement is required; 
and
    (B) On accumulation of sufficient funds to cover a periodic payment 
in any suspense or unapplied funds account, treat such funds as a 
periodic payment received in accordance with paragraph (c)(1)(i) of this 
section.
    (iii) Non-conforming payments. If a servicer specifies in writing 
requirements for the consumer to follow in making payments, but accepts 
a payment that does not conform to the requirements, the servicer shall 
credit the payment as of five days after receipt.
    (2) No pyramiding of late fees. In connection with a consumer credit 
transaction secured by a consumer's principal dwelling, a servicer shall 
not impose any late fee or delinquency charge for a payment if:
    (i) Such a fee or charge is attributable solely to failure of the 
consumer to pay a late fee or delinquency charge on an earlier payment; 
and
    (ii) The payment is otherwise a periodic payment received on the due 
date, or within any applicable courtesy period.
    (3) Payoff statements. In connection with a consumer credit 
transaction secured by a consumer's dwelling, a creditor, assignee or 
servicer, as applicable, must provide an accurate statement of the total 
outstanding balance that would be required to pay the consumer's 
obligation in full as of a specified date. The statement shall be sent 
within a reasonable time, but in no case more than seven business days, 
after receiving a written request from the consumer or any person acting 
on

[[Page 102]]

behalf of the consumer. When a creditor, assignee, or servicer, as 
applicable, is not able to provide the statement within seven business 
days of such a request because a loan is in bankruptcy or foreclosure, 
because the loan is a reverse mortgage or shared appreciation mortgage, 
or because of natural disasters or other similar circumstances, the 
payoff statement must be provided within a reasonable time. A creditor 
or assignee that does not currently own the mortgage loan or the 
mortgage servicing rights is not subject to the requirement in this 
paragraph (c)(3) to provide a payoff statement.
    (d) Prohibited payments to loan originators--(1) Payments based on a 
term of a transaction. (i) Except as provided in paragraph (d)(1)(iii) 
or (iv) of this section, in connection with a consumer credit 
transaction secured by a dwelling, no loan originator shall receive and 
no person shall pay to a loan originator, directly or indirectly, 
compensation in an amount that is based on a term of a transaction, the 
terms of multiple transactions by an individual loan originator, or the 
terms of multiple transactions by multiple individual loan originators. 
If a loan originator's compensation is based in whole or in part on a 
factor that is a proxy for a term of a transaction, the loan 
originator's compensation is based on a term of a transaction. A factor 
that is not itself a term of a transaction is a proxy for a term of the 
transaction if the factor consistently varies with that term over a 
significant number of transactions, and the loan originator has the 
ability, directly or indirectly, to add, drop, or change the factor in 
originating the transaction.
    (ii) For purposes of this paragraph (d)(1) only, a ``term of a 
transaction'' is any right or obligation of the parties to a credit 
transaction. The amount of credit extended is not a term of a 
transaction or a proxy for a term of a transaction, provided that 
compensation received by or paid to a loan originator, directly or 
indirectly, is based on a fixed percentage of the amount of credit 
extended; however, such compensation may be subject to a minimum or 
maximum dollar amount.
    (iii) An individual loan originator may receive, and a person may 
pay to an individual loan originator, compensation in the form of a 
contribution to a defined contribution plan that is a designated tax-
advantaged plan or a benefit under a defined benefit plan that is a 
designated tax-advantaged plan. In the case of a contribution to a 
defined contribution plan, the contribution shall not be directly or 
indirectly based on the terms of that individual loan originator's 
transactions. As used in this paragraph (d)(1)(iii), ``designated tax-
advantaged plan'' means any plan that meets the requirements of Internal 
Revenue Code section 401(a), 26 U.S.C. 401(a); employee annuity plan 
described in Internal Revenue Code section 403(a), 26 U.S.C. 403(a); 
simple retirement account, as defined in Internal Revenue Code section 
408(p), 26 U.S.C. 408(p); simplified employee pension described in 
Internal Revenue Code section 408(k), 26 U.S.C. 408(k); annuity contract 
described in Internal Revenue Code section 403(b), 26 U.S.C. 403(b); or 
eligible deferred compensation plan, as defined in Internal Revenue Code 
section 457(b), 26 U.S.C. 457(b).
    (iv) An individual loan originator may receive, and a person may pay 
to an individual loan originator, compensation under a non-deferred 
profits-based compensation plan (i.e., any arrangement for the payment 
of non-deferred compensation that is determined with reference to the 
profits of the person from mortgage-related business), provided that:
    (A) The compensation paid to an individual loan originator pursuant 
to this paragraph (d)(1)(iv) is not directly or indirectly based on the 
terms of that individual loan originator's transactions that are subject 
to this paragraph (d); and
    (B) At least one of the following conditions is satisfied:
    (1) The compensation paid to an individual loan originator pursuant 
to this paragraph (d)(1)(iv) does not, in the aggregate, exceed 10 
percent of the individual loan originator's total compensation 
corresponding to the time period for which the compensation under the 
non-deferred profits-based compensation plan is paid; or

[[Page 103]]

    (2) The individual loan originator was a loan originator for ten or 
fewer transactions subject to this paragraph (d) consummated during the 
12-month period preceding the date of the compensation determination.
    (2) Payments by persons other than consumer--(i) Dual compensation. 
(A) Except as provided in paragraph (d)(2)(i)(C) of this section, if any 
loan originator receives compensation directly from a consumer in a 
consumer credit transaction secured by a dwelling:
    (1) No loan originator shall receive compensation, directly or 
indirectly, from any person other than the consumer in connection with 
the transaction; and
    (2) No person who knows or has reason to know of the consumer-paid 
compensation to the loan originator (other than the consumer) shall pay 
any compensation to a loan originator, directly or indirectly, in 
connection with the transaction.
    (B) Compensation received directly from a consumer includes payments 
to a loan originator made pursuant to an agreement between the consumer 
and a person other than the creditor or its affiliates, under which such 
other person agrees to provide funds toward the consumer's costs of the 
transaction (including loan originator compensation).
    (C) If a loan originator organization receives compensation directly 
from a consumer in connection with a transaction, the loan originator 
organization may pay compensation to an individual loan originator, and 
the individual loan originator may receive compensation from the loan 
originator organization, subject to paragraph (d)(1) of this section.
    (ii) Exemption. A payment to a loan originator that is otherwise 
prohibited by section 129B(c)(2)(A) of the Truth in Lending Act is 
nevertheless permitted pursuant to section 129B(c)(2)(B) of the Act, 
regardless of whether the consumer makes any upfront payment of discount 
points, origination points, or fees, as described in section 
129B(c)(2)(B)(ii) of the Act, as long as the loan originator does not 
receive any compensation directly from the consumer as described in 
section 129B(c)(2)(B)(i) of the Act.
    (3) Affiliates. For purposes of this paragraph (d), affiliates shall 
be treated as a single ``person.''
    (e) Prohibition on steering--(1) General. In connection with a 
consumer credit transaction secured by a dwelling, a loan originator 
shall not direct or ``steer'' a consumer to consummate a transaction 
based on the fact that the originator will receive greater compensation 
from the creditor in that transaction than in other transactions the 
originator offered or could have offered to the consumer, unless the 
consummated transaction is in the consumer's interest.
    (2) Permissible transactions. A transaction does not violate 
paragraph (e)(1) of this section if the consumer is presented with loan 
options that meet the conditions in paragraph (e)(3) of this section for 
each type of transaction in which the consumer expressed an interest. 
For purposes of paragraph (e) of this section, the term ``type of 
transaction'' refers to whether:
    (i) A loan has an annual percentage rate that cannot increase after 
consummation;
    (ii) A loan has an annual percentage rate that may increase after 
consummation; or
    (iii) A loan is a reverse mortgage.
    (3) Loan options presented. A transaction satisfies paragraph (e)(2) 
of this section only if the loan originator presents the loan options 
required by that paragraph and all of the following conditions are met:
    (i) The loan originator must obtain loan options from a significant 
number of the creditors with which the originator regularly does 
business and, for each type of transaction in which the consumer 
expressed an interest, must present the consumer with loan options that 
include:
    (A) The loan with the lowest interest rate;
    (B) The loan with the lowest interest rate without negative 
amortization, a prepayment penalty, interest-only payments, a balloon 
payment in the first 7 years of the life of the loan, a demand feature, 
shared equity, or shared appreciation; or, in the case of a reverse 
mortgage, a loan without a prepayment penalty, or shared equity or 
shared appreciation; and

[[Page 104]]

    (C) The loan with the lowest total dollar amount of discount points, 
origination points or origination fees (or, if two or more loans have 
the same total dollar amount of discount points, origination points or 
origination fees, the loan with the lowest interest rate that has the 
lowest total dollar amount of discount points, origination points or 
origination fees).
    (ii) The loan originator must have a good faith belief that the 
options presented to the consumer pursuant to paragraph (e)(3)(i) of 
this section are loans for which the consumer likely qualifies.
    (iii) For each type of transaction, if the originator presents to 
the consumer more than three loans, the originator must highlight the 
loans that satisfy the criteria specified in paragraph (e)(3)(i) of this 
section.
    (4) Number of loan options presented. The loan originator can 
present fewer than three loans and satisfy paragraphs (e)(2) and 
(e)(3)(i) of this section if the loan(s) presented to the consumer 
satisfy the criteria of the options in paragraph (e)(3)(i) of this 
section and the provisions of paragraph (e)(3) of this section are 
otherwise met.
    (f) Loan originator qualification requirements. A loan originator 
for a consumer credit transaction secured by a dwelling must, when 
required by applicable State or Federal law, be registered and licensed 
in accordance with those laws, including the Secure and Fair Enforcement 
for Mortgage Licensing Act of 2008 (SAFE Act, 12 U.S.C. 5102 et seq.), 
its implementing regulations (12 CFR part 1007 or part 1008), and State 
SAFE Act implementing law. To comply with this paragraph (f), a loan 
originator organization that is not a government agency or State housing 
finance agency must:
    (1) Comply with all applicable State law requirements for legal 
existence and foreign qualification;
    (2) Ensure that each individual loan originator who works for the 
loan originator organization is licensed or registered to the extent the 
individual is required to be licensed or registered under the SAFE Act, 
its implementing regulations, and State SAFE Act implementing law before 
the individual acts as a loan originator in a consumer credit 
transaction secured by a dwelling; and
    (3) For each of its individual loan originator employees who is not 
required to be licensed and is not licensed as a loan originator 
pursuant to Sec. 1008.103 of this chapter or State SAFE Act 
implementing law:
    (i) Obtain for any individual whom the loan originator organization 
hired on or after January 1, 2014 (or whom the loan originator 
organization hired before this date but for whom there were no 
applicable statutory or regulatory background standards in effect at the 
time of hire or before January 1, 2014, used to screen the individual) 
and for any individual regardless of when hired who, based on reliable 
information known to the loan originator organization, likely does not 
meet the standards under Sec. 1026.36(f)(3)(ii), before the individual 
acts as a loan originator in a consumer credit transaction secured by a 
dwelling:
    (A) A criminal background check through the Nationwide Mortgage 
Licensing System and Registry (NMLSR) or, in the case of an individual 
loan originator who is not a registered loan originator under the NMLSR, 
a criminal background check from a law enforcement agency or commercial 
service;
    (B) A credit report from a consumer reporting agency described in 
section 603(p) of the Fair Credit Reporting Act (15 U.S.C. 1681a(p)) 
secured, where applicable, in compliance with the requirements of 
section 604(b) of the Fair Credit Reporting Act, 15 U.S.C. 1681b(b); and
    (C) Information from the NMLSR about any administrative, civil, or 
criminal findings by any government jurisdiction or, in the case of an 
individual loan originator who is not a registered loan originator under 
the NMLSR, such information from the individual loan originator;
    (ii) Determine on the basis of the information obtained pursuant to 
paragraph (f)(3)(i) of this section and any other information reasonably 
available to the loan originator organization, for any individual whom 
the loan originator organization hired on or after January 1, 2014 (or 
whom the loan originator organization hired before

[[Page 105]]

this date but for whom there were no applicable statutory or regulatory 
background standards in effect at the time of hire or before January 1, 
2014, used to screen the individual) and for any individual regardless 
of when hired who, based on reliable information known to the loan 
originator organization, likely does not meet the standards under this 
paragraph (f)(3)(ii), before the individual acts as a loan originator in 
a consumer credit transaction secured by a dwelling, that the individual 
loan originator:
    (A)(1) Has not been convicted of, or pleaded guilty or nolo 
contendere to, a felony in a domestic or military court during the 
preceding seven-year period or, in the case of a felony involving an act 
of fraud, dishonesty, a breach of trust, or money laundering, at any 
time;
    (2) For purposes of this paragraph (f)(3)(ii)(A):
    (i) A crime is a felony only if at the time of conviction it was 
classified as a felony under the law of the jurisdiction under which the 
individual was convicted;
    (ii) Expunged convictions and pardoned convictions do not render an 
individual unqualified; and
    (iii) A conviction or plea of guilty or nolo contendere does not 
render an individual unqualified under this Sec. 1026.36(f) if the loan 
originator organization has obtained consent to employ the individual 
from the Federal Deposit Insurance Corporation (or the Board of 
Governors of the Federal Reserve System, as applicable) pursuant to 
section 19 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1829, 
the National Credit Union Administration pursuant to section 205 of the 
Federal Credit Union Act (FCUA), 12 U.S.C. 1785(d), or the Farm Credit 
Administration pursuant to section 5.65(d) of the Farm Credit Act of 
1971 (FCA), 12 U.S.C. 227a-14(d), notwithstanding the bars posed with 
respect to that conviction or plea by the FDIA, FCUA, and FCA, as 
applicable; and
    (B) Has demonstrated financial responsibility, character, and 
general fitness such as to warrant a determination that the individual 
loan originator will operate honestly, fairly, and efficiently; and
    (iii) Provide periodic training covering Federal and State law 
requirements that apply to the individual loan originator's loan 
origination activities.
    (g) Name and NMLSR ID on loan documents. (1) For a consumer credit 
transaction secured by a dwelling, a loan originator organization must 
include on the loan documents described in paragraph (g)(2) of this 
section, whenever each such loan document is provided to a consumer or 
presented to a consumer for signature, as applicable:
    (i) Its name and NMLSR ID, if the NMLSR has provided it an NMLSR ID; 
and
    (ii) The name of the individual loan originator (as the name appears 
in the NMLSR) with primary responsibility for the origination and, if 
the NMLSR has provided such person an NMLSR ID, that NMLSR ID.
    (2) The loan documents that must include the names and NMLSR IDs 
pursuant to paragraph (g)(1) of this section are:
    (i) The credit application;
    (ii) The disclosures required by Sec. 1026.19 (e) and (f);
    (iii) The note or loan contract; and
    (iv) The security instrument.
    (3) For purposes of this section, NMLSR ID means a number assigned 
by the Nationwide Mortgage Licensing System and Registry to facilitate 
electronic tracking and uniform identification of loan originators and 
public access to the employment history of, and the publicly adjudicated 
disciplinary and enforcement actions against, loan originators.
    (h) Prohibition on mandatory arbitration clauses and waivers of 
certain consumer rights--(1) Arbitration. A contract or other agreement 
for a consumer credit transaction secured by a dwelling (including a 
home equity line of credit secured by the consumer's principal dwelling) 
may not include terms that require arbitration or any other non-judicial 
procedure to resolve any controversy or settle any claims arising out of 
the transaction. This prohibition does not limit a consumer and creditor 
or any assignee from agreeing, after a dispute or claim under the 
transaction arises, to settle or use arbitration or other non-judicial 
procedure to resolve that dispute or claim.

[[Page 106]]

    (2) No waivers of Federal statutory causes of action. A contract or 
other agreement relating to a consumer credit transaction secured by a 
dwelling (including a home equity line of credit secured by the 
consumer's principal dwelling) may not be applied or interpreted to bar 
a consumer from bringing a claim in court pursuant to any provision of 
law for damages or other relief in connection with any alleged violation 
of any Federal law. This prohibition does not limit a consumer and 
creditor or any assignee from agreeing, after a dispute or claim under 
the transaction arises, to settle or use arbitration or other non-
judicial procedure to resolve that dispute or claim.
    (i) Prohibition on financing credit insurance. (1) A creditor may 
not finance, directly or indirectly, any premiums or fees for credit 
insurance in connection with a consumer credit transaction secured by a 
dwelling (including a home equity line of credit secured by the 
consumer's principal dwelling). This prohibition does not apply to 
credit insurance for which premiums or fees are calculated and paid in 
full on a monthly basis.
    (2) For purposes of this paragraph (i):
    (i) ``Credit insurance'':
    (A) Means credit life, credit disability, credit unemployment, or 
credit property insurance, or any other accident, loss-of-income, life, 
or health insurance, or any payments directly or indirectly for any debt 
cancellation or suspension agreement or contract, but
    (B) Excludes credit unemployment insurance for which the 
unemployment insurance premiums are reasonable, the creditor receives no 
direct or indirect compensation in connection with the unemployment 
insurance premiums, and the unemployment insurance premiums are paid 
pursuant to a separate insurance contract and are not paid to an 
affiliate of the creditor;
    (ii) A creditor finances premiums or fees for credit insurance if it 
provides a consumer the right to defer payment of a credit insurance 
premium or fee owed by the consumer beyond the monthly period in which 
the premium or fee is due; and
    (iii) Credit insurance premiums or fees are calculated on a monthly 
basis if they are determined mathematically by multiplying a rate by the 
actual monthly outstanding balance.
    (j) Policies and procedures to ensure and monitor compliance. (1) A 
depository institution must establish and maintain written policies and 
procedures reasonably designed to ensure and monitor the compliance of 
the depository institution, its employees, its subsidiaries, and its 
subsidiaries' employees with the requirements of paragraphs (d), (e), 
(f), and (g) of this section. These written policies and procedures must 
be appropriate to the nature, size, complexity, and scope of the 
mortgage lending activities of the depository institution and its 
subsidiaries.
    (2) For purposes of this paragraph (j), ``depository institution'' 
has the meaning in section 1503(3) of the SAFE Act, 12 U.S.C. 5102(3). 
For purposes of this paragraph (j), ``subsidiary'' has the meaning in 
section 3 of the Federal Deposit Insurance Act, 12 U.S.C. 1813.
    (k) Negative amortization counseling. (1) Counseling required. A 
creditor shall not extend credit to a first-time borrower in connection 
with a closed-end transaction secured by a dwelling, other than a 
reverse mortgage transaction subject to Sec. 1026.33 or a transaction 
secured by a consumer's interest in a timeshare plan described in 11 
U.S.C. 101(53D), that may result in negative amortization, unless the 
creditor receives documentation that the consumer has obtained 
homeownership counseling from a counseling organization or counselor 
certified or approved by the U.S. Department of Housing and Urban 
Development to provide such counseling.
    (2) Definitions. For the purposes of this paragraph (k), the 
following definitions apply:
    (i) A ``first-time borrower'' means a consumer who has not 
previously received a closed-end credit transaction or open-end credit 
plan secured by a dwelling.
    (ii) ``Negative amortization'' means a payment schedule with regular 
periodic payments that cause the principal balance to increase.
    (3) Steering prohibited. A creditor that extends credit to a first-
time borrower in connection with a closed-end transaction secured by a 
dwelling, other

[[Page 107]]

than a reverse mortgage transaction subject to Sec. 1026.33 or a 
transaction secured by a consumer's interest in a timeshare plan 
described in 11 U.S.C. 101(53D), that may result in negative 
amortization shall not steer or otherwise direct a consumer to choose a 
particular counselor or counseling organization for the counseling 
required under this paragraph (k).

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 6966, Jan. 31, 2013; 78 
FR 11006, Feb. 14, 2013; 78 FR 11410, Feb. 15, 2013; 78 FR 60441, Oct. 
1, 2013; 80 FR 8776, Feb. 19, 2015]

    Effective Date Note: At 81 FR 72388, Oct. 19, 2016, Sec. 1026.36 
was amended by revising the introductory text of paragraphs (c)(1) and 
(2), effective Oct. 19, 2017. For the convenience of the user, the 
revised text is set forth as follows:



Sec. 1026.36  Prohibited acts or practices and certain requirements for 
          credit secured by a dwelling.

                                * * * * *

    (c) * * *
    (1) Payment processing. In connection with a closed-end consumer 
credit transaction secured by a consumer's principal dwelling:

                                * * * * *

    (2) No pyramiding of late fees. In connection with a closed-end 
consumer credit transaction secured by a consumer's principal dwelling, 
a servicer shall not impose any late fee or delinquency charge for a 
payment if:

                                * * * * *



Sec. 1026.37  Content of disclosures for certain mortgage transactions
(Loan Estimate).

    For each transaction subject to Sec. 1026.19(e), the creditor shall 
disclose the information in this section:
    (a) General information--(1) Form title. The title of the form, 
``Loan Estimate,'' using that term.
    (2) Form purpose. The statement, ``Save this Loan Estimate to 
compare with your Closing Disclosure.''
    (3) Creditor. The name and address of the creditor making the 
disclosures.
    (4) Date issued. The date the disclosures are mailed or delivered to 
the consumer by the creditor, labeled ``Date Issued.''
    (5) Applicants. The name and mailing address of the consumer(s) 
applying for the credit, labeled ``Applicants.''
    (6) Property. The address including the zip code of the property 
that secures or will secure the transaction, or if the address is 
unavailable, the location of such property including a zip code, labeled 
``Property.''
    (7) Sale price. (i) For transactions that involve a seller, the 
contract sale price of the property identified in paragraph (a)(6) of 
this section, labeled ``Sale Price.''
    (ii) For transactions that do not involve a seller, the estimated 
value of the property identified in paragraph (a)(6), labeled ``Prop. 
Value.''
    (8) Loan term. The term to maturity of the credit transaction, 
stated in years or months, or both, as applicable, labeled ``Loan 
Term.''
    (9) Purpose. The consumer's intended use for the credit, labeled 
``Purpose,'' using one of the following terms:
    (i) Purchase. If the credit is to finance the acquisition of the 
property identified in paragraph (a)(6) of this section, the creditor 
shall disclose that the loan is for a ``Purchase.''
    (ii) Refinance. If the credit is not for the purpose described in 
paragraph (a)(9)(i) of this section, and if the credit will be used to 
refinance an existing obligation, as defined in Sec. 1026.20(a) (but 
without regard to whether the creditor is the original creditor or a 
holder or servicer of the original obligation), that is secured by the 
property identified in paragraph (a)(6) of this section, the creditor 
shall disclose that the loan is for a ``Refinance.''
    (iii) Construction. If the credit is not for one of the purposes 
described in paragraphs (a)(9)(i) or (ii) of this section and the credit 
will be used to finance the initial construction of a dwelling on the 
property identified in paragraph (a)(6) of this section, the creditor 
shall disclose that the loan is for ``Construction.''
    (iv) Home equity loan. If the credit is not for one of the purposes 
described in paragraphs (a)(9)(i) through (iii) of this section, the 
creditor shall disclose that the loan is a ``Home Equity Loan.''
    (10) Product. A description of the loan product, labeled 
``Product.''

[[Page 108]]

    (i) The description of the loan product shall include one of the 
following terms:
    (A) Adjustable rate. If the interest rate may increase after 
consummation, but the rates that will apply or the periods for which 
they will apply are not known at consummation, the creditor shall 
disclose the loan product as an ``Adjustable Rate.''
    (B) Step rate. If the interest rate will change after consummation, 
and the rates that will apply and the periods for which they will apply 
are known at consummation, the creditor shall disclose the loan product 
as a ``Step Rate.''
    (C) Fixed rate. If the loan product is not an Adjustable Rate or a 
Step Rate, as described in paragraphs (a)(10)(i)(A) and (B) of this 
section, respectively, the creditor shall disclose the loan product as a 
``Fixed Rate.''
    (ii) The description of the loan product shall include the features 
that may change the periodic payment using the following terms, subject 
to paragraph (a)(10)(iii) of this section, as applicable:
    (A) Negative amortization. If the principal balance may increase due 
to the addition of accrued interest to the principal balance, the 
creditor shall disclose that the loan product has a ``Negative 
Amortization'' feature.
    (B) Interest only. If one or more regular periodic payments may be 
applied only to interest accrued and not to the loan principal, the 
creditor shall disclose that the loan product has an ``Interest Only'' 
feature.
    (C) Step payment. If scheduled variations in regular periodic 
payment amounts occur that are not caused by changes to the interest 
rate during the loan term, the creditor shall disclose that the loan 
product has a ``Step Payment'' feature.
    (D) Balloon payment. If the terms of the legal obligation include a 
``balloon payment,'' as that term is defined in paragraph (b)(5) of this 
section, the creditor shall disclose that the loan has a ``Balloon 
Payment'' feature.
    (E) Seasonal payment. If the terms of the legal obligation expressly 
provide that regular periodic payments are not scheduled between 
specified unit-periods on a regular basis, the creditor shall disclose 
that the loan product has a ``Seasonal Payment'' feature.
    (iii) The disclosure of a loan feature under paragraph (a)(10)(ii) 
of this section shall precede the disclosure of the loan product under 
paragraph (a)(10)(i) of this section. If a transaction has more than one 
of the loan features described in paragraph (a)(10)(ii) of this section, 
the creditor shall disclose only the first applicable feature in the 
order the features are listed in paragraph (a)(10)(ii) of this section.
    (iv) The disclosures required by paragraphs (a)(10)(i)(A) and (B), 
and (a)(10)(ii)(A) through (D) of this section must each be preceded by 
the duration of any introductory rate or payment period, and the first 
adjustment period, as applicable.
    (11) Loan type. The type of loan, labeled ``Loan Type,'' offered to 
the consumer using one of the following terms, as applicable:
    (i) Conventional. If the loan is not guaranteed or insured by a 
Federal or State government agency, the creditor shall disclose that the 
loan is a ``Conventional.''
    (ii) FHA. If the loan is insured by the Federal Housing 
Administration, the creditor shall disclose that the loan is an ``FHA.''
    (iii) VA. If the loan is guaranteed by the U.S. Department of 
Veterans Affairs, the creditor shall disclose that the loan is a ``VA.''
    (iv) Other. For federally-insured or guaranteed loans other than 
those described in paragraphs (a)(11)(ii) and (iii) of this section, and 
for loans insured or guaranteed by a State agency, the creditor shall 
disclose the loan type as ``Other,'' and provide a brief description of 
the loan type.
    (12) Loan identification number (Loan ID #). A number that may be 
used by the creditor, consumer, and other parties to identify the 
transaction, labeled ``Loan ID .''
    (13) Rate lock. A statement of whether the interest rate disclosed 
pursuant to paragraph (b)(2) of this section is locked for a specific 
period of time, labeled ``Rate Lock.''
    (i) For transactions in which the interest rate is locked for a 
specific period of time, the creditor must provide

[[Page 109]]

the date and time (including the applicable time zone) when that period 
ends.
    (ii) The ``Rate Lock'' statement required by this paragraph (a)(13) 
shall be accompanied by a statement that the interest rate, any points, 
and any lender credits may change unless the interest rate has been 
locked, and the date and time (including the applicable time zone) at 
which estimated closing costs expire.
    (b) Loan terms. A separate table under the heading ``Loan Terms'' 
that contains the following information and satisfies the following 
requirements:
    (1) Loan amount. The amount of credit to be extended under the terms 
of the legal obligation, labeled ``Loan Amount.''
    (2) Interest rate. The interest rate that will be applicable to the 
transaction at consummation, labeled ``Interest Rate.'' For an 
adjustable rate transaction, if the interest rate at consummation is not 
known, the rate disclosed shall be the fully-indexed rate, which, for 
purposes of this paragraph, means the interest rate calculated using the 
index value and margin at the time of consummation.
    (3) Principal and interest payment. The initial periodic payment 
amount that will be due under the terms of the legal obligation, labeled 
``Principal & Interest,'' immediately preceded by the applicable unit-
period, and a statement referring to the payment amount that includes 
any mortgage insurance and escrow payments that is required to be 
disclosed pursuant to paragraph (c) of this section. If the interest 
rate at consummation is not known, the amount disclosed shall be 
calculated using the fully-indexed rate disclosed under paragraph (b)(2) 
of this section.
    (4) Prepayment penalty. A statement of whether the transaction 
includes a prepayment penalty, labeled ``Prepayment Penalty.'' For 
purposes of this paragraph (b)(4), ``prepayment penalty'' means a charge 
imposed for paying all or part of a transaction's principal before the 
date on which the principal is due, other than a waived, bona fide 
third-party charge that the creditor imposes if the consumer prepays all 
of the transaction's principal sooner than 36 months after consummation.
    (5) Balloon payment. A statement of whether the transaction includes 
a balloon payment, labeled ``Balloon Payment.'' For purposes of this 
paragraph (b)(5), ``balloon payment'' means a payment that is more than 
two times a regular periodic payment. ``Balloon payment'' includes the 
payment or payments under a transaction that requires only one or two 
payments during the loan term.
    (6) Adjustments after consummation. For each amount required to be 
disclosed by paragraphs (b)(1) through (3) of this section, a statement 
of whether the amount may increase after consummation as an affirmative 
or negative answer to the question, and under such question disclosed as 
a subheading, ``Can this amount increase after closing?'' and, in the 
case of an affirmative answer, the following additional information, as 
applicable:
    (i) Adjustment in loan amount. The maximum principal balance for the 
transaction and the due date of the last payment that may cause the 
principal balance to increase. The disclosure further shall indicate 
whether the maximum principal balance is potential or is scheduled to 
occur under the terms of the legal obligation.
    (ii) Adjustment in interest rate. The frequency of interest rate 
adjustments, the date when the interest rate may first adjust, the 
maximum interest rate, and the first date when the interest rate can 
reach the maximum interest rate, followed by a reference to the 
disclosure required by paragraph (j) of this section. If the loan term, 
as defined under paragraph (a)(8) of this section, may increase based on 
an interest rate adjustment, the disclosure required by this paragraph 
(b)(6)(ii) shall also state that fact and the maximum possible loan term 
determined in accordance with paragraph (a)(8) of this section.
    (iii) Increase in periodic payment. The scheduled frequency of 
adjustments to the periodic principal and interest payment, the due date 
of the first adjusted principal and interest payment, the maximum 
possible periodic principal and interest payment, and the date when the 
periodic principal and interest payment may first equal the maximum 
principal and interest payment.

[[Page 110]]

If any adjustments to the principal and interest payment are not the 
result of a change to the interest rate, a reference to the disclosure 
required by paragraph (i) of this section. If there is a period during 
which only interest is required to be paid, the disclosure required by 
this paragraph (b)(6)(iii) shall also state that fact and the due date 
of the last periodic payment of such period.
    (7) Details about prepayment penalty and balloon payment. The 
information required to be disclosed by paragraphs (b)(4) and (5) of 
this section shall be disclosed as an affirmative or negative answer to 
the question, and under such question disclosed as a subheading, ``Does 
the loan have these features?'' If an affirmative answer for a 
prepayment penalty or balloon payment is required to be disclosed, the 
following information shall be included, as applicable:
    (i) The maximum amount of the prepayment penalty that may be imposed 
and the date when the period during which the penalty may be imposed 
terminates; and
    (ii) The maximum amount of the balloon payment and the due date of 
such payment.
    (8) Timing. (i) The dates required to be disclosed by paragraph 
(b)(6)(ii) of this section shall be disclosed as the year in which the 
event occurs, counting from the date that interest for the first 
scheduled periodic payment begins to accrue after consummation.
    (ii) The dates required to be disclosed by paragraphs (b)(6)(i), 
(b)(6)(iii) and (b)(7)(ii) of this section shall be disclosed as the 
year in which the event occurs, counting from the due date of the 
initial periodic payment.
    (iii) The date required to be disclosed by paragraph (b)(7)(i) of 
this section shall be disclosed as the year in which the event occurs, 
counting from the date of consummation.
    (c) Projected payments. In a separate table under the heading 
``Projected Payments,'' an itemization of each separate periodic payment 
or range of payments, together with an estimate of taxes, insurance, and 
assessments and the payments to be made with escrow account funds.
    (1) Periodic payment or range of payments. (i) The initial periodic 
payment or range of payments is a separate periodic payment or range of 
payments and, except as otherwise provided in paragraph (c)(1)(ii) and 
(iii) of this section, the following events require the disclosure of 
additional separate periodic payments or ranges of payments:
    (A) The periodic principal and interest payment or range of such 
payments may change;
    (B) A scheduled balloon payment, as defined in paragraph (b)(5) of 
this section;
    (C) The creditor must automatically terminate mortgage insurance or 
any functional equivalent under applicable law; and
    (D) The anniversary of the due date of the initial periodic payment 
or range of payments that immediately follows the occurrence of multiple 
events described in paragraph (c)(1)(i)(A) of this section during a 
single year.
    (ii) The table required by this paragraph (c) shall not disclose 
more than four separate periodic payments or ranges of payments. For all 
events requiring disclosure of additional separate periodic payments or 
ranges of payments described in paragraph (c)(1)(i)(A) through (D) of 
this section occurring after the third separate periodic payment or 
range of payments disclosed, the separate periodic payments or ranges of 
payments shall be disclosed as a single range of payments, subject to 
the following exceptions:
    (A) A balloon payment that is scheduled as a final payment under the 
terms of the legal obligation shall always be disclosed as a separate 
periodic payment or range of payments, in which case all events 
requiring disclosure of additional separate periodic payments or ranges 
of payments described in paragraph (c)(1)(i)(A) through (D) of this 
section occurring after the second separate periodic payment or range of 
payments disclosed, other than the balloon payment that is scheduled as 
a final payment, shall be disclosed as a single range of payments.
    (B) The automatic termination of mortgage insurance or any 
functional equivalent under applicable law shall

[[Page 111]]

require disclosure of an additional separate periodic payment or range 
of payments only if the total number of separate periodic payments or 
ranges of payments otherwise disclosed pursuant to this paragraph (c)(1) 
does not exceed three.
    (iii) When a range of payments is required to be disclosed under 
this paragraph (c)(1), the creditor must disclose the minimum and 
maximum amount for both the principal and interest payment under 
paragraph (c)(2)(i) of this section and the total periodic payment under 
paragraph (c)(2)(iv) of this section. A range of payments is required to 
be disclosed under this paragraph (c)(1) when:
    (A) Multiple events described in paragraph (c)(1)(i) of this section 
are combined in a single range of payments pursuant to paragraph 
(c)(1)(ii) of this section;
    (B) Multiple events described in paragraph (c)(1)(i)(A) of this 
section occur during a single year or an event described in paragraph 
(c)(1)(i)(A) of this section occurs during the same year as the initial 
periodic payment or range of payments, in which case the creditor 
discloses the range of payments that would apply during the year in 
which the events occur; or
    (C) The periodic principal and interest payment may adjust based on 
index rates at the time an interest rate adjustment may occur.
    (2) Itemization. Each separate periodic payment or range of payments 
disclosed on the table required by this paragraph (c) shall be itemized 
as follows:
    (i) The amount payable for principal and interest, labeled 
``Principal & Interest,'' including the term ``only interest'' if the 
payment or range of payments includes any interest only payment:
    (A) In the case of a loan that has an adjustable interest rate, the 
maximum principal and interest payment amounts are determined by 
assuming that the interest rate in effect throughout the loan term is 
the maximum possible interest rate, and the minimum amounts are 
determined by assuming that the interest rate in effect throughout the 
loan term is the minimum possible interest rate;
    (B) In the case of a loan that has an adjustable interest rate and 
also contains a negative amortization feature, the maximum principal and 
interest payment amounts after the end of the period of the loan's term 
during which the loan's principal balance may increase due to the 
addition of accrued interest are determined by assuming the maximum 
principal amount permitted under the terms of the legal obligation at 
the end of such period, and the minimum amounts are determined pursuant 
to paragraph (c)(2)(i)(A) of this section;
    (ii) The maximum amount payable for mortgage insurance premiums 
corresponding to the principal and interest payment disclosed pursuant 
to paragraph (c)(2)(i) of this section, labeled ``Mortgage Insurance'';
    (iii) The amount payable into an escrow account to pay some or all 
of the charges described in paragraph (c)(4)(ii), as applicable, labeled 
``Escrow,'' together with a statement that the amount disclosed can 
increase over time; and
    (iv) The total periodic payment, calculated as the sum of the 
amounts disclosed pursuant to paragraphs (c)(2)(i) through (iii) of this 
section, labeled ``Total Monthly Payment.''
    (3) Subheadings. (i) The labels required pursuant to paragraph 
(c)(2) of this section must be listed under the subheading ``Payment 
Calculation.''
    (ii) Except as provided in paragraph (c)(3)(iii) of this section, 
each separate periodic payment or range of payments to be disclosed 
under this paragraph (c) must be disclosed under a subheading that 
states the years of the loan during which that payment or range of 
payments will apply. The subheadings must be stated in a sequence of 
whole years from the due date of the initial periodic payment.
    (iii) A balloon payment that is scheduled as a final payment under 
the terms of the legal obligation must be disclosed under the subheading 
``Final Payment.''
    (4) Taxes, insurance, and assessments. Under the information 
required by paragraphs (c)(1) through (3) of this section:
    (i) The label ``Taxes, Insurance & Assessments'';

[[Page 112]]

    (ii) The sum of the charges identified in Sec. 1026.43(b)(8), other 
than amounts identified in Sec. 1026.4(b)(5), expressed as a monthly 
amount, even if no escrow account for the payment of some or any of such 
charges will be established;
    (iii) A statement that the amount disclosed pursuant to paragraph 
(c)(4)(ii) of this section can increase over time;
    (iv) A statement of whether the amount disclosed pursuant to 
paragraph (c)(4)(ii) of this section includes payments for property 
taxes, amounts identified in Sec. 1026.4(b)(8), and other amounts 
described in paragraph (c)(4)(ii) of this section, along with a 
description of any such other amounts, and an indication of whether such 
amounts will be paid by the creditor using escrow account funds;
    (v) A statement that the consumer must pay separately any amounts 
described in paragraph (c)(4)(ii) of this section that are not paid by 
the creditor using escrow account funds; and
    (vi) A reference to the information disclosed pursuant to paragraph 
(g)(3) of this section.
    (5) Calculation of taxes and insurance. For purposes of paragraphs 
(c)(2)(iii) and (c)(4)(ii) of this section, estimated property taxes and 
homeowner's insurance shall reflect:
    (i) The taxable assessed value of the real property securing the 
transaction after consummation, including the value of any improvements 
on the property or to be constructed on the property, if known, whether 
or not such construction will be financed from the proceeds of the 
transaction, for property taxes; and
    (ii) The replacement costs of the property during the initial year 
after the transaction, for amounts identified in Sec. 1026.4(b)(8).
    (d) Costs at closing--(1) Costs at closing table. In a separate 
table, under the heading ``Costs at Closing'':
    (i) Labeled ``Closing Costs,'' the dollar amount disclosed pursuant 
to paragraph (g)(6) of this section, together with:
    (A) A statement that the amount disclosed pursuant to paragraph 
(d)(1)(i) of this section includes the amounts disclosed pursuant to 
paragraphs (f)(4), (g)(5), and (g)(6)(ii);
    (B) The dollar amount disclosed pursuant to paragraph (f)(4) of this 
section, labeled ``Loan Costs'';
    (C) The dollar amount disclosed pursuant to paragraph (g)(5) of this 
section, labeled ``Other Costs'':
    (D) The dollar amount disclosed pursuant to paragraph (g)(6)(ii) of 
this section, labeled ``Lender Credits''; and
    (E) A statement referring the consumer to the tables disclosed 
pursuant to paragraphs (f) and (g) of this section for details.
    (ii) Labeled ``Cash to Close,'' the dollar amount calculated in 
accordance with paragraph (h)(1)(viii) of this section, together with:
    (A) A statement that the amount includes the amount disclosed 
pursuant to paragraph (d)(1)(i) of this section, and
    (B) A statement referring the consumer to the location of the table 
required pursuant to paragraph (h) of this section for details.
    (2) Optional alternative table for transactions without a seller. 
For transactions that do not involve a seller, instead of the amount and 
statements described in paragraph (d)(1)(ii) of this section, the 
creditor may alternatively disclose, using the label ``Cash to Close'':
    (i) The amount calculated in accordance with (h)(2)(iv) of this 
section;
    (ii) A statement of whether the disclosed estimated amount is due 
from or to the consumer; and
    (iii) A statement referring the consumer to the alternative table 
disclosed pursuant to paragraph (h)(2) of this section for details.
    (e) Web site reference. A statement that the consumer may obtain 
general information and tools at the Web site of the Bureau, and the 
link or uniform resource locator address to the Web site: 
www.consumerfinance.gov/mortgage-estimate.
    (f) Closing cost details; loan costs. Under the master heading 
``Closing Cost Details,'' in a table under the heading ``Loan Costs,'' 
all loan costs associated with the transaction. The table shall contain 
the items and amounts listed under four subheadings, described in 
paragraphs (f)(1) through (4) of this section.

[[Page 113]]

    (1) Origination charges. Under the subheading ``Origination 
Charges,'' an itemization of each amount, and a subtotal of all such 
amounts, that the consumer will pay to each creditor and loan originator 
for originating and extending the credit.
    (i) The points paid to the creditor to reduce the interest rate 
shall be itemized separately, as both a percentage of the amount of 
credit extended and a dollar amount, and using the label ``----% of Loan 
Amount (Points).'' If points to reduce the interest rate are not paid, 
the disclosure required by this paragraph (f)(1)(i) must be blank.
    (ii) The number of items disclosed under this paragraph (f)(1), 
including the points disclosed under paragraph (f)(1)(i) of this 
section, shall not exceed 13.
    (2) Services you cannot shop for. Under the subheading ``Services 
You Cannot Shop For,'' an itemization of each amount, and a subtotal of 
all such amounts, the consumer will pay for settlement services for 
which the consumer cannot shop in accordance with Sec. 
1026.19(e)(1)(vi)(A) and that are provided by persons other than the 
creditor or mortgage broker.
    (i) For any item that is a component of title insurance or is for 
conducting the closing, the introductory description ``Title --'' shall 
appear at the beginning of the label for that item.
    (ii) The number of items disclosed under this paragraph (f)(2) shall 
not exceed 13.
    (3) Services you can shop for. Under the subheading ``Services You 
Can Shop For,'' an itemization of each amount and a subtotal of all such 
amounts the consumer will pay for settlement services for which the 
consumer can shop in accordance with Sec. 1026.19(e)(1)(vi)(A) and that 
are provided by persons other than the creditor or mortgage broker.
    (i) For any item that is a component of title insurance or is for 
conducting the closing, the introductory description ``Title --'' shall 
appear at the beginning of the label for that item.
    (ii) The number of items disclosed under this paragraph (f)(3) shall 
not exceed 14.
    (4) Total loan costs. Under the subheading ``Total Loan Costs,'' the 
sum of the subtotals disclosed under paragraphs (f)(1) through (3) of 
this section.
    (5) Item descriptions and ordering. The items listed as loan costs 
pursuant to this paragraph (f) shall be labeled using terminology that 
describes each item, subject to the requirements of paragraphs 
(f)(1)(i), (f)(2)(i), and (f)(3)(i) of this section.
    (i) The item prescribed in paragraph (f)(1)(i) of this section for 
points shall be the first item listed in the disclosure pursuant to 
paragraph (f)(1) of this section.
    (ii) All other items must be listed in alphabetical order by their 
labels under the applicable subheading.
    (6) Use of addenda. (i) An addendum to a form of disclosures 
prescribed by this section may not be used for items described in 
paragraph (f)(1) or (2) of this section. If the creditor is not able to 
itemize every service and every corresponding charge required to be 
disclosed in the number of lines provided by paragraph (f)(1)(ii) or 
(f)(2)(ii) of this section, the remaining charges shall be disclosed as 
an aggregate amount in the last line permitted under paragraph 
(f)(1)(ii) or (f)(2)(ii), as applicable, labeled ``Additional Charges.''
    (ii) An addendum to a form of disclosures prescribed by this section 
may be used for items described in paragraph (f)(3) of this section. If 
the creditor is not able to itemize all of the charges required to be 
disclosed in the number of lines provided by paragraph (f)(3)(ii), the 
remaining charges shall be disclosed as follows:
    (A) Label the last line permitted under paragraph (f)(3)(ii) with an 
appropriate reference to an addendum and list the remaining items on the 
addendum in accordance with the requirements in paragraphs (f)(3) and 
(5) of this section; or
    (B) Disclose the remaining charges as an aggregate amount in the 
last line permitted under paragraph (f)(3)(ii), labeled ``Additional 
Charges.''
    (g) Closing cost details; other costs. Under the master heading 
``Closing Cost Details,'' in a table under the heading ``Other Costs,'' 
all costs associated with the transaction that are in addition to the 
costs disclosed under

[[Page 114]]

paragraph (f) of this section. The table shall contain the items and 
amounts listed under six subheadings, described in paragraphs (g)(1) 
through (6) of this section.
    (1) Taxes and other government fees. Under the subheading ``Taxes 
and Other Government Fees,'' the amounts to be paid to State and local 
governments for taxes and other government fees, and the subtotal of all 
such amounts, as follows:
    (i) On the first line, the sum of all recording fees and other 
government fees and taxes, except for transfer taxes paid by the 
consumer and disclosed pursuant to paragraph (g)(1)(ii) of this section, 
labeled ``Recording Fees and Other Taxes.''
    (ii) On the second line, the sum of all transfer taxes paid by the 
consumer, labeled ``Transfer Taxes.''
    (iii) If an amount required to be disclosed by this paragraph (g)(1) 
is not charged to the consumer, the amount disclosed on the applicable 
line required by this paragraph (g)(1) must be blank.
    (2) Prepaids. Under the subheading ``Prepaids,'' an itemization of 
the amounts to be paid by the consumer in advance of the first scheduled 
payment, and the subtotal of all such amounts, as follows:
    (i) On the first line, the number of months for which homeowner's 
insurance premiums are to be paid by the consumer at consummation and 
the total dollar amount to be paid by the consumer at consummation for 
such premiums, labeled ``Homeowner's Insurance Premium ( ---- months).''
    (ii) On the second line, the number of months for which mortgage 
insurance premiums are to be paid by the consumer at consummation and 
the total dollar amount to be paid by the consumer at consummation for 
such premiums, labeled ``Mortgage Insurance Premium ( ---- months).''
    (iii) On the third line, the amount of prepaid interest to be paid 
per day, the number of days for which prepaid interest will be 
collected, the interest rate, and the total dollar amount to be paid by 
the consumer at consummation for such interest, labeled ``Prepaid 
Interest ( ------ per day for ---- days @---- %).''
    (iv) On the fourth line, the number of months for which property 
taxes are to be paid by the consumer at consummation and the total 
dollar amount to be paid by the consumer at consummation for such taxes, 
labeled ``Property Taxes ( ---- months).''
    (v) If an amount is not charged to the consumer for any item for 
which this paragraph (g)(2) prescribes a label, each of the amounts 
required to be disclosed on that line must be blank.
    (vi) A maximum of three additional items may be disclosed under this 
paragraph (g)(2), and each additional item must be identified and 
include the applicable time period covered by the amount to be paid by 
the consumer at consummation and the total amount to be paid.
    (3) Initial escrow payment at closing. Under the subheading 
``Initial Escrow Payment at Closing,'' an itemization of the amounts 
that the consumer will be expected to place into a reserve or escrow 
account at consummation to be applied to recurring periodic charges, and 
the subtotal of all such amounts, as follows:
    (i) On the first line, the amount escrowed per month, the number of 
months covered by an escrowed amount collected at consummation, and the 
total amount to be paid into the escrow account by the consumer at 
consummation for homeowner's insurance premiums, labeled ``Homeowner's 
Insurance ---- per month for ---- mo.''
    (ii) On the second line, the amount escrowed per month, the number 
of months covered by an escrowed amount collected at consummation, and 
the total amount to be paid into the escrow account by the consumer at 
consummation for mortgage insurance premiums, labeled ``Mortgage 
Insurance ---- per month for ---- mo.''
    (iii) On the third line, the amount escrowed per month, the number 
of months covered by an escrowed amount collected at consummation, and 
the total amount to be paid into the escrow account by the consumer at 
consummation for property taxes, labeled ``Property Taxes ---- per month 
for ---- mo.''
    (iv) If an amount is not charged to the consumer for any item for 
which this paragraph (g)(3) prescribes a label,

[[Page 115]]

each of the amounts required to be disclosed on that line must be blank.
    (v) A maximum of five items may be disclosed pursuant to this 
paragraph (g)(3) in addition to the items described in paragraph 
(g)(3)(i) through (iii) of this section, and each such additional item 
must be identified with a descriptive label and include the applicable 
amount per month, the number of months collected at consummation, and 
the total amount to be paid.
    (4) Other. Under the subheading ``Other,'' an itemization of any 
other amounts in connection with the transaction that the consumer is 
likely to pay or has contracted with a person other than the creditor or 
loan originator to pay at closing and of which the creditor is aware at 
the time of issuing the Loan Estimate, a descriptive label of each such 
amount, and the subtotal of all such amounts.
    (i) For any item that is a component of title insurance, the 
introductory description ``Title --'' shall appear at the beginning of 
the label for that item.
    (ii) The parenthetical description ``(optional)'' shall appear at 
the end of the label for items disclosing any premiums paid for separate 
insurance, warranty, guarantee, or event-coverage products.
    (iii) The number of items disclosed under this paragraph (g)(4) 
shall not exceed five.
    (5) Total other costs. Under the subheading ``Total Other Costs,'' 
the sum of the subtotals disclosed pursuant to paragraphs (g)(1) through 
(4) of this section.
    (6) Total closing costs. Under the subheading ``Total Closing 
Costs,'' the component amounts and their sum, as follows:
    (i) The sum of the amounts disclosed as loan costs and other costs 
under paragraphs (f)(4) and (g)(5) of this section, labeled ``D + I''; 
and
    (ii) The amount of any lender credits, disclosed as a negative 
number with the label ``Lender Credits'' provided that, if no such 
amount is disclosed, the amount must be blank.
    (7) Item descriptions and ordering. The items listed as other costs 
pursuant to this paragraph (g) shall be labeled using terminology that 
describes each item.
    (i) The items prescribed in paragraphs (g)(1)(i) and (ii), (g)(2)(i) 
through (iv), and (g)(3)(i) through (iii) of this section must be listed 
in the order prescribed as the initial items under the applicable 
subheading, with any additional items to follow.
    (ii) All additional items must be listed in alphabetical order under 
the applicable subheading.
    (8) Use of addenda. An addendum to a form of disclosures prescribed 
by this section may not be used for items required to be disclosed by 
this paragraph (g). If the creditor is not able to itemize all of the 
charges described in this paragraph (g) in the number of lines provided 
by paragraphs (g)(2)(vi), (3)(v), or (4)(iii) of this section, the 
remaining charges shall be disclosed as an aggregate amount in the last 
line permitted under paragraphs (g)(2)(vi), (g)(3)(v), or (g)(4)(iii), 
as applicable, using the label ``Additional Charges.''
    (h) Calculating cash to close--(1) For all transactions. Under the 
master heading ``Closing Cost Details,'' under the heading ``Calculating 
Cash to Close,'' the total amount of cash or other funds that must be 
provided by the consumer at consummation, with an itemization of that 
amount into the following component amounts:
    (i) Total closing costs. The amount disclosed under paragraph (g)(6) 
of this section, disclosed as a positive number, labeled ``Total Closing 
Costs'';
    (ii) Closing costs to be financed. The amount of any closing costs 
to be paid out of loan proceeds, disclosed as a negative number, labeled 
``Closing Costs Financed (Paid from your Loan Amount)'';
    (iii) Downpayment and other funds from borrower. Labeled ``Down 
Payment/Funds from Borrower'':
    (A) In a purchase transaction as defined in paragraph (a)(9)(i) of 
this section, the amount of the difference between the purchase price of 
the property and the principal amount of the loan, disclosed as a 
positive number; or
    (B) In all transactions other than purchase transactions as defined 
in paragraph (a)(9)(i) of this section, the estimated funds from the 
consumer as determined in accordance with paragraph (h)(1)(v) of this 
section;

[[Page 116]]

    (iv) Deposit. (A) In a purchase transaction as defined in paragraph 
(a)(9)(i) of this section, the amount that is paid to the seller or held 
in trust or escrow by an attorney or other party under the terms of the 
agreement for the sale of the property, disclosed as a negative number, 
labeled ``Deposit'';
    (B) In all transactions other than purchase transactions as defined 
in paragraph (a)(9)(i) of this section, the amount of $0, labeled 
``Deposit'';
    (v) Funds for borrower. The amount of funds for the consumer, 
labeled ``Funds for Borrower.'' The amount of funds from the consumer 
disclosed under paragraph (h)(1)(iii)(B) of this section, and of funds 
for the consumer disclosed under this paragraph (h)(1)(v) of this 
section, are determined by subtracting the principal amount of the 
credit extended (excluding any amount disclosed pursuant to paragraph 
(h)(1)(ii) of this section) from the total amount of all existing debt 
being satisfied in the transaction (except to the extent the 
satisfaction of such existing debt is disclosed under paragraph (g) of 
this section);
    (A) If the calculation under this paragraph (h)(1)(v) yields an 
amount that is a positive number, such amount is disclosed under 
paragraph (h)(1)(iii)(B) of this section, and $0 is disclosed under this 
paragraph (h)(1)(v);
    (B) If the calculation under this paragraph (h)(1)(v) yields an 
amount that is a negative number, such amount is disclosed under this 
paragraph (h)(1)(v) as a negative number, and $0 is disclosed under 
paragraph (h)(1)(iii)(B) of this section;
    (C) If the calculation under this paragraph (h)(1)(v) of this 
section yields $0, then $0 is disclosed under paragraphs (h)(1)(iii)(B) 
and paragraph (h)(1)(v) of this section;
    (vi) Seller credits. The total amount that the seller will pay for 
total loan costs as determined by paragraph (f)(4) of this section and 
total other costs as determined by paragraph (g)(5) of this section, to 
the extent known, disclosed as a negative number, labeled ``Seller 
Credits'';
    (vii) Adjustments and other credits. The amount of all loan costs 
determined pursuant to paragraph (f) and other costs determined pursuant 
to paragraph (g) that are paid by persons other than the loan 
originator, creditor, consumer, or seller, together with any other 
amounts that are required to be paid by the consumer at closing pursuant 
to a purchase and sale contract, disclosed as a negative number, labeled 
``Adjustments and Other Credits''; and
    (viii) Estimated Cash to Close. The sum of the amounts disclosed 
under paragraphs (h)(1)(i) through (vii) of this section labeled ``Cash 
to Close.''
    (2) Optional alternative calculating cash to close table for 
transactions without a seller. For transactions that do not involve a 
seller, instead of the table described in paragraph (h)(1) above, the 
creditor may alternatively provide, in a separate table, under the 
master heading ``Closing Cost Details,'' under the heading ``Calculating 
Cash to Close,'' the total amount of cash or other funds that must be 
provided by the consumer at consummation with an itemization of that 
amount into the following component amounts:
    (i) Loan amount. The amount disclosed under paragraph (b)(1) of this 
section, labeled ``Loan Amount'';
    (ii) Total closing costs. The amount disclosed under paragraph 
(g)(6) of this section, disclosed as a negative number, labeled ``Total 
Closing Costs'';
    (iii) Payoffs and payments. The total amount of payoffs and payments 
to be made to third parties not otherwise disclosed pursuant to 
paragraphs (f) and (g) of this section, disclosed as a negative number, 
labeled ``Total Payoffs and Payments'';
    (iv) Cash to or from consumer. The amount of cash or other funds due 
from or to the consumer and a statement of whether the disclosed 
estimated amount is due from or to the consumer, calculated by the sum 
of the amounts disclosed under paragraphs (h)(2)(i) through (iii) of 
this section, labeled ``Cash to Close''; and
    (v) Closing costs financed. The sum of the amounts disclosed under 
paragraphs (h)(2)(i) and (iii) of this section, but only to the extent 
that the sum is greater than zero and less than or equal to the sum 
disclosed under paragraph (g)(6) of this section, labeled ``Closing 
Costs Financed (Paid from your Loan Amount).''

[[Page 117]]

    (i) Adjustable payment table. If the periodic principal and interest 
payment may change after consummation but not based on an adjustment to 
the interest rate, or if the transaction is a seasonal payment product 
as described in paragraph (a)(10)(ii)(E) of this section, a separate 
table under the master heading ``Closing Cost Details'' required by 
paragraph (f) of this section and under the heading ``Adjustable Payment 
(AP) Table'' that contains the following information and satisfies the 
following requirements:
    (1) Interest only payments. Whether the transaction is an interest 
only product pursuant to paragraph (a)(10)(ii)(B) of this section as an 
affirmative or negative answer to the question ``Interest Only 
Payments?'' and, if an affirmative answer is disclosed, the period 
during which interest only periodic payments are scheduled.
    (2) Optional payments. Whether the terms of the legal obligation 
expressly provide that the consumer may elect to pay a specified 
periodic principal and interest payment in an amount other than the 
scheduled amount of the payment, as an affirmative or negative answer to 
the question ``Optional Payments?'' and, if an affirmative answer is 
disclosed, the period during which the consumer may elect to make such 
payments.
    (3) Step payments. Whether the transaction is a step payment product 
pursuant to paragraph (a)(10)(ii)(C) of this section as an affirmative 
or negative answer to the question ``Step Payments?'' and, if an 
affirmative answer is disclosed, the period during which the regular 
periodic payments are scheduled to increase.
    (4) Seasonal payments. Whether the transaction is a seasonal payment 
product pursuant to paragraph (a)(10)(ii)(E) of this section as an 
affirmative or negative answer to the question ``Seasonal Payments?'' 
and, if an affirmative answer is disclosed, the period during which 
periodic payments are not scheduled.
    (5) Principal and interest payments. Under the subheading 
``Principal and Interest Payments,'' which subheading is immediately 
preceded by the applicable unit-period, the following information:
    (i) The number of the payment of the first periodic principal and 
interest payment that may change under the terms of the legal obligation 
disclosed under this paragraph (i), counting from the first periodic 
payment due after consummation, and the amount or range of the periodic 
principal and interest payment for such payment, labeled ``First Change/
Amount'';
    (ii) The frequency of subsequent changes to the periodic principal 
and interest payment, labeled ``Subsequent Changes''; and
    (iii) The maximum periodic principal and interest payment that may 
occur during the term of the transaction, and the first periodic 
principal and interest payment that can reach such maximum, counting 
from the first periodic payment due after consummation, labeled 
``Maximum Payment.''
    (j) Adjustable interest rate table. If the interest rate may 
increase after consummation, a separate table under the master heading 
``Closing Cost Details'' required by paragraph (f) of this section and 
under the heading ``Adjustable Interest Rate (AIR) Table'' that contains 
the following information and satisfies the following requirements:
    (1) Index and margin. If the interest rate may adjust and the 
product type is not a ``Step Rate'' under paragraph (a)(10)(i)(B) of 
this section, the index upon which the adjustments to the interest rate 
are based and the margin that is added to the index to determine the 
interest rate, if any, labeled ``Index + Margin.''
    (2) Increases in interest rate. If the product type is a ``Step 
Rate'' and not also an ``Adjustable Rate'' under paragraph (a)(10)(i)(A) 
of this section, the maximum amount of any adjustments to the interest 
rate that are scheduled and pre-determined, labeled ``Interest Rate 
Adjustments.''
    (3) Initial interest rate. The interest rate at consummation of the 
loan transaction, labeled ``Initial Interest Rate.''
    (4) Minimum and maximum interest rate. The minimum and maximum 
interest rates for the loan, after any introductory period expires, 
labeled ``Minimum/Maximum Interest Rate.''

[[Page 118]]

    (5) Frequency of adjustments. The following information, under the 
subheading ``Change Frequency'':
    (i) The month when the interest rate after consummation may first 
change, calculated from the date interest for the first scheduled 
periodic payment begins to accrue, labeled ``First Change''; and
    (ii) The frequency of interest rate adjustments after the initial 
adjustment to the interest rate, labeled, ``Subsequent Changes.''
    (6) Limits on interest rate changes. The following information, 
under the subheading ``Limits on Interest Rate Changes'':
    (i) The maximum possible change for the first adjustment of the 
interest rate after consummation, labeled ``First Change''; and
    (ii) The maximum possible change for subsequent adjustments of the 
interest rate after consummation, labeled ``Subsequent Changes.''
    (k) Contact information. Under the master heading, ``Additional 
Information About This Loan,'' the following information:
    (1) The name and Nationwide Mortgage Licensing System and Registry 
identification number (NMLSR ID) (labeled ``NMLS ID/License ID'') for 
the creditor (labeled ``Lender'') and the mortgage broker (labeled 
``Mortgage Broker''), if any. In the event the creditor or the mortgage 
broker has not been assigned an NMLSR ID, the license number or other 
unique identifier issued by the applicable jurisdiction or regulating 
body with which the creditor or mortgage broker is licensed and/or 
registered shall be disclosed, with the abbreviation for the State of 
the applicable jurisdiction or regulatory body stated before the word 
``License'' in the label, if any;
    (2) The name and NMLSR ID of the individual loan officer (labeled 
``Loan Officer'' and ``NMLS ID/License ID,'' respectively) of the 
creditor and the mortgage broker, if any, who is the primary contact for 
the consumer. In the event the individual loan officer has not been 
assigned an NMLSR ID, the license number or other unique identifier 
issued by the applicable jurisdiction or regulating body with which the 
loan officer is licensed and/or registered shall be disclosed with the 
abbreviation for the State of the applicable jurisdiction or regulatory 
body stated before the word ``License'' in the label, if any; and
    (3) The email address and telephone number of the loan officer 
(labeled ``Email'' and ``Phone,'' respectively).
    (l) Comparisons. Under the master heading, ``Additional Information 
About This Loan'' required by paragraph (k) of this section, in a 
separate table under the heading ``Comparisons'' along with the 
statement ``Use these measures to compare this loan with other loans'':
    (1) In five years. Using the label ``In 5 Years'':
    (i) The total principal, interest, mortgage insurance, and loan 
costs scheduled to be paid through the end of the 60th month after the 
due date of the first periodic payment, expressed as a dollar amount, 
along with the statement ``Total you will have paid in principal, 
interest, mortgage insurance, and loan costs''; and
    (ii) The principal scheduled to be paid through the end of the 60th 
month after the due date of the first periodic payment, expressed as a 
dollar amount, along with the statement ``Principal you will have paid 
off.''
    (2) Annual percentage rate. The ``Annual Percentage Rate,'' using 
that term and the abbreviation ``APR'' and expressed as a percentage, 
and the following statement: ``Your costs over the loan term expressed 
as a rate. This is not your interest rate.''
    (3) Total interest percentage. The total amount of interest that the 
consumer will pay over the life of the loan, expressed as a percentage 
of the amount of credit extended, using the term ``Total Interest 
Percentage,'' the abbreviation ``TIP,'' and the statement ``The total 
amount of interest that you will pay over the loan term as a percentage 
of your loan amount.''
    (m) Other considerations. Under the master heading ``Additional 
Information About This Loan'' required by paragraph (k) of this section 
and under the heading ``Other Considerations'':
    (1) Appraisal. For transactions subject to 15 U.S.C. 1639h or 
1691(e), as implemented in this part or Regulation B,

[[Page 119]]

12 CFR part 1002, respectively, a statement, labeled ``Appraisal,'' 
that:
    (i) The creditor may order an appraisal to determine the value of 
the property identified in paragraph (a)(6) of this section and may 
charge the consumer for that appraisal;
    (ii) The creditor will promptly provide the consumer a copy of any 
appraisal, even if the transaction is not consummated; and
    (iii) The consumer may choose to pay for an additional appraisal of 
the property for the consumer's use.
    (2) Assumption. A statement of whether a subsequent purchaser of the 
property may be permitted to assume the remaining loan obligation on its 
original terms, labeled ``Assumption.''
    (3) Homeowner's insurance. At the option of the creditor, a 
statement that homeowner's insurance is required on the property and 
that the consumer may choose the insurance provider, labeled 
``Homeowner's Insurance.''
    (4) Late payment. A statement detailing any charge that may be 
imposed for a late payment, stated as a dollar amount or percentage 
charge of the late payment amount, and the number of days that a payment 
must be late to trigger the late payment fee, labeled ``Late Payment.''
    (5) Refinance. The following statement, labeled ``Refinance'': 
``Refinancing this loan will depend on your future financial situation, 
the property value, and market conditions. You may not be able to 
refinance this loan.''
    (6) Servicing. A statement of whether the creditor intends to 
service the loan or transfer the loan to another servicer, labeled 
``Servicing.''
    (7) Liability after foreclosure. If the purpose of the credit 
transaction is to refinance an extension of credit as described in 
paragraph (a)(9)(ii) of this section, a brief statement that certain 
State law protections against liability for any deficiency after 
foreclosure may be lost, the potential consequences of the loss of such 
protections, and a statement that the consumer should consult an 
attorney for additional information, labeled ``Liability after 
Foreclosure.''
    (8) Construction loans. In transactions involving new construction, 
where the creditor reasonably expects that settlement will occur more 
than 60 days after the provision of the loan estimate, at the creditor's 
option, a clear and conspicuous statement that the creditor may issue a 
revised disclosure any time prior to 60 days before consummation, 
pursuant to Sec. 1026.19(e)(3)(iv)(F).
    (n) Signature statement. (1) At the creditor's option, under the 
master heading required by paragraph (k) of this section and under the 
heading ``Confirm Receipt,'' a line for the signatures of the consumers 
in the transaction. If the creditor includes a line for the consumer's 
signature, the creditor must disclose the following above the signature 
line: ``By signing, you are only confirming that you have received this 
form. You do not have to accept this loan because you have signed or 
received this form.''
    (2) If the creditor does not include a line for the consumer's 
signature, the creditor must disclose the following statement under the 
heading ``Other Considerations'' required by paragraph (m) of this 
section, labeled ``Loan Acceptance'': ``You do not have to accept this 
loan because you have received this form or signed a loan application.''
    (o) Form of disclosures--(1) General requirements. (i) The creditor 
shall make the disclosures required by this section clearly and 
conspicuously in writing, in a form that the consumer may keep. The 
disclosures also shall be grouped together and segregated from 
everything else.
    (ii) Except as provided in paragraph (o)(5) of this section, the 
disclosures shall contain only the information required by paragraphs 
(a) through (n) of this section and shall be made in the same order, and 
positioned relative to the master headings, headings, subheadings, 
labels, and similar designations in the same manner, as shown in form H-
24, set forth in appendix H to this part.
    (2) Headings and labels. If a master heading, heading, subheading, 
label, or similar designation contains the word ``estimated'' or a 
capital letter designation in form H-24, set forth in appendix H to this 
part, that heading, label, or similar designation shall contain the word 
``estimated'' and the applicable capital letter designation.

[[Page 120]]

    (3) Form. Except as provided in paragraph (o)(5) of this section:
    (i) For a transaction subject to Sec. 1026.19(e) that is a 
federally related mortgage loan, as defined in Regulation X, 12 CFR 
1024.2, the disclosures must be made using form H-24, set forth in 
appendix H to this part.
    (ii) For any other transaction subject to this section, the 
disclosures must be made with headings, content, and format 
substantially similar to form H-24, set forth in appendix H to this 
part.
    (iii) The disclosures required by this section may be provided to 
the consumer in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (15 U.S.C. 7001 et seq.).
    (4) Rounding--(i) Nearest dollar. (A) The dollar amounts required to 
be disclosed by paragraphs (b)(6) and (7), (c)(1)(iii), (c)(2)(ii) and 
(iii), (c)(4)(ii), (f), (g), (h), (i), and (l) of this section shall be 
rounded to the nearest whole dollar, except that the per diem amount 
required to be disclosed by paragraph (g)(2)(iii) of this section and 
the monthly amounts required to be disclosed by paragraphs (g)(3)(i) 
through (iii) and (g)(3)(v) of this section shall not be rounded.
    (B) The dollar amount required to be disclosed by paragraph (b)(1) 
of this section shall not be rounded, and if the amount is a whole 
number then the amount disclosed shall be truncated at the decimal 
point.
    (C) The dollar amounts required to be disclosed by paragraph 
(c)(2)(iv) of this section shall be rounded to the nearest whole dollar, 
if any of the component amounts are required by paragraph (o)(4)(i)(A) 
of this section to be rounded to the nearest whole dollar.
    (ii) Percentages. The percentage amounts required to be disclosed 
under paragraphs (b)(2) and (6), (f)(1)(i), (g)(2)(iii), (j), and (l)(3) 
of this section shall not be rounded and shall be disclosed up to two or 
three decimal places. The percentage amount required to be disclosed 
under paragraph (l)(2) of this section shall be disclosed up to three 
decimal places. If the amount is a whole number then the amount 
disclosed shall be truncated at the decimal point.
    (5) Exceptions--(i) Unit-period. Wherever the form or this section 
uses ``monthly'' to describe the frequency of any payments or uses 
``month'' to describe the applicable unit-period, the creditor shall 
substitute the appropriate term to reflect the fact that the 
transaction's terms provide for other than monthly periodic payments, 
such as bi-weekly or quarterly payments.
    (ii) Translation. The form may be translated into languages other 
than English, and creditors may modify form H-24 of appendix H to this 
part to the extent that translation prevents the headings, labels, 
designations, and required disclosure items under this section from 
fitting in the space provided on form H-24.
    (iii) Logo or slogan. The creditor providing the form may use a logo 
for, and include a slogan with, the information required by paragraph 
(a)(3) of this section in any font size or type, provided that such logo 
or slogan does not cause the information required by paragraph (a)(3) of 
this section to exceed the space provided for that information, as 
illustrated in form H-24 of appendix H to this part. If the creditor 
does not use a logo for the information required by paragraph (a)(3) of 
this section, the information shall be disclosed in a similar format as 
form H-24.
    (iv) Business card. The creditor may physically attach a business 
card over the information required to be disclosed by paragraph (a)(3) 
of this section.
    (v) Administrative information. The creditor may insert at the 
bottom of each page under the disclosures required by this section as 
illustrated by form H-24 of appendix H to this part, any administrative 
information, text, or codes that assist in identification of the form or 
the information disclosed on the form, provided that the space provided 
on form H-24 of appendix H to this part for any of the information 
required by this section is not altered.

[78 FR 80113, Dec. 31, 2013, as amended at 80 FR 8776, Feb. 19, 2015]

[[Page 121]]



Sec. 1026.38  Content of disclosures for certain mortgage transactions
(Closing Disclosure).

    For each transaction subject to Sec. 1026.19(f), the creditor shall 
disclose the information in this section:
    (a) General information--(1) Form title. The title of the form, 
``Closing Disclosure,'' using that term.
    (2) Form purpose. The following statement: ``This form is a 
statement of final loan terms and closing costs. Compare this document 
with your Loan Estimate.''
    (3) Closing information. Under the heading ``Closing Information'':
    (i) Date issued. The date the disclosures required by this section 
are delivered to the consumer, labeled ``Date Issued.''
    (ii) Closing date. The date of consummation, labeled ``Closing 
Date.''
    (iii) Disbursement date. The date the amounts disclosed pursuant to 
paragraphs (j)(3)(iii) and (k)(3)(iii) of this section are expected to 
be paid in a purchase transaction under Sec. 1026.37(a)(9)(i) to the 
consumer and seller, respectively, as applicable, or the date the 
amounts disclosed pursuant to paragraphs (j)(2)(iii) or (t)(5)(vii)(B) 
of this section are expected to be paid to the consumer or a third party 
in a transaction that is not a purchase transaction under Sec. 
1026.37(a)(9)(i), labeled ``Disbursement Date.''
    (iv) Settlement agent. The name of the settlement agent conducting 
the closing, labeled ``Settlement Agent.''
    (v) File number. The number assigned to the transaction by the 
settlement agent for identification purposes, labeled ``File 
.''
    (vi) Property. The address or location of the property required to 
be disclosed under Sec. 1026.37(a)(6), labeled ``Property.''
    (vii) Sale price. (A) In credit transactions where there is a 
seller, the contract sale price of the property identified in paragraph 
(a)(3)(vi) of this section, labeled ``Sale Price.''
    (B) In credit transactions where there is no seller, the appraised 
value of the property identified in paragraph (a)(3)(vi) of this 
section, labeled ``Appraised Prop. Value.''
    (4) Transaction information. Under the heading ``Transaction 
Information'':
    (i) Borrower. The consumer's name and mailing address, labeled 
``Borrower.''
    (ii) Seller. Where applicable, the seller's name and mailing 
address, labeled ``Seller.''
    (iii) Lender. The name of the creditor making the disclosure, 
labeled ``Lender.''
    (5) Loan information. Under the heading ``Loan Information'':
    (i) Loan term. The information required to be disclosed under Sec. 
1026.37(a)(8), labeled ``Loan Term.''
    (ii) Purpose. The information required to be disclosed under Sec. 
1026.37(a)(9), labeled ``Purpose.''
    (iii) Product. The information required to be disclosed under Sec. 
1026.37(a)(10), labeled ``Product.''
    (iv) Loan type. The information required to be disclosed under Sec. 
1026.37(a)(11), labeled ``Loan Type.''
    (v) Loan identification number. The information required to be 
disclosed under Sec. 1026.37(a)(12), labeled ``Loan ID .''
    (vi) Mortgage insurance case number. The case number for any 
mortgage insurance policy, if required by the creditor, labeled ``MIC 
.''
    (b) Loan terms. A separate table under the heading ``Loan Terms'' 
that includes the information required by Sec. 1026.37(b).
    (c) Projected payments. A separate table, under the heading 
``Projected Payments,'' that includes and satisfies the following 
information and requirements:
    (1) Projected payments or range of payments. The information 
required to be disclosed pursuant to Sec. 1026.37(c)(1) through (4), 
other than Sec. 1026.37(c)(4)(vi). In disclosing estimated escrow 
payments as described in Sec. 1026.37(c)(2)(iii) and (c)(4)(ii), the 
amount disclosed on the Closing Disclosure:
    (i) For transactions subject to RESPA, is determined under the 
escrow account analysis described in Regulation X, 12 CFR 1024.17;
    (ii) For transactions not subject to RESPA, may be determined under 
the escrow account analysis described in

[[Page 122]]

Regulation X, 12 CFR 1024.17 or in the manner set forth in Sec. 
1026.37(c)(5).
    (2) Estimated taxes, insurance, and assessments. A reference to the 
disclosure required by paragraph (l)(7) of this section.
    (d) Costs at closing--(1) Costs at closing table. In a separate 
table, under the heading ``Costs at Closing'':
    (i) Labeled ``Closing Costs,'' the sum of the dollar amounts 
disclosed pursuant to paragraphs (f)(4), (g)(5), and (h)(3) of this 
section, together with:
    (A) A statement that the amount disclosed pursuant to paragraph 
(d)(1)(i) of this section includes the amounts disclosed pursuant to 
paragraphs (f)(4), (g)(5), and (h)(3) of this section;
    (B) The dollar amount disclosed pursuant to paragraph (f)(4) of this 
section, labeled ``Loan Costs'';
    (C) The dollar amount disclosed pursuant to paragraph (g)(5) of this 
section, labeled ``Other Costs'';
    (D) The dollar amount disclosed pursuant to paragraph (h)(3) of this 
section, labeled ``Lender Credits''; and
    (E) A statement referring the consumer to the tables disclosed 
pursuant to paragraphs (f) and (g) of this section for details.
    (ii) Labeled ``Cash to Close,'' the sum of the dollar amounts 
calculated in accordance with paragraph (i)(9)(ii) of this section, 
together with:
    (A) A statement that the amount disclosed pursuant to paragraph 
(d)(1)(ii) of this section includes the amount disclosed pursuant to 
paragraph (d)(1)(i) of this section; and
    (B) A statement referring the consumer to the table required 
pursuant to paragraph (i) of this section for details.
    (2) Alternative table for transactions without a seller. For 
transactions that do not involve a seller and where the creditor 
disclosed the optional alternative table pursuant to Sec. 
1026.37(d)(2), the creditor shall disclose, with the label ``Cash to 
Close,'' instead of the sum of the dollar amounts described in paragraph 
(d)(1)(ii) of this section:
    (i) The amount calculated in accordance with paragraph (e)(5)(ii) of 
this section;
    (ii) A statement of whether the disclosed amount is due from or to 
the consumer; and
    (iii) A statement referring the consumer to the table required 
pursuant to paragraph (e) of this section for details.
    (e) Alternative calculating cash to close table for transactions 
without a seller. For transactions that do not involve a seller and 
where the creditor disclosed the optional alternative table pursuant to 
Sec. 1026.37(h)(2), the creditor shall disclose, instead of the table 
described in paragraph (i) of this section, in a separate table, under 
the heading ``Calculating Cash to Close,'' together with the statement 
``Use this table to see what has changed from your Loan Estimate'':
    (1) Loan amount. Labeled ``Loan Amount:''
    (i) Under the subheading ``Loan Estimate,'' the loan amount 
disclosed on the Loan Estimate under Sec. 1026.37(b)(1);
    (ii) Under the subheading ``Final,'' the loan amount disclosed under 
paragraph (b) of this section;
    (iii) Disclosed more prominently than the other disclosures under 
paragraph (e)(1)(i) and (ii) of this section, under the subheading ``Did 
this change?'':
    (A) If the amount disclosed under paragraph (e)(1)(ii) of this 
section is different than the amount disclosed under paragraph (e)(1)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact along with a statement of whether this amount increased or 
decreased; or
    (B) If the amount disclosed under paragraph (e)(1)(i) of this 
section is equal to the amount disclosed under paragraph (e)(1)(ii) of 
this section a statement of that fact.
    (2) Total closing costs. Labeled ``Total Closing Costs'':
    (i) Under the subheading ``Loan Estimate,'' the amount disclosed on 
the Loan Estimate under Sec. 1026.37(h)(2)(ii);
    (ii) Under the subheading ``Final,'' the amount disclosed under 
paragraph (h)(1) of this section, disclosed as a negative number; and
    (iii) Disclosed more prominently than the other disclosures under 
this paragraph (e)(2)(i) and (ii) of this section, under the subheading 
``Did this change?'':
    (A) If the amount disclosed under paragraph (e)(2)(ii) of this 
section is

[[Page 123]]

different than the amount disclosed under paragraph (e)(2)(i) of this 
section (unless the difference is due to rounding):
    (1) A statement of that fact;
    (2) If the difference in the amounts disclosed under paragraphs 
(e)(2)(i) and (e)(2)(ii) is attributable to differences in itemized 
charges that are included in either or both subtotals, a statement that 
the consumer should see the total loan costs and total other costs 
subtotals disclosed under paragraphs (f)(4) and (g)(5) of this section 
(together with references to such disclosures), as applicable; and
    (3) If the increase exceeds the limitations on increases in closing 
costs under Sec. 1026.19(e)(3), a statement that such increase exceeds 
the legal limits by the dollar amount of the excess and if any refund is 
provided pursuant to Sec. 1026.19(f)(2)(v), a statement directing the 
consumer to the disclosure required under paragraph (h)(3) of this 
section. Such dollar amount shall equal the sum total of all excesses of 
the limitations on increases in closing costs under Sec. 1026.19(e)(3), 
taking into account the different methods of calculating excesses of the 
limitations on increases in closing costs under Sec. 1026.19(e)(3)(i) 
and (ii).
    (B) If the amount disclosed under paragraph (e)(2)(i) of this 
section is equal to the amount disclosed under paragraph (e)(2)(ii) of 
this section, a statement of that fact.
    (3) Closing costs paid before closing. Labeled ``Closing Costs Paid 
Before Closing:''
    (i) Under the subheading ``Loan Estimate,'' the amount of $0;
    (ii) Under the subheading ``Final,'' any amount designated as 
borrower-paid before closing under paragraph (h)(2) of this section, 
disclosed as a positive number; and
    (iii) Disclosed more prominently than the other disclosures under 
this paragraph (e)(3)(i) and (ii) of this section, under the subheading 
``Did this change?'':
    (A) If the amount disclosed under paragraph (e)(3)(ii) of this 
section is different than the amount disclosed under paragraph (e)(3)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer paid such amounts 
prior to consummation of the transaction; or
    (B) If the amount disclosed under paragraph (e)(3)(ii) of this 
section is equal to the amount disclosed under paragraph (e)(3)(i) of 
this section, a statement of that fact.
    (4) Payoffs and payments. Labeled ``Total Payoffs and Payments,''
    (i) Under the subheading ``Loan Estimate,'' the total payoffs and 
payments disclosed on the Loan Estimate under Sec. 1026.37(h)(2)(iii);
    (ii) Under the subheading ``Final,'' the total amount of payoffs and 
payments made to third parties disclosed pursuant to paragraph 
(t)(5)(vii)(B) of this section, to the extent known, disclosed as a 
negative number;
    (iii) Disclosed more prominently than the other disclosures under 
this paragraph (e)(4)(i) and (ii), under the subheading ``Did this 
change?'':
    (A) If the amount disclosed under paragraph (e)(4)(ii) of this 
section is different than the amount disclosed under paragraph (e)(4)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact along with a reference to the table disclosed under 
paragraph (t)(5)(vii)(B) of this section; or
    (B) If the amount disclosed under paragraph (e)(4)(ii) of this 
section is equal to the amount disclosed under paragraph (e)(4)(i) of 
this section, a statement of that fact.
    (5) Cash to or from consumer. Labeled ``Cash to Close:''
    (i) Under the subheading ``Loan Estimate,'' the estimated cash to 
close on the Loan Estimate together with the statement of whether the 
estimated amount is due from or to the consumer as disclosed under Sec. 
1026.37(h)(2)(iv);
    (ii) Under the subheading ``Final,'' the amount due from or to the 
consumer, calculated by the sum of the amounts disclosed under 
paragraphs (e)(1)(ii), (e)(2)(ii), (e)(3)(ii), and (e)(4)(ii) of this 
section, disclosed as a positive number, together with a statement of 
whether the disclosed amount is due from or to the consumer.
    (6) Closing costs financed. Labeled ``Closing Costs Financed (Paid 
from your Loan Amount),'' the sum of the amounts disclosed under 
paragraphs

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(e)(1)(ii) and (e)(4)(ii) of this section, but only to the extent that 
the sum is greater than zero and less than or equal to the sum disclosed 
under paragraph (h)(1) of this section minus the sum disclosed under 
paragraph (h)(2) of this section designated borrower-paid before 
closing.
    (f) Closing cost details; loan costs. Under the master heading 
``Closing Cost Details'' with columns stating whether the charge was 
borrower-paid at or before closing, seller-paid at or before closing, or 
paid by others, all loan costs associated with the transaction, listed 
in a table under the heading ``Loan Costs.'' The table shall contain the 
items and amounts listed under four subheadings, described in paragraphs 
(f)(1) through (5) of this section.
    (1) Origination charges. Under the subheading ``Origination 
Charges,'' and in the applicable columns as described in paragraph (f) 
of this section, an itemization of each amount paid for charges 
described in Sec. 1026.37(f)(1), the amount of compensation paid by the 
creditor to a third-party loan originator along with the name of the 
loan originator ultimately receiving the payment, and the total of all 
such itemized amounts that are designated borrower-paid at or before 
closing.
    (2) Services borrower did not shop for. Under the subheading 
``Services Borrower Did Not Shop For'' and in the applicable columns as 
described in paragraph (f) of this section, an itemization of the 
services and corresponding costs for each of the settlement services 
required by the creditor for which the consumer did not shop in 
accordance with Sec. 1026.19(e)(1)(vi)(A) and that are provided by 
persons other than the creditor or mortgage broker, the name of the 
person ultimately receiving the payment for each such amount, and the 
total of all such itemized amounts that are designated borrower-paid at 
or before closing. Items that were disclosed pursuant to Sec. 
1026.37(f)(3) must be disclosed under this paragraph (f)(2) if the 
consumer was provided a written list of settlement service providers 
under Sec. 1026.19(e)(1)(vi)(C) and the consumer selected a settlement 
service provider contained on that written list.
    (3) Services borrower did shop for. Under the subheading ``Services 
Borrower Did Shop For'' and in the applicable column as described in 
paragraph (f) of this section, an itemization of the services and 
corresponding costs for each of the settlement services required by the 
creditor for which the consumer shopped in accordance with Sec. 
1026.19(e)(1)(vi)(A) and that are provided by persons other than the 
creditor or mortgage broker, the name of the person ultimately receiving 
the payment for each such amount, and the total of all such itemized 
costs that are designated borrower-paid at or before closing. Items that 
were disclosed pursuant to Sec. 1026.37(f)(3) must be disclosed under 
this paragraph (f)(3) if the consumer was provided a written list of 
settlement service providers under Sec. 1026.19(e)(1)(vi)(C) and the 
consumer did not select a settlement service provider contained on that 
written list.
    (4) Total loan costs. Under the subheading ``Total Loan Costs 
(Borrower-Paid),'' the sum of the amounts disclosed as borrower-paid 
pursuant to paragraph (f)(5) of this section.
    (5) Subtotal of loan costs. The sum of loan costs, calculated by 
totaling the amounts described in paragraphs (f)(1) through (3) of this 
section for costs designated borrower-paid at or before closing, labeled 
``Loan Costs Subtotals.''
    (g) Closing cost details; other costs. Under the master heading 
``Closing Cost Details'' disclosed pursuant to paragraph (f) of this 
section, with columns stating whether the charge was borrower-paid at or 
before closing, seller-paid at or before closing, or paid by others, all 
costs in connection with the transaction, other than those disclosed 
under paragraph (f) of this section, listed in a table with a heading 
disclosed as ``Other Costs.'' The table shall contain the items and 
amounts listed under five subheadings, described in paragraphs (g)(1) 
through (6) of this section.
    (1) Taxes and other government fees. Under the subheading ``Taxes 
and Other Government Fees,'' and in the applicable column as described 
in paragraph (g) of this section, an itemization of each amount that is 
expected to be paid to State and local governments for taxes and 
government

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fees and the total of all such itemized amounts that are designated 
borrower-paid at or before closing, as follows:
    (i) Recording fees and the amounts paid in the applicable columns; 
and
    (ii) An itemization of transfer taxes, with the name of the 
government entity assessing the transfer tax.
    (2) Prepaids. Under the subheading ``Prepaids'' and in the 
applicable column as described in paragraph (g) of this section, an 
itemization of each amount for charges described in Sec. 1026.37(g)(2), 
the name of the person ultimately receiving the payment or government 
entity assessing the property tax, provided that the person ultimately 
receiving the payment need not be disclosed for the disclosure required 
by Sec. 1026.37(g)(2)(iii) when disclosed pursuant to this paragraph, 
and the total of all such itemized amounts that are designated borrower-
paid at or before closing.
    (3) Initial escrow payment at closing. Under the subheading 
``Initial escrow payment at closing'' and in the applicable column as 
described in paragraph (g) of this section, an itemization of each 
amount for charges described in Sec. 1026.37(g)(3), the applicable 
aggregate adjustment pursuant to 12 CFR 1024.17(d)(2) along with the 
label ``aggregate adjustment,'' and the total of all such itemized 
amounts that are designated borrower-paid at or before closing.
    (4) Other. Under the subheading ``Other'' and in the applicable 
column as described in paragraph (g) of this section, an itemization of 
each amount for charges in connection with the transaction that are in 
addition to the charges disclosed under paragraphs (f) and (g)(1) 
through (3) for services that are required or obtained in the real 
estate closing by the consumer, the seller, or other party, the name of 
the person ultimately receiving the payment, and the total of all such 
itemized amounts that are designated borrower-paid at or before closing.
    (i) For any cost that is a component of title insurance services, 
the introductory description ``Title --'' shall appear at the beginning 
of the label for that actual cost.
    (ii) The parenthetical description ``(optional)'' shall appear at 
the end of the label for costs designated borrower-paid at or before 
closing for any premiums paid for separate insurance, warranty, 
guarantee, or event-coverage products.
    (5) Total other costs. Under the subheading ``Total Other Costs 
(Borrower-Paid),'' the sum of the amounts disclosed as borrower-paid 
pursuant to paragraph (g)(6) of this section.
    (6) Subtotal of costs. The sum of other costs, calculated by 
totaling the costs disclosed in paragraphs (g)(1) through (4) of this 
section designated borrower-paid at or before closing, labeled ``Other 
Costs Subtotals.''
    (h) Closing cost totals. (1) The sum of the costs disclosed as 
borrower-paid pursuant to paragraph (h)(2) of this section and the 
amount disclosed in paragraph (h)(3) of this section, under the 
subheading ``Total Closing Costs (Borrower-Paid).''
    (2) The sum of the amounts disclosed in paragraphs (f)(5) and (g)(6) 
of this section, designated borrower-paid at or before closing, and the 
sum of the costs designated seller-paid at or before closing or paid by 
others disclosed pursuant to paragraphs (f) and (g) of this section, 
labeled ``Closing Costs Subtotals.''
    (3) The amount described in Sec. 1026.37(g)(6)(ii) as a negative 
number, labeled ``Lender Credits'' and designated borrower-paid at 
closing, and if a refund is provided pursuant to Sec. 1026.19(f)(2)(v), 
a statement that this amount includes a credit for an amount that 
exceeds the limitations on increases in closing costs under Sec. 
1026.19(e)(3), and the amount of such credit under Sec. 
1026.19(f)(2)(v).
    (4) The services and costs disclosed pursuant to paragraphs (f) and 
(g) of this section on the Closing Disclosure shall be labeled using 
terminology that describes the item disclosed, in a manner that is 
consistent with the descriptions or prescribed labels, as applicable, 
used for such items on the Loan Estimate pursuant to Sec. 1026.37. The 
creditor must also list the items on the Closing Disclosure in the same 
sequential order as on the Loan Estimate pursuant to Sec. 1026.37.
    (i) Calculating cash to close. In a separate table, under the 
heading ``Calculating Cash to Close,'' together with

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the statement ``Use this table to see what has changed from your Loan 
Estimate'':
    (1) Total closing costs. (i) Under the subheading ``Loan Estimate,'' 
the ``Total Closing Costs'' disclosed on the Loan Estimate under Sec. 
1026.37(h)(1)(i), labeled using that term.
    (ii) Under the subheading ``Final,'' the amount disclosed under 
paragraph (h)(1) of this section.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(1):
    (A) If the amount disclosed under paragraph (i)(1)(ii) of this 
section is different than the amount disclosed under paragraph (i)(1)(i) 
of this section (unless the difference is due to rounding):
    (1) A statement of that fact;
    (2) If the difference in the ``Total Closing Costs'' is attributable 
to differences in itemized charges that are included in either or both 
subtotals, a statement that the consumer should see the total loan costs 
and total other costs subtotals disclosed under paragraphs (f)(4) and 
(g)(5) of this section (together with references to such disclosures), 
as applicable; and
    (3) If the increase exceeds the limitations on increases in closing 
costs under Sec. 1026.19(e)(3), a statement that such increase exceeds 
the legal limits by the dollar amount of the excess, and if any refund 
is provided pursuant to Sec. 1026.19(f)(2)(v), a statement directing 
the consumer to the disclosure required under paragraph (h)(3) of this 
section. Such dollar amount shall equal the sum total of all excesses of 
the limitations on increases in closing costs under Sec. 1026.19(e)(3), 
taking into account the different methods of calculating excesses of the 
limitations on increases in closing costs under Sec. 1026.19(e)(3)(i) 
and (ii).
    (B) If the amount disclosed under paragraph (i)(1)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(1)(i) of 
this section, a statement of that fact.
    (2) Closing costs paid before closing. (i) Under the subheading 
``Loan Estimate,'' the dollar amount ``$0,'' labeled ``Closing Costs 
Paid Before Closing.''
    (ii) Under the subheading ``Final,'' the amount of ``Total Closing 
Costs'' disclosed under paragraph (h)(2) of this section and designated 
as borrower-paid before closing, stated as a negative number.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(2):
    (A) If the amount disclosed under paragraph (i)(2)(ii) of this 
section is different than the amount disclosed under paragraph (i)(2)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer paid such amounts 
prior to consummation of the transaction; or
    (B) If the amount disclosed under paragraph (i)(2)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(2)(i) of 
this section, a statement of that fact.
    (3) Closing costs financed. (i) Under the subheading ``Loan 
Estimate,'' the amount disclosed under Sec. 1026.37(h)(1)(ii), labeled 
``Closing Costs Financed (Paid from your Loan Amount).''
    (ii) Under the subheading ``Final,'' the actual amount of the 
closing costs that are to be paid out of loan proceeds, if any, stated 
as a negative number.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(3):
    (A) If the amount disclosed under paragraph (i)(3)(ii) of this 
section is different than the amount disclosed under paragraph (i)(3)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer included the 
closing costs in the loan amount, which increased the loan amount; or
    (B) If the amount disclosed under paragraph (i)(3)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(3)(i) of 
this section, a statement of that fact.
    (4) Down payment/funds from borrower. (i) Under the subheading 
``Loan Estimate,'' the amount disclosed under Sec. 1026.37(h)(1)(iii), 
labeled ``Down Payment/Funds from Borrower.''
    (ii) Under the subheading ``Final'':
    (A) In a transaction that is a purchase as defined in Sec. 
1026.37(a)(9)(i), the

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amount of the difference between the purchase price of the property and 
the principal amount of the credit extended, stated as a positive 
number, labeled ``Down Payment/Funds from Borrower''; or
    (B) In a transaction other than the type described in paragraph 
(i)(4)(ii)(A) of this section, the ``Funds from Borrower'' as determined 
in accordance with paragraph (i)(6)(iv) of this section, labeled ``Down 
Payment/Funds from Borrower.''
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(4):
    (A) If the amount disclosed under paragraph (i)(4)(ii) of this 
section is different than the amount disclosed under paragraph (i)(4)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer increased or 
decreased this payment and that the consumer should see the details 
disclosed under paragraph (j)(1) or (j)(2) of this section, as 
applicable; or
    (B) If the amount disclosed under paragraph (i)(4)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(4)(i) of 
this section, a statement of that fact.
    (5) Deposit. (i) Under the subheading ``Loan Estimate,'' the amount 
disclosed under Sec. 1026.37(h)(1)(iv), labeled ``Deposit.''
    (ii) Under the subheading ``Final,'' the amount disclosed under 
paragraph (j)(2)(ii) of this section, stated as a negative number.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(5):
    (A) If the amount disclosed under paragraph (i)(5)(ii) of this 
section is different than the amount disclosed under paragraph (i)(5)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer increased or 
decreased this payment, as applicable, and that the consumer should see 
the details disclosed under paragraph (j)(2)(ii) of this section; or
    (B) If the amount disclosed under paragraph (i)(5)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(5)(i) of 
this section, a statement of that fact.
    (6) Funds for borrower. (i) Under the subheading ``Loan Estimate,'' 
the amount disclosed under Sec. 1026.37(h)(1)(v), labeled ``Funds for 
Borrower.''
    (ii) Under the subheading ``Final,'' the ``Funds for Borrower,'' 
labeled using that term, as determined in accordance with paragraph 
(i)(6)(iv) of this section.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(6):
    (A) If the amount disclosed under paragraph (i)(6)(ii) of this 
section is different than the amount disclosed under paragraph (i)(6)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer's available funds 
from the loan amount have increased or decreased, as applicable; or
    (B) If the amount disclosed under paragraph (i)(6)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(6)(i) of 
this section, a statement of that fact.
    (iv) The ``Funds from Borrower'' to be disclosed under paragraph 
(i)(4)(ii)(B) of this section and ``Funds for Borrower'' to be disclosed 
under paragraph (i)(6)(ii) of this section are determined by subtracting 
the principal amount of the credit extended (excluding any amount 
disclosed pursuant to paragraph (i)(3)(ii) of this section) from the 
total amount of all existing debt being satisfied in the real estate 
closing and disclosed under paragraph (j)(1)(v) of this section (except 
to the extent the satisfaction of such existing debt is disclosed under 
paragraph (g) of this section).
    (A) If the calculation under this paragraph (i)(6)(iv) yields an 
amount that is a positive number, such amount shall be disclosed under 
paragraph (i)(4)(ii)(B) of this section, and $0 shall be disclosed under 
paragraph (i)(6)(ii) of this section.
    (B) If the calculation under this paragraph (i)(6)(iv) yields an 
amount that is a negative number, such amount shall be disclosed under 
paragraph (i)(6)(ii) of this section, stated as a negative

[[Page 128]]

number, and $0 shall be disclosed under paragraph (i)(4)(ii)(B) of this 
section.
    (C) If the calculation under this paragraph (i)(6)(iv) yields $0, $0 
shall be disclosed under paragraph (i)(4)(ii)(B) of this section and 
under paragraph (i)(6)(ii) of this section.
    (7) Seller credits. (i) Under the subheading ``Loan Estimate,'' the 
amount disclosed under Sec. 1026.37(h)(1)(vi), labeled ``Seller 
Credits.''
    (ii) Under the subheading ``Final,'' the amount disclosed under 
paragraph (j)(2)(v) of this section, stated as a negative number.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(7):
    (A) If the amount disclosed under paragraph (i)(7)(ii) of this 
section is different than the amount disclosed under paragraph (i)(7)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer should see the 
details disclosed under paragraph (j)(2)(v) of this section; or
    (B) If the amount disclosed under paragraph (i)(7)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(7)(i) of 
this section, a statement of that fact.
    (8) Adjustments and other credits. (i) Under the subheading ``Loan 
Estimate,'' the amount disclosed on the Loan Estimate under Sec. 
1026.37(h)(1)(vii) rounded to the nearest whole dollar, labeled 
``Adjustments and Other Credits.''
    (ii) Under the subheading ``Final,'' the amount equal to the total 
of the amounts disclosed under paragraphs (j)(1)(iii) and (v) through 
(x) of this section reduced by the total of the amounts disclosed under 
paragraphs (j)(2)(vi) through (xi) of this section.
    (iii) Under the subheading ``Did this change?,'' disclosed more 
prominently than the other disclosures under this paragraph (i)(8):
    (A) If the amount disclosed under paragraph (i)(8)(ii) of this 
section is different than the amount disclosed under paragraph (i)(8)(i) 
of this section (unless the difference is due to rounding), a statement 
of that fact, along with a statement that the consumer should see the 
details disclosed under paragraphs (j)(1)(iii) and (v) through (x) and 
(j)(2)(vi) through (xi) of this section; or
    (B) If the amount disclosed under paragraph (i)(8)(ii) of this 
section is equal to the amount disclosed under paragraph (i)(8)(i) of 
this section, a statement of that fact.
    (9) Cash to close. (i) Under the subheading ``Loan Estimate,'' the 
amount disclosed on the Loan Estimate under Sec. 1026.37(h)(1)(viii), 
labeled ``Cash to Close'' and disclosed more prominently than the other 
disclosures under this paragraph (i).
    (ii) Under the subheading ``Final,'' the sum of the amounts 
disclosed under paragraphs (i)(1) through (i)(8) of this section under 
the subheading ``Final,'' and disclosed more prominently than the other 
disclosures under this paragraph (i).
    (j) Summary of borrower's transaction. Under the heading ``Summaries 
of Transactions,'' with a statement to ``Use this table to see a summary 
of your transaction,'' two separate tables are disclosed. The first 
table shall include, under the subheading ``Borrower's Transaction,'' 
the following information and shall satisfy the following requirements:
    (1) Itemization of amounts due from borrower. (i) The total amount 
due from the consumer at closing, calculated as the sum of items 
required to be disclosed by paragraph (j)(1)(ii) through (x) of this 
section, excluding items paid from funds other than closing funds as 
described in paragraph (j)(4)(i) of this section, labeled ``Due from 
Borrower at Closing'';
    (ii) The amount of the contract sales price of the property being 
sold in a purchase real estate transaction, excluding the price of any 
tangible personal property if the consumer and seller have agreed to a 
separate price for such items, labeled ``Sale Price of Property'';
    (iii) The amount of the sales price of any tangible personal 
property excluded from the contract sales price pursuant to paragraph 
(j)(1)(ii) of this section, labeled ``Sale Price of Any Personal 
Property Included in Sale'';
    (iv) The total amount of closing costs disclosed that are designated 
borrower-paid at closing, as the sum of the

[[Page 129]]

amounts calculated pursuant to paragraphs (h)(2) and (3) of this 
section, labeled ``Closing Costs Paid at Closing'';
    (v) A description and the amount of any additional items that the 
seller has paid prior to the real estate closing, but reimbursed by the 
consumer at the real estate closing, and a description and the amount of 
any other items owed by the consumer at the real estate closing not 
otherwise disclosed pursuant to paragraph (f), (g), or (j) of this 
section;
    (vi) The description ``Adjustments for Items Paid by Seller in 
Advance'';
    (vii) The prorated amount of any prepaid taxes due from the consumer 
to reimburse the seller at the real estate closing, and the time period 
corresponding to that amount, labeled ``City/Town Taxes'';
    (viii) The prorated amount of any prepaid taxes due from the 
consumer to reimburse the seller at the real estate closing, and the 
time period corresponding to that amount, labeled ``County Taxes'';
    (ix) The prorated amount of any prepaid assessments due from the 
consumer to reimburse the seller at the real estate closing, and the 
time period corresponding to that amount, labeled ``Assessments''; and
    (x) A description and the amount of any additional items paid by the 
seller prior to the real estate closing that are due from the consumer 
at the real estate closing.
    (2) Itemization of amounts already paid by or on behalf of borrower. 
(i) The sum of the amounts disclosed in this paragraphs (j)(2)(ii) 
through (xi) of this section, excluding items paid from funds other than 
closing funds as described in paragraph (j)(4)(i) of this section, 
labeled ``Paid Already by or on Behalf of Borrower at Closing'';
    (ii) Any amount that is paid to the seller or held in trust or 
escrow by an attorney or other party under the terms of the agreement 
for the sale of the property, labeled ``Deposit'';
    (iii) The amount of the consumer's new loan amount or first user 
loan as disclosed pursuant to paragraph (b) of this section, labeled 
``Loan Amount'';
    (iv) The amount of any existing loans that the consumer is assuming, 
or any loans subject to which the consumer is taking title to the 
property, labeled ``Existing Loan(s) Assumed or Taken Subject to'';
    (v) The total amount of money that the seller will provide at the 
real estate closing as a lump sum not otherwise itemized to pay for loan 
costs as determined by paragraph (f) of this section and other costs as 
determined by paragraph (g) of this section and any other obligations of 
the seller to be paid directly to the consumer, labeled ``Seller 
Credit'';
    (vi) The description ``Other Credits,'' together with a description 
and amount of other items paid by or on behalf of the consumer and not 
otherwise disclosed pursuant to paragraphs (f), (g), (h), and (j)(2) of 
this section;
    (vii) The description ``Adjustments for Items Unpaid by Seller'';
    (viii) The prorated amount of any unpaid taxes due from the seller 
to reimburse the consumer at the real estate closing, and the time 
period corresponding to that amount, labeled ''City/Town Taxes'';
    (ix) The prorated amount of any unpaid taxes due from the seller to 
reimburse the consumer at the real estate closing, and the time period 
corresponding to that amount, labeled ``County Taxes'';
    (x) The prorated amount of any unpaid assessments due from the 
seller to reimburse the consumer at the real estate closing, and the 
time period corresponding to that amount, labeled ``Assessments''; and
    (xi) A description and the amount of any additional items which have 
not yet been paid and which the consumer is expected to pay after the 
real estate closing, but which are attributable in part to a period of 
time prior to the real estate closing.
    (3) Calculation of borrower's transaction. Under the label 
``Calculation'':
    (i) The amount disclosed pursuant to paragraph (j)(1)(i) of this 
section, labeled ``Total Due from Borrower at Closing'';
    (ii) The amount disclosed pursuant to paragraph (j)(2)(i) of this 
section, if any, disclosed as a negative number, labeled ``Total Paid 
Already by or on Behalf of Borrower at Closing''; and

[[Page 130]]

    (iii) A statement that the disclosed amount is due from or to the 
consumer, and the amount due from or to the consumer at the real estate 
closing, calculated by the sum of the amounts disclosed under paragraphs 
(j)(3)(i) and (ii) of this section, labeled ``Cash to Close.''
    (4) Items paid outside of closing funds. (i) Costs that are not paid 
from closing funds but that would otherwise be disclosed in the table 
required pursuant to paragraph (j) of this section, should be marked 
with the phrase ``Paid Outside of Closing'' or the abbreviation 
``P.O.C.'' and include the name of the party making the payment.
    (ii) For purposes of this paragraph (j), ``closing funds'' means 
funds collected and disbursed at real estate closing.
    (k) Summary of seller's transaction. Under the heading ``Summaries 
of Transactions'' required by paragraph (j) of this section, a separate 
table under the subheading ``Seller's Transaction,'' that includes the 
following information and satisfies the following requirements:
    (1) Itemization of amounts due to seller. (i) The total amount due 
to the seller at the real estate closing, calculated as the sum of items 
required to be disclosed pursuant to paragraphs (k)(1)(ii) through (ix) 
of this section, excluding items paid from funds other than closing 
funds as described in paragraph (k)(4)(i) of this section, labeled ``Due 
to Seller at Closing'';
    (ii) The amount of the contract sales price of the property being 
sold, excluding the price of any tangible personal property if the 
consumer and seller have agreed to a separate price for such items, 
labeled ``Sale Price of Property'';
    (iii) The amount of the sales price of any tangible personal 
property excluded from the contract sales price pursuant to paragraph 
(k)(1)(ii) of this section, labeled ``Sale Price of Any Personal 
Property Included in Sale'';
    (iv) A description and the amount of other items paid to the seller 
by the consumer pursuant to the contract of sale or other agreement, 
such as charges that were not disclosed pursuant to Sec. 1026.37 on the 
Loan Estimate or items paid by the seller prior to the real estate 
closing but reimbursed by the consumer at the real estate closing;
    (v) The description ``Adjustments for Items Paid by Seller in 
Advance'';
    (vi) The prorated amount of any prepaid taxes due from the consumer 
to reimburse the seller at the real estate closing, and the time period 
corresponding to that amount, labeled ``City/Town Taxes'';
    (vii) The prorated amount of any prepaid taxes due from the consumer 
to reimburse the seller at the real estate closing, and the time period 
corresponding to that amount, labeled ``County Taxes'';
    (viii) The prorated amount of any prepaid assessments due from the 
consumer to reimburse the seller at the real estate closing, and the 
time period corresponding to that amount, labeled ``Assessments''; and
    (ix) A description and the amount of additional items paid by the 
seller prior to the real estate closing that are reimbursed by the 
consumer at the real estate closing.
    (2) Itemization of amounts due from seller. (i) The total amount due 
from the seller at the real estate closing, calculated as the sum of 
items required to be disclosed pursuant to paragraphs (k)(2)(ii) through 
(xiii) of this section, excluding items paid from funds other than 
closing funds as described in paragraph (k)(4)(i) of this section, 
labeled ``Due from Seller at Closing'';
    (ii) The amount of any excess deposit disbursed to the seller prior 
to the real estate closing, labeled ``Excess Deposit'';
    (iii) The amount of closing costs designated seller-paid at closing 
disclosed pursuant to paragraph (h)(2) of this section, labeled 
``Closing Costs Paid at Closing'';
    (iv) The amount of any existing loans that the consumer is assuming, 
or any loans subject to which the consumer is taking title to the 
property, labeled ``Existing Loan(s) Assumed or Taken Subject to'';
    (v) The amount of any loan secured by a first lien on the property 
that will be paid off as part of the real estate closing, labeled 
``Payoff of First Mortgage Loan'';
    (vi) The amount of any loan secured by a second lien on the property 
that

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will be paid off as part of the real estate closing, labeled ``Payoff of 
Second Mortgage Loan'';
    (vii) The total amount of money that the seller will provide at the 
real estate closing as a lump sum not otherwise itemized to pay for loan 
costs as determined by paragraph (f) of this section and other costs as 
determined by paragraph (g) of this section and any other obligations of 
the seller to be paid directly to the consumer, labeled ``Seller 
Credit'';
    (viii) A description and amount of any and all other obligations 
required to be paid by the seller at the real estate closing, including 
any lien-related payoffs, fees, or obligations;
    (ix) The description ``Adjustments for Items Unpaid by Seller'';
    (x) The prorated amount of any unpaid taxes due from the seller to 
reimburse the consumer at the real estate closing, and the time period 
corresponding to that amount, labeled ``City/Town Taxes'';
    (xi) The prorated amount of any unpaid taxes due from the seller to 
the consumer at the real estate closing, and the time period 
corresponding to that amount, labeled ``County Taxes'';
    (xii) The prorated amount of any unpaid assessments due from the 
seller to reimburse the consumer at the real estate closing, and the 
time period corresponding to that amount, labeled ``Assessments''; and
    (xiii) A description and the amount of any additional items which 
have not yet been paid and which the consumer is expected to pay after 
the real estate closing, but which are attributable in part to a period 
of time prior to the real estate closing.
    (3) Calculation of seller's transaction. Under the label 
``Calculation'':
    (i) The amount described in paragraph (k)(1)(i) of this section, 
labeled ``Total Due to Seller at Closing'';
    (ii) The amount described in paragraph (k)(2)(i) of this section, 
disclosed as a negative number, labeled ``Total Due from Seller at 
Closing''; and
    (iii) A statement that the disclosed amount is due from or to the 
seller, and the amount due from or to the seller at closing, calculated 
by the sum of the amounts disclosed pursuant to paragraphs (k)(3)(i) and 
(ii) of this section, labeled ``Cash.''
    (4) Items paid outside of closing funds. (i) Charges that are not 
paid from closing funds but that would otherwise be disclosed in the 
table described in paragraph (k) of this section, should be marked with 
the phrase ``Paid Outside of Closing'' or the acronym ``P.O.C.'' and 
include a statement of the party making the payment.
    (ii) For purposes of this paragraph (k), ``closing funds'' are 
defined as funds collected and disbursed at real estate closing.
    (l) Loan disclosures. Under the master heading ``Additional 
Information About This Loan'' and under the heading ``Loan 
Disclosures'':
    (1) Assumption. Under the subheading ``Assumption,'' the information 
required by Sec. 1026.37(m)(2).
    (2) Demand feature. Under the subheading ``Demand Feature,'' a 
statement of whether the legal obligation permits the creditor to demand 
early repayment of the loan and, if the statement is affirmative, a 
reference to the note or other loan contract for details.
    (3) Late payment. Under the subheading ``Late Payment,'' the 
information required by Sec. 1026.37(m)(4).
    (4) Negative amortization. Under the subheading ``Negative 
Amortization (Increase in Loan Amount),'' a statement of whether the 
regular periodic payments may cause the principal balance to increase.
    (i) If the regular periodic payments do not cover all of the 
interest due, the creditor must provide a statement that the principal 
balance will increase, such balance will likely become larger than the 
original loan amount, and increases in such balance lower the consumer's 
equity in the property.
    (ii) If the consumer may make regular periodic payments that do not 
cover all of the interest due, the creditor must provide a statement 
that, if the consumer chooses a monthly payment option that does not 
cover all of the interest due, the principal balance may become larger 
than the original loan amount and the increases in the principal balance 
lower the consumer's equity in the property.
    (5) Partial payment policy. Under the subheading ``Partial 
Payments'':

[[Page 132]]

    (i) If periodic payments that are less than the full amount due are 
accepted, a statement that the creditor, using the term ``lender,'' may 
accept partial payments and apply such payments to the consumer's loan;
    (ii) If periodic payments that are less than the full amount due are 
accepted but not applied to a consumer's loan until the consumer pays 
the remainder of the full amount due, a statement that the creditor, 
using the term ``lender,'' may hold partial payments in a separate 
account until the consumer pays the remainder of the payment and then 
apply the full periodic payment to the consumer's loan;
    (iii) If periodic payments that are less than the full amount due 
are not accepted, a statement that the creditor, using the term 
``lender,'' does not accept any partial payments; and
    (iv) A statement that, if the loan is sold, the new creditor, using 
the term ``lender,'' may have a different policy.
    (6) Security interest. Under the subheading ``Security Interest,'' a 
statement that the consumer is granting a security interest in the 
property securing the transaction, the property address including a zip 
code, and a statement that the consumer may lose the property if the 
consumer does not make the required payments or satisfy other 
requirements under the legal obligation.
    (7) Escrow account. Under the subheading ``Escrow Account'':
    (i) Under the reference ``For now,'' a statement that an escrow 
account may also be called an impound or trust account, a statement of 
whether the creditor has established or will establish, at or before 
consummation, an escrow account in connection with the transaction for 
the costs that will be paid using escrow account funds described in 
paragraph (l)(7)(i)(A)(1) of this section:
    (A) A statement that the creditor may be liable for penalties and 
interest if it fails to make a payment for any cost for which the escrow 
account is established, a statement that the consumer would have to pay 
such costs directly in the absence of the escrow account, and a table, 
titled ``Escrow'' that contains, if an escrow account is or will be 
established, an itemization of the following:
    (1) The total amount the consumer will be required to pay into an 
escrow account over the first year after consummation for payment of the 
charges described in Sec. 1026.37(c)(4)(ii), labeled ``Escrowed 
Property Costs over Year 1,'' together with a descriptive name of each 
such charge, calculated as the amount disclosed under paragraph 
(l)(7)(i)(A)(4) of this section multiplied by the number of periodic 
payments scheduled to be made to the escrow account during the first 
year after consummation;
    (2) The estimated amount the consumer is likely to pay during the 
first year after consummation for charges described in Sec. 
1026.37(c)(4)(ii) that are known to the creditor and that will not be 
paid using escrow account funds, labeled ``Non-Escrowed Property Costs 
over Year 1,'' together with a descriptive name of each such charge and 
a statement that the consumer may have to pay other costs that are not 
listed;
    (3) The total amount disclosed pursuant to paragraph (g)(3) of this 
section, a statement that the payment is a cushion for the escrow 
account, labeled ``Initial Escrow Payment,'' and a reference to the 
information disclosed pursuant to paragraph (g)(3) of this section;
    (4) The amount the consumer will be required to pay into the escrow 
account with each periodic payment during the first year after 
consummation for payment of the charges described in Sec. 
1026.37(c)(4)(ii), labeled ``Monthly Escrow Payment.''
    (5) A creditor complies with the requirements of paragraphs 
(l)(7)(i)(A)(1) and (l)(7)(i)(A)(4) of this section if the creditor 
bases the numerical disclosures required by those paragraphs on amounts 
derived from the escrow account analysis required under Regulation X, 12 
CFR 1024.17.
    (B) A statement of whether the consumer will not have an escrow 
account, the reason why an escrow account will not be established, a 
statement that the consumer must pay all property costs, such as taxes 
and homeowner's insurance, directly, a statement that the consumer may 
contact the creditor to inquire about the availability of an

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escrow account, and a table, titled ``No Escrow,'' that contains, if an 
escrow account will not be established, an itemization of the following:
    (1) The estimated total amount the consumer will pay directly for 
charges described in Sec. 1026.37(c)(4)(ii) during the first year after 
consummation that are known to the creditor and a statement that, 
without an escrow account, the consumer must pay the identified costs, 
possibly in one or two large payments, labeled ``Property Costs over 
Year 1''; and
    (2) The amount of any fee the creditor imposes on the consumer for 
not establishing an escrow account in connection with the transaction, 
labeled ``Escrow Waiver Fee.''
    (ii) Under the reference ``In the future'':
    (A) A statement that the consumer's property costs may change and 
that, as a result, the consumer's escrow payment may change;
    (B) A statement that the consumer may be able to cancel any escrow 
account that has been established, but that the consumer is responsible 
for directly paying all property costs in the absence of an escrow 
account; and
    (C) A description of the consequences if the consumer fails to pay 
property costs, including the actions that a State or local government 
may take if property taxes are not paid and the actions the creditor may 
take if the consumer does not pay some or all property costs, such as 
adding amounts to the loan balance, adding an escrow account to the 
loan, or purchasing a property insurance policy on the consumer's behalf 
that may be more expensive and provide fewer benefits than what the 
consumer could obtain directly.
    (m) Adjustable payment table. Under the master heading ``Additional 
Information About This Loan'' required by paragraph (l) of this section, 
and under the heading ``Adjustable Payment (AP) Table,'' the table 
required to be disclosed by Sec. 1026.37(i).
    (n) Adjustable interest rate table. Under the master heading 
``Additional Information About This Loan'' required by paragraph (l) of 
this section, and under the heading ``Adjustable Interest Rate (AIR) 
Table,'' the table required to be disclosed by Sec. 1026.37(j).
    (o) Loan calculations. In a separate table under the heading ``Loan 
Calculations'':
    (1) Total of payments. The ``Total of Payments,'' using that term 
and expressed as a dollar amount, and a statement that the disclosure is 
the total the consumer will have paid after making all payments of 
principal, interest, mortgage insurance, and loan costs, as scheduled.
    (2) Finance charge. The ``Finance Charge,'' using that term and 
expressed as a dollar amount, and the following statement: ``The dollar 
amount the loan will cost you.'' The disclosed finance charge and other 
disclosures affected by the disclosed financed charge (including the 
amount financed and the annual percentage rate) shall be treated as 
accurate if the amount disclosed as the finance charge:
    (i) Is understated by no more than $100; or
    (ii) Is greater than the amount required to be disclosed.
    (3) Amount financed. The ``Amount Financed,'' using that term and 
expressed as a dollar amount, and the following statement: ``The loan 
amount available after paying your upfront finance charge.''
    (4) Annual percentage rate. The ``Annual Percentage Rate,'' using 
that term and the abbreviation ``APR'' and expressed as a percentage, 
and the following statement: ``Your costs over the loan term expressed 
as a rate. This is not your interest rate.''
    (5) Total interest percentage. The ``Total Interest Percentage,'' 
using that term and the abbreviation ``TIP'' and expressed as a 
percentage, and the following statement: ``The total amount of interest 
that you will pay over the loan term as a percentage of your loan 
amount.''
    (p) Other disclosures. Under the heading ``Other Disclosures'':
    (1) Appraisal. For transactions subject to 15 U.S.C. 1639h or 
1691(e), as implemented in this part or Regulation B, 12 CFR part 1002, 
respectively, under the subheading ``Appraisal,'' that:
    (i) If there was an appraisal of the property in connection with the 
loan, the creditor is required to provide the

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consumer with a copy at no additional cost to the consumer at least 
three days prior to consummation; and
    (ii) If the consumer has not yet received a copy of the appraisal, 
the consumer should contact the creditor using the information disclosed 
pursuant to paragraph (r) of this section.
    (2) Contract details. A statement that the consumer should refer to 
the appropriate loan document and security instrument for information 
about nonpayment, what constitutes a default under the legal obligation, 
circumstances under which the creditor may accelerate the maturity of 
the obligation, and prepayment rebates and penalties, under the 
subheading ``Contract Details.''
    (3) Liability after foreclosure. A brief statement of whether, and 
the conditions under which, the consumer may remain responsible for any 
deficiency after foreclosure under applicable State law, a brief 
statement that certain protections may be lost if the consumer 
refinances or incurs additional debt on the property, and a statement 
that the consumer should consult an attorney for additional information, 
under the subheading ``Liability after Foreclosure.''
    (4) Refinance. Under the subheading ``Refinance,'' the statement 
required by Sec. 1026.37(m)(5).
    (5) Tax deductions. Under the subheading ``Tax Deductions,'' a 
statement that, if the extension of credit exceeds the fair market value 
of the property, the interest on the portion of the credit extension 
that is greater than the fair market value of the property is not tax 
deductible for Federal income tax purposes and a statement that the 
consumer should consult a tax adviser for further information.
    (q) Questions notice. In a separate notice labeled ``Questions?'':
    (1) A statement directing the consumer to use the contact 
information disclosed under paragraph (r) of this section if the 
consumer has any questions about the disclosures required pursuant to 
Sec. 1026.19(f);
    (2) A reference to the Bureau's Web site to obtain more information 
or to submit a complaint; and the link or uniform resource locator 
address to the Web site: www.consumerfinance.gov/mortgage-closing; and
    (3) A prominent question mark.
    (r) Contact information. In a separate table, under the heading 
``Contact Information,'' the following information for each creditor 
(under the subheading ``Lender''), mortgage broker (under the subheading 
``Mortgage Broker''), consumer's real estate broker (under the 
subheading ``Real Estate Broker (B)''), seller's real estate broker 
(under the subheading ``Real Estate Broker (S)''), and settlement agent 
(under the subheading ``Settlement Agent'') participating in the 
transaction:
    (1) Name of the person, labeled ``Name'';
    (2) Address, using that label;
    (3) Nationwide Mortgage Licensing System & Registry (NMLSR ID) 
identification number, labeled ``NMLS ID,'' or, if none, license number 
or other unique identifier issued by the applicable jurisdiction or 
regulating body with which the person is licensed and/or registered, 
labeled ``License ID,'' with the abbreviation for the State of the 
applicable jurisdiction or regulatory body stated before the word 
``License'' in the label, for the persons identified in paragraph (r)(1) 
of this section;
    (4) Name of the natural person who is the primary contact for the 
consumer with the person identified in paragraph (r)(1) of this section, 
labeled ``Contact'';
    (5) NMLSR ID, labeled ``Contact NMLS ID,'' or, if none, license 
number or other unique identifier issued by the applicable jurisdiction 
or regulating body with which the person is licensed and/or registered, 
labeled ``Contact License ID,'' with the abbreviation for the State of 
the applicable jurisdiction or regulatory body stated before the word 
``License'' in the label, for the natural person identified in paragraph 
(r)(4) of this section,
    (6) Email address for the person identified in paragraph (r)(4) of 
this section, labeled ``Email''; and
    (7) Telephone number for the person identified in paragraph (r)(4) 
of this section, labeled ``Phone.''
    (s) Signature statement. (1) At the creditor's option, under the 
heading

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``Confirm Receipt,'' a line for the signatures of the consumers in the 
transaction. If the creditor provides a line for the consumer's 
signature, the creditor must disclose above the signature line the 
statement required to be disclosed under Sec. 1026.37(n)(1).
    (2) If the creditor does not provide a line for the consumer's 
signature, the statement required to be disclosed under Sec. 
1026.37(n)(2) under the heading ``Other Disclosures'' required by 
paragraph (p) of this section.
    (t) Form of disclosures--(1) General requirements. (i) The creditor 
shall make the disclosures required by this section clearly and 
conspicuously in writing, in a form that the consumer may keep. The 
disclosures also shall be grouped together and segregated from 
everything else.
    (ii) Except as provided in paragraph (t)(5), the disclosures shall 
contain only the information required by paragraphs (a) through (s) of 
this section and shall be made in the same order, and positioned 
relative to the master headings, headings, subheadings, labels, and 
similar designations in the same manner, as shown in form H-25, set 
forth in appendix H to this part.
    (2) Headings and labels. If a master heading, heading, subheading, 
label, or similar designation contains the word ``estimated'' or a 
capital letter designation in form H-25, set forth in appendix H to this 
part, that heading, label, or similar designation shall contain the word 
``estimated'' and the applicable capital letter designation.
    (3) Form. Except as provided in paragraph (t)(5) of this section:
    (i) For a transaction subject to Sec. 1026.19(f) that is a 
federally related mortgage loan, as defined in Regulation X, 12 CFR 
1024.2, the disclosures must be made using form H-25, set forth in 
appendix H to this part.
    (ii) For any other transaction subject to this section, the 
disclosures must be made with headings, content, and format 
substantially similar to form H-25, set forth in appendix H to this 
part.
    (iii) The disclosures required by this section may be provided to 
the consumer in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (15 U.S.C. 7001 et seq.).
    (4) Rounding--(i) Nearest dollar. The following dollar amounts are 
required to be rounded to the nearest whole dollar:
    (A) The dollar amounts required to be disclosed by paragraph (b) of 
this section that are required to be rounded by Sec. 
1026.37(o)(4)(i)(A) when disclosed under Sec. 1026.37(b)(6) and (7);
    (B) The dollar amounts required to be disclosed by paragraph (c) of 
this section that are required to be rounded by Sec. 
1026.37(o)(4)(i)(A) when disclosed under Sec. 1026.37(c)(1)(iii);
    (C) The dollar amounts required to be disclosed by paragraphs (e) 
and (i) of this section under the subheading ``Loan Estimate'';
    (D) The dollar amounts required to be disclosed by paragraph (m) of 
this section; and
    (E) The dollar amounts required to be disclosed by paragraph (c) of 
this section that are required to be rounded by Sec. 
1026.37(o)(4)(i)(C) when disclosed under Sec. 1026.37(c)(2)(iv).
    (ii) Percentages. The percentage amounts required to be disclosed 
under paragraphs (b), (f)(1), (n), and (o)(5) of this section shall not 
be rounded and shall be disclosed up to two or three decimal places. The 
percentage amount required to be disclosed under paragraph (o)(4) of 
this section shall not be rounded and shall be disclosed up to three 
decimal places. If the amount is a whole number then the amount 
disclosed shall be truncated at the decimal point.
    (iii) Loan amount. The dollar amount required to be disclosed by 
paragraph (b) of this section as required by Sec. 1026.37(b)(1) shall 
be disclosed as an unrounded number, except that if the amount is a 
whole number then the amount disclosed shall be truncated at the decimal 
point.
    (5) Exceptions--(i) Unit-period. Wherever the form or this section 
uses ``monthly'' to describe the frequency of any payments or uses 
``month'' to describe the applicable unit-period, the creditor shall 
substitute the appropriate term to reflect the fact that the 
transaction's terms provide for other than monthly periodic payments, 
such as bi-weekly or quarterly payments.

[[Page 136]]

    (ii) Lender credits. The amount required to be disclosed by 
paragraph (d)(1)(i)(D) of this section may be omitted from the form if 
the amount is zero.
    (iii) Administrative information. The creditor may insert at the 
bottom of each page under the disclosures required by this section as 
illustrated by form H-25 of appendix H to this part, any administrative 
information, text, or codes that assist in identification of the form or 
the information disclosed on the form, provided that the space provided 
on form H-25 for any of the information required by this section is not 
altered.
    (iv) Closing cost details--(A) Additional line numbers. Line numbers 
provided on form H-25 of appendix H to this part for the disclosure of 
the information required by paragraphs (f)(1) through (3) and (g)(1) 
through (4) of this section that are not used may be deleted and the 
deleted line numbers added to the space provided for any other of those 
paragraphs as necessary to accommodate the disclosure of additional 
items.
    (B) Two pages. To the extent that adding or deleting line numbers 
provided on form H-25 of appendix H to this part, as permitted by 
paragraph (t)(5)(iv)(A) of this section, does not accommodate an 
itemization of all information required to be disclosed by paragraphs 
(f) through (h) on one page, the information required to be disclosed by 
paragraphs (f) through (h) of this section may be disclosed on two 
pages, provided that the information required by paragraph (f) is 
disclosed on a page separate from the information required by paragraph 
(g). The information required by paragraph (g), if disclosed on a page 
separate from paragraph (f), shall be disclosed on the same page as the 
information required by paragraph (h).
    (v) Separation of consumer and seller information. The creditor or 
settlement agent preparing the form may use form H-25 of appendix H to 
this part for the disclosure provided to both the consumer and the 
seller, with the following modifications to separate the information of 
the consumer and seller, as necessary:
    (A) The information required to be disclosed by paragraphs (j) and 
(k) of this section may be disclosed on separate pages to the consumer 
and the seller, respectively, with the information required by the other 
paragraph left blank. The information disclosed to the consumer pursuant 
to paragraph (j) of this section must be disclosed on the same page as 
the information required by paragraph (i) of this section.
    (B) The information required to be disclosed by paragraphs (f) and 
(g) of this section with respect to costs paid by the consumer may be 
left blank on the disclosure provided to the seller.
    (C) The information required by paragraphs (a)(2), (a)(4)(iii), 
(a)(5), (b) through (d), (i), (l) through (p), (r) with respect to the 
creditor and mortgage broker, and (s)(2) of this section may be left 
blank on the disclosure provided to the seller.
    (vi) Modified version of the form for a seller or third-party. The 
information required by paragraphs (a)(2), (a)(4)(iii), (a)(5), (b) 
through (d), (f), and (g) with respect to costs paid by the consumer, 
(i), (j), (l) through (p), (q)(1), and (r) with respect to the creditor 
and mortgage broker, and (s) of this section may be deleted from the 
form provided to the seller or a third-party, as illustrated by form H-
25(I) of appendix H to this part.
    (vii) Transaction without a seller. The following modifications to 
form H-25 of appendix H to this part may be made for a transaction that 
does not involve a seller and for which the alternative tables are 
disclosed pursuant to paragraphs (d)(2) and (e) of this section, as 
illustrated by form H-25(J) of appendix H to this part:
    (A) The information required by paragraph (a)(4)(ii), and paragraphs 
(f), (g), and (h) of this section with respect to costs paid by the 
seller, may be deleted.
    (B) A table under the master heading ``Closing Cost Details'' 
required by paragraph (f) of this section may be added with the heading 
``Payoffs and Payments'' that itemizes the amounts of payments made at 
closing to other parties from the credit extended to the consumer or 
funds provided by the consumer in connection with the transaction, 
including designees of the consumer; the payees and a description of the 
purpose of such disbursements

[[Page 137]]

under the subheading ``To''; and the total amount of such payments 
labeled ``Total Payoffs and Payments.''
    (C) The tables required to be disclosed by paragraphs (j) and (k) of 
this section may be deleted.
    (viii) Translation. The form may be translated into languages other 
than English, and creditors may modify form H-25 of appendix H to this 
part to the extent that translation prevents the headings, labels, 
designations, and required disclosure items under this section from 
fitting in the space provided on form H-25.
    (ix) Customary recitals and information. An additional page may be 
attached to the form for the purpose of including customary recitals and 
information used locally in real estate settlements.

[78 FR 80120, Dec. 31, 2013, as amended at 80 FR 8776, Feb. 19, 2015; 80 
FR 43920, July 24, 2015]



Sec. 1026.39  Mortgage transfer disclosures.

    (a) Scope. The disclosure requirements of this section apply to any 
covered person except as otherwise provided in this section. For 
purposes of this section:
    (1) A ``covered person'' means any person, as defined in Sec. 
1026.2(a)(22), that becomes the owner of an existing mortgage loan by 
acquiring legal title to the debt obligation, whether through a 
purchase, assignment or other transfer, and who acquires more than one 
mortgage loan in any twelve-month period. For purposes of this section, 
a servicer of a mortgage loan shall not be treated as the owner of the 
obligation if the servicer holds title to the loan, or title is assigned 
to the servicer, solely for the administrative convenience of the 
servicer in servicing the obligation.
    (2) A ``mortgage loan'' means:
    (i) An open-end consumer credit transaction that is secured by the 
principal dwelling of a consumer; and
    (ii) A closed-end consumer credit transaction secured by a dwelling 
or real property.
    (b) Disclosure required. Except as provided in paragraph (c) of this 
section, each covered person is subject to the requirements of this 
section and shall mail or deliver the disclosures required by this 
section to the consumer on or before the 30th calendar day following the 
date of transfer.
    (1) Form of disclosures. The disclosures required by this section 
shall be provided clearly and conspicuously in writing, in a form that 
the consumer may keep. The disclosures required by this section may be 
provided to the consumer in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.).
    (2) The date of transfer. For purposes of this section, the date of 
transfer to the covered person may, at the covered person's option, be 
either the date of acquisition recognized in the books and records of 
the acquiring party, or the date of transfer recognized in the books and 
records of the transferring party.
    (3) Multiple consumers. If more than one consumer is liable on the 
obligation, a covered person may mail or deliver the disclosures to any 
consumer who is primarily liable.
    (4) Multiple transfers. If a mortgage loan is acquired by a covered 
person and subsequently sold, assigned, or otherwise transferred to 
another covered person, a single disclosure may be provided on behalf of 
both covered persons if the disclosure satisfies the timing and content 
requirements applicable to each covered person.
    (5) Multiple covered persons. If an acquisition involves multiple 
covered persons who jointly acquire the loan, a single disclosure must 
be provided on behalf of all covered persons.
    (c) Exceptions. Notwithstanding paragraph (b) of this section, a 
covered person is not subject to the requirements of this section with 
respect to a particular mortgage loan if:
    (1) The covered person sells, or otherwise transfers or assigns 
legal title to the mortgage loan on or before the 30th calendar day 
following the date that the covered person acquired the mortgage loan 
which shall be the date of transfer recognized for purposes of paragraph 
(b)(2) of this section;
    (2) The mortgage loan is transferred to the covered person in 
connection with a repurchase agreement that obligates the transferor to 
repurchase the

[[Page 138]]

loan. However, if the transferor does not repurchase the loan, the 
covered person must provide the disclosures required by this section 
within 30 days after the date that the transaction is recognized as an 
acquisition on its books and records; or
    (3) The covered person acquires only a partial interest in the loan 
and the party authorized to receive the consumer's notice of the right 
to rescind and resolve issues concerning the consumer's payments on the 
loan does not change as a result of the transfer of the partial 
interest.
    (d) Content of required disclosures. The disclosures required by 
this section shall identify the mortgage loan that was sold, assigned or 
otherwise transferred, and state the following, except that the 
information required by paragraph (d)(5) of this section shall be stated 
only for a mortgage loan that is a closed-end consumer credit 
transaction secured by a dwelling or real property other than a reverse 
mortgage transaction subject to Sec. 1026.33 of this part:
    (1) The name, address, and telephone number of the covered person.
    (i) If a single disclosure is provided on behalf of more than one 
covered person, the information required by this paragraph shall be 
provided for each of them unless paragraph (d)(1)(ii) of this section 
applies.
    (ii) If a single disclosure is provided on behalf of more than one 
covered person and one of them has been authorized in accordance with 
paragraph (d)(3) of this section to receive the consumer's notice of the 
right to rescind and resolve issues concerning the consumer's payments 
on the loan, the information required by paragraph (d)(1) of this 
section may be provided only for that covered person.
    (2) The date of transfer.
    (3) The name, address and telephone number of an agent or party 
authorized to receive notice of the right to rescind and resolve issues 
concerning the consumer's payments on the loan. However, no information 
is required to be provided under this paragraph if the consumer can use 
the information provided under paragraph (d)(1) of this section for 
these purposes.
    (4) Where transfer of ownership of the debt to the covered person is 
or may be recorded in public records, or, alternatively, that the 
transfer of ownership has not been recorded in public records at the 
time the disclosure is provided.
    (5) Partial payment policy. Under the subheading ``Partial 
Payment'':
    (i) If periodic payments that are less than the full amount due are 
accepted, a statement that the covered person, using the term 
``lender,'' may accept partial payments and apply such payments to the 
consumer's loan;
    (ii) If periodic payments that are less than the full amount due are 
accepted but not applied to a consumer's loan until the consumer pays 
the remainder of the full amount due, a statement that the covered 
person, using the term ``lender,'' may hold partial payments in a 
separate account until the consumer pays the remainder of the payment 
and then apply the full periodic payment to the consumer's loan;
    (iii) If periodic payments that are less than the full amount due 
are not accepted, a statement that the covered person, using the term 
``lender,'' does not accept any partial payments; and
    (iv) A statement that, if the loan is sold, the new covered person, 
using the term ``lender,'' may have a different policy.
    (e) Optional disclosures. In addition to the information required to 
be disclosed under paragraph (d) of this section, a covered person may, 
at its option, provide any other information regarding the transaction.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80130, Dec. 31, 2013]

    Effective Date Note: At 81 FR 72388, Oct. 19, 2016, Sec. 1026.39 
was amended by adding paragraph (f), effective Apr. 19, 2018. For the 
convenience of the user, the added text is set forth as follows:



Sec. 1026.39  Mortgage transfer disclosures.

                                * * * * *

    (f) Successor in interest. If, upon confirmation, a servicer 
provides a confirmed successor in interest who is not liable on the 
mortgage loan obligation with a written notice and acknowledgment form 
in accordance with Regulation X, Sec. 1024.32(c)(1) of this chapter, 
the servicer is not required to provide to

[[Page 139]]

the confirmed successor in interest any written disclosure required by 
paragraph (b) of this section unless and until the confirmed successor 
in interest either assumes the mortgage loan obligation under State law 
or has provided the servicer an executed acknowledgment in accordance 
with Regulation X, Sec. 1024.32(c)(1)(iv) of this chapter, that the 
confirmed successor in interest has not revoked.



Sec. 1026.40  Requirements for home equity plans.

    The requirements of this section apply to open-end credit plans 
secured by the consumer's dwelling. For purposes of this section, an 
annual percentage rate is the annual percentage rate corresponding to 
the periodic rate as determined under Sec. 1026.14(b).
    (a) Form of disclosures--(1) General. The disclosures required by 
paragraph (d) of this section shall be made clearly and conspicuously 
and shall be grouped together and segregated from all unrelated 
information. The disclosures may be provided on the application form or 
on a separate form. The disclosure described in paragraph (d)(4)(iii), 
the itemization of third-party fees described in paragraph (d)(8), and 
the variable-rate information described in paragraph (d)(12) of this 
section may be provided separately from the other required disclosures.
    (2) Precedence of certain disclosures. The disclosures described in 
paragraph (d)(1) through (4)(ii) of this section shall precede the other 
required disclosures.
    (3) For an application that is accessed by the consumer in 
electronic form, the disclosures required under this section may be 
provided to the consumer in electronic form on or with the application.
    (b) Time of disclosures. The disclosures and brochure required by 
paragraphs (d) and (e) of this section shall be provided at the time an 
application is provided to the consumer. The disclosures and the 
brochure may be delivered or placed in the mail not later than three 
business days following receipt of a consumer's application in the case 
of applications contained in magazines or other publications, or when 
the application is received by telephone or through an intermediary 
agent or broker.
    (c) Duties of third parties. Persons other than the creditor who 
provide applications to consumers for home equity plans must provide the 
brochure required under paragraph (e) of this section at the time an 
application is provided. If such persons have the disclosures required 
under paragraph (d) of this section for a creditor's home equity plan, 
they also shall provide the disclosures at such time. The disclosures 
and the brochure may be delivered or placed in the mail not later than 
three business days following receipt of a consumer's application in the 
case of applications contained in magazines or other publications, or 
when the application is received by telephone or through an intermediary 
agent or broker.
    (d) Content of disclosures. The creditor shall provide the following 
disclosures, as applicable:
    (1) Retention of information. A statement that the consumer should 
make or otherwise retain a copy of the disclosures.
    (2) Conditions for disclosed terms. (i) A statement of the time by 
which the consumer must submit an application to obtain specific terms 
disclosed and an identification of any disclosed term that is subject to 
change prior to opening the plan.
    (ii) A statement that, if a disclosed term changes (other than a 
change due to fluctuations in the index in a variable-rate plan) prior 
to opening the plan and the consumer therefore elects not to open the 
plan, the consumer may receive a refund of all fees paid in connection 
with the application.
    (3) Security interest and risk to home. A statement that the 
creditor will acquire a security interest in the consumer's dwelling and 
that loss of the dwelling may occur in the event of default.
    (4) Possible actions by creditor. (i) A statement that, under 
certain conditions, the creditor may terminate the plan and require 
payment of the outstanding balance in full in a single payment and 
impose fees upon termination; prohibit additional extensions of credit 
or reduce the credit limit; and, as specified in the initial agreement, 
implement certain changes in the plan.

[[Page 140]]

    (ii) A statement that the consumer may receive, upon request, 
information about the conditions under which such actions may occur.
    (iii) In lieu of the disclosure required under paragraph (d)(4)(ii) 
of this section, a statement of such conditions.
    (5) Payment terms. The payment terms of the plan. If different 
payment terms may apply to the draw and any repayment period, or if 
different payment terms may apply within either period, the disclosures 
shall reflect the different payment terms. The payment terms of the plan 
include:
    (i) The length of the draw period and any repayment period.
    (ii) An explanation of how the minimum periodic payment will be 
determined and the timing of the payments. If paying only the minimum 
periodic payments may not repay any of the principal or may repay less 
than the outstanding balance, a statement of this fact, as well as a 
statement that a balloon payment may result. A balloon payment results 
if paying the minimum periodic payments does not fully amortize the 
outstanding balance by a specified date or time, and the consumer must 
repay the entire outstanding balance at such time.
    (iii) An example, based on a $10,000 outstanding balance and a 
recent annual percentage rate, showing the minimum periodic payment, any 
balloon payment, and the time it would take to repay the $10,000 
outstanding balance if the consumer made only those payments and 
obtained no additional extensions of credit. For fixed-rate plans, a 
recent annual percentage rate is a rate that has been in effect under 
the plan within the twelve months preceding the date the disclosures are 
provided to the consumer. For variable-rate plans, a recent annual 
percentage rate is the most recent rate provided in the historical 
example described in paragraph (d)(12)(xi) of this section or a rate 
that has been in effect under the plan since the date of the most recent 
rate in the table.
    (6) Annual percentage rate. For fixed-rate plans, a recent annual 
percentage rate imposed under the plan and a statement that the rate 
does not include costs other than interest. A recent annual percentage 
rate is a rate that has been in effect under the plan within the twelve 
months preceding the date the disclosures are provided to the consumer.
    (7) Fees imposed by creditor. An itemization of any fees imposed by 
the creditor to open, use, or maintain the plan, stated as a dollar 
amount or percentage, and when such fees are payable.
    (8) Fees imposed by third parties to open a plan. A good faith 
estimate, stated as a single dollar amount or range, of any fees that 
may be imposed by persons other than the creditor to open the plan, as 
well as a statement that the consumer may receive, upon request, a good 
faith itemization of such fees. In lieu of the statement, the 
itemization of such fees may be provided.
    (9) Negative amortization. A statement that negative amortization 
may occur and that negative amortization increases the principal balance 
and reduces the consumer's equity in the dwelling.
    (10) Transaction requirements. Any limitations on the number of 
extensions of credit and the amount of credit that may be obtained 
during any time period, as well as any minimum outstanding balance and 
minimum draw requirements, stated as dollar amounts or percentages.
    (11) Tax implications. A statement that the consumer should consult 
a tax advisor regarding the deductibility of interest and charges under 
the plan.
    (12) Disclosures for variable-rate plans. For a plan in which the 
annual percentage rate is variable, the following disclosures, as 
applicable:
    (i) The fact that the annual percentage rate, payment, or term may 
change due to the variable-rate feature.
    (ii) A statement that the annual percentage rate does not include 
costs other than interest.
    (iii) The index used in making rate adjustments and a source of 
information about the index.
    (iv) An explanation of how the annual percentage rate will be 
determined, including an explanation of how the index is adjusted, such 
as by the addition of a margin.
    (v) A statement that the consumer should ask about the current index

[[Page 141]]

value, margin, discount or premium, and annual percentage rate.
    (vi) A statement that the initial annual percentage rate is not 
based on the index and margin used to make later rate adjustments, and 
the period of time such initial rate will be in effect.
    (vii) The frequency of changes in the annual percentage rate.
    (viii) Any rules relating to changes in the index value and the 
annual percentage rate and resulting changes in the payment amount, 
including, for example, an explanation of payment limitations and rate 
carryover.
    (ix) A statement of any annual or more frequent periodic limitations 
on changes in the annual percentage rate (or a statement that no annual 
limitation exists), as well as a statement of the maximum annual 
percentage rate that may be imposed under each payment option.
    (x) The minimum periodic payment required when the maximum annual 
percentage rate for each payment option is in effect for a $10,000 
outstanding balance, and a statement of the earliest date or time the 
maximum rate may be imposed.
    (xi) An historical example, based on a $10,000 extension of credit, 
illustrating how annual percentage rates and payments would have been 
affected by index value changes implemented according to the terms of 
the plan. The historical example shall be based on the most recent 15 
years of index values (selected for the same time period each year) and 
shall reflect all significant plan terms, such as negative amortization, 
rate carryover, rate discounts, and rate and payment limitations, that 
would have been affected by the index movement during the period.
    (xii) A statement that rate information will be provided on or with 
each periodic statement.
    (e) Brochure. The home equity brochure entitled ``What You Should 
Know About Home Equity Lines of Credit'' or a suitable substitute shall 
be provided.
    (f) Limitations on home equity plans. No creditor may, by contract 
or otherwise:
    (1) Change the annual percentage rate unless:
    (i) Such change is based on an index that is not under the 
creditor's control; and
    (ii) Such index is available to the general public.
    (2) Terminate a plan and demand repayment of the entire outstanding 
balance in advance of the original term (except for reverse mortgage 
transactions that are subject to paragraph (f)(4) of this section) 
unless:
    (i) There is fraud or material misrepresentation by the consumer in 
connection with the plan;
    (ii) The consumer fails to meet the repayment terms of the agreement 
for any outstanding balance;
    (iii) Any action or inaction by the consumer adversely affects the 
creditor's security for the plan, or any right of the creditor in such 
security; or
    (iv) Federal law dealing with credit extended by a depository 
institution to its executive officers specifically requires that as a 
condition of the plan the credit shall become due and payable on demand, 
provided that the creditor includes such a provision in the initial 
agreement.
    (3) Change any term, except that a creditor may:
    (i) Provide in the initial agreement that it may prohibit additional 
extensions of credit or reduce the credit limit during any period in 
which the maximum annual percentage rate is reached. A creditor also may 
provide in the initial agreement that specified changes will occur if a 
specified event takes place (for example, that the annual percentage 
rate will increase a specified amount if the consumer leaves the 
creditor's employment).
    (ii) Change the index and margin used under the plan if the original 
index is no longer available, the new index has an historical movement 
substantially similar to that of the original index, and the new index 
and margin would have resulted in an annual percentage rate 
substantially similar to the rate in effect at the time the original 
index became unavailable.
    (iii) Make a specified change if the consumer specifically agrees to 
it in writing at that time.
    (iv) Make a change that will unequivocally benefit the consumer 
throughout the remainder of the plan.

[[Page 142]]

    (v) Make an insignificant change to terms.
    (vi) Prohibit additional extensions of credit or reduce the credit 
limit applicable to an agreement during any period in which:
    (A) The value of the dwelling that secures the plan declines 
significantly below the dwelling's appraised value for purposes of the 
plan;
    (B) The creditor reasonably believes that the consumer will be 
unable to fulfill the repayment obligations under the plan because of a 
material change in the consumer's financial circumstances;
    (C) The consumer is in default of any material obligation under the 
agreement;
    (D) The creditor is precluded by government action from imposing the 
annual percentage rate provided for in the agreement;
    (E) The priority of the creditor's security interest is adversely 
affected by government action to the extent that the value of the 
security interest is less than 120 percent of the credit line; or
    (F) The creditor is notified by its regulatory agency that continued 
advances constitute an unsafe and unsound practice.
    (4) For reverse mortgage transactions that are subject to Sec. 
1026.33, terminate a plan and demand repayment of the entire outstanding 
balance in advance of the original term except:
    (i) In the case of default;
    (ii) If the consumer transfers title to the property securing the 
note;
    (iii) If the consumer ceases using the property securing the note as 
the primary dwelling; or
    (iv) Upon the consumer's death.
    (g) Refund of fees. A creditor shall refund all fees paid by the 
consumer to anyone in connection with an application if any term 
required to be disclosed under paragraph (d) of this section changes 
(other than a change due to fluctuations in the index in a variable-rate 
plan) before the plan is opened and, as a result, the consumer elects 
not to open the plan.
    (h) Imposition of nonrefundable fees. Neither a creditor nor any 
other person may impose a nonrefundable fee in connection with an 
application until three business days after the consumer receives the 
disclosures and brochure required under this section. If the disclosures 
and brochure are mailed to the consumer, the consumer is considered to 
have received them three business days after they are mailed.



Sec. 1026.41  Periodic statements for residential mortgage loans.

    (a) In general--(1) Scope. This section applies to a closed-end 
consumer credit transaction secured by a dwelling, unless an exemption 
in paragraph (e) of this section applies. A closed-end consumer credit 
transaction secured by a dwelling is referred to as a mortgage loan for 
purposes of this section.
    (2) Periodic statements. A servicer of a transaction subject to this 
section shall provide the consumer, for each billing cycle, a periodic 
statement meeting the requirements of paragraphs (b), (c), and (d) of 
this section. If a mortgage loan has a billing cycle shorter than a 
period of 31 days (for example, a bi-weekly billing cycle), a periodic 
statement covering an entire month may be used. For the purposes of this 
section, servicer includes the creditor, assignee, or servicer, as 
applicable. A creditor or assignee that does not currently own the 
mortgage loan or the mortgage servicing rights is not subject to the 
requirement in this section to provide a periodic statement.
    (b) Timing of the periodic statement. The periodic statement must be 
delivered or placed in the mail within a reasonably prompt time after 
the payment due date or the end of any courtesy period provided for the 
previous billing cycle.
    (c) Form of the periodic statement. The servicer must make the 
disclosures required by this section clearly and conspicuously in 
writing, or electronically if the consumer agrees, and in a form that 
the consumer may keep. Sample forms for periodic statements are provided 
in appendix H-30. Proper use of these forms complies with the 
requirements of this paragraph (c) and the layout requirements in 
paragraph (d) of this section.
    (d) Content and layout of the periodic statement. The periodic 
statement required by this section shall include:

[[Page 143]]

    (1) Amount due. Grouped together in close proximity to each other 
and located at the top of the first page of the statement:
    (i) The payment due date;
    (ii) The amount of any late payment fee, and the date on which that 
fee will be imposed if payment has not been received; and
    (iii) The amount due, shown more prominently than other disclosures 
on the page and, if the transaction has multiple payment options, the 
amount due under each of the payment options.
    (2) Explanation of amount due. The following items, grouped together 
in close proximity to each other and located on the first page of the 
statement:
    (i) The monthly payment amount, including a breakdown showing how 
much, if any, will be applied to principal, interest, and escrow and, if 
a mortgage loan has multiple payment options, a breakdown of each of the 
payment options along with information on whether the principal balance 
will increase, decrease, or stay the same for each option listed;
    (ii) The total sum of any fees or charges imposed since the last 
statement; and
    (iii) Any payment amount past due.
    (3) Past Payment Breakdown. The following items, grouped together in 
close proximity to each other and located on the first page of the 
statement:
    (i) The total of all payments received since the last statement, 
including a breakdown showing the amount, if any, that was applied to 
principal, interest, escrow, fees and charges, and the amount, if any, 
sent to any suspense or unapplied funds account; and
    (ii) The total of all payments received since the beginning of the 
current calendar year, including a breakdown of that total showing the 
amount, if any, that was applied to principal, interest, escrow, fees 
and charges, and the amount, if any, currently held in any suspense or 
unapplied funds account.
    (4) Transaction activity. A list of all the transaction activity 
that occurred since the last statement. For purposes of this paragraph 
(d)(4), transaction activity means any activity that causes a credit or 
debit to the amount currently due. This list must include the date of 
the transaction, a brief description of the transaction, and the amount 
of the transaction for each activity on the list.
    (5) Partial payment information. If a statement reflects a partial 
payment that was placed in a suspense or unapplied funds account, 
information explaining what must be done for the funds to be applied. 
The information must be on the front page of the statement or, 
alternatively, may be included on a separate page enclosed with the 
periodic statement or in a separate letter.
    (6) Contact information. A toll-free telephone number and, if 
applicable, an electronic mailing address that may be used by the 
consumer to obtain information about the consumer's account, located on 
the front page of the statement.
    (7) Account information. The following information:
    (i) The amount of the outstanding principal balance;
    (ii) The current interest rate in effect for the mortgage loan;
    (iii) The date after which the interest rate may next change;
    (iv) The existence of any prepayment penalty, as defined in Sec. 
1026.32(b)(6)(i), that may be charged;
    (v) The Web site to access either the Bureau list or the HUD list of 
homeownership counselors and counseling organizations and the HUD toll-
free telephone number to access contact information for homeownership 
counselors or counseling organizations; and
    (8) Delinquency information. If the consumer is more than 45 days 
delinquent, the following items, grouped together in close proximity to 
each other and located on the first page of the statement or, 
alternatively, on a separate page enclosed with the periodic statement 
or in a separate letter:
    (i) The date on which the consumer became delinquent;
    (ii) A notification of possible risks, such as foreclosure, and 
expenses, that may be incurred if the delinquency is not cured;
    (iii) An account history showing, for the previous six months or the 
period since the last time the account was current, whichever is 
shorter, the amount remaining past due from each

[[Page 144]]

billing cycle or, if any such payment was fully paid, the date on which 
it was credited as fully paid;
    (iv) A notice indicating any loss mitigation program to which the 
consumer has agreed, if applicable;
    (v) A notice of whether the servicer has made the first notice or 
filing required by applicable law for any judicial or non-judicial 
foreclosure process, if applicable;
    (vi) The total payment amount needed to bring the account current; 
and
    (vii) A reference to the homeownership counselor information 
disclosed pursuant to paragraph (d)(7)(v) of this section.
    (e) Exemptions--(1) Reverse mortgages. Reverse mortgage 
transactions, as defined by Sec. 1026.33(a), are exempt from the 
requirements of this section.
    (2) Timeshare plans. Transactions secured by consumers' interests in 
timeshare plans, as defined by 11 U.S.C. 101(53D), are exempt from the 
requirements of this section.
    (3) Coupon books. The requirements of paragraph (a) of this section 
do not apply to fixed-rate loans if the servicer:
    (i) Provides the consumer with a coupon book that includes on each 
coupon the information listed in paragraph (d)(1) of this section;
    (ii) Provides the consumer with a coupon book that includes anywhere 
in the coupon book:
    (A) The account information listed in paragraph (d)(7) of this 
section;
    (B) The contact information for the servicer, listed in paragraph 
(d)(6) of this section; and
    (C) Information on how the consumer can obtain the information 
listed in paragraph (e)(3)(iii) of this section;
    (iii) Makes available upon request to the consumer by telephone, in 
writing, in person, or electronically, if the consumer consents, the 
information listed in paragraph (d)(2) through (5) of this section; and
    (iv) Provides the consumer the information listed in paragraph 
(d)(8) of this section in writing, for any billing cycle during which 
the consumer is more than 45 days delinquent.
    (4) Small servicers--(i) Exemption. A creditor, assignee, or 
servicer is exempt from the requirements of this section for mortgage 
loans serviced by a small servicer.
    (ii) Small servicer defined. A small servicer is a servicer that:
    (A) Services, together with any affiliates, 5,000 or fewer mortgage 
loans, for all of which the servicer (or an affiliate) is the creditor 
or assignee;
    (B) Is a Housing Finance Agency, as defined in 24 CFR 266.5; or
    (C) Is a nonprofit entity that services 5,000 or fewer mortgage 
loans, including any mortgage loans serviced on behalf of associated 
nonprofit entities, for all of which the servicer or an associated 
nonprofit entity is the creditor. For purposes of this paragraph 
(e)(4)(ii)(C), the following definitions apply:
    (1) The term ``nonprofit entity'' means an entity having a tax 
exemption ruling or determination letter from the Internal Revenue 
Service under section 501(c)(3) of the Internal Revenue Code of 1986 (26 
U.S.C. 501(c)(3); 26 CFR 1.501(c)(3)-1), and;
    (2) The term ``associated nonprofit entities'' means nonprofit 
entities that by agreement operate using a common name, trademark, or 
servicemark to further and support a common charitable mission or 
purpose.
    (iii) Small servicer determination. In determining whether a 
servicer satisfies paragraph (e)(4)(ii)(A) of this section, the servicer 
is evaluated based on the mortgage loans serviced by the servicer and 
any affiliates as of January 1 and for the remainder of the calendar 
year. In determining whether a servicer satisfies paragraph 
(e)(4)(ii)(C) of this section, the servicer is evaluated based on the 
mortgage loans serviced by the servicer as of January 1 and for the 
remainder of the calendar year. A servicer that ceases to qualify as a 
small servicer will have six months from the time it ceases to qualify 
or until the next January 1, whichever is later, to comply with any 
requirements from which the servicer is no longer exempt as a small 
servicer. The following mortgage loans are not considered in determining 
whether a servicer qualifies as a small servicer:
    (A) Mortgage loans voluntarily serviced by the servicer for a 
creditor or assignee that is not an affiliate of the

[[Page 145]]

servicer and for which the servicer does not receive any compensation or 
fees.
    (B) Reverse mortgage transactions.
    (C) Mortgage loans secured by consumers' interests in timeshare 
plans.
    (5) Consumers in bankruptcy. A servicer is exempt from the 
requirements of this section for a mortgage loan while the consumer is a 
debtor in bankruptcy under Title 11 of the United States Code.

[78 FR 11007, Feb. 14, 2013, as amended at 78 FR 44718, July 24, 2013; 
78 FR 63005, Oct. 23, 2013; 79 FR 65322, Nov. 3, 2014]

    Effective Date Notes: 1. At 81 FR 72388, Oct. 19, 2016, Sec. 
1026.41 was amended by revising paragraphs (d)(8)(i) and (e)(4)(iii)(A), 
and adding paragraphs (e)(4)(iii)(D) and (e)(6), effective Oct. 19, 
2017. For the convenience of the user, the added and revised text is set 
forth as follows:



Sec. 1026.41  Periodic statements for residential mortgage loans.

                                * * * * *

    (d) * * *
    (8) * * *
    (i) The length of the consumer's delinquency;

                                * * * * *

    (e) * * *
    (4) * * *
    (iii) * * *
    (A) Mortgage loans voluntarily serviced by the servicer for a non-
affiliate of the servicer and for which the servicer does not receive 
any compensation or fees.

                                * * * * *

    (D) Transactions serviced by the servicer for a seller financer that 
meets all of the criteria identified in Sec. 1026.36(a)(5).

                                * * * * *

    (e) * * *
    (6) Charged-off loans. (i) A servicer is exempt from the 
requirements of this section for a mortgage loan if the servicer:
    (A) Has charged off the loan in accordance with loan-loss provisions 
and will not charge any additional fees or interest on the account; and
    (B) Provides, within 30 days of charge-off or the most recent 
periodic statement, a periodic statement, clearly and conspicuously 
labeled ``Suspension of Statements & Notice of Charge Off--Retain This 
Copy for Your Records.'' The periodic statement must clearly and 
conspicuously explain that, as applicable, the mortgage loan has been 
charged off and the servicer will not charge any additional fees or 
interest on the account; the servicer will no longer provide the 
consumer a periodic statement for each billing cycle; the lien on the 
property remains in place and the consumer remains liable for the 
mortgage loan obligation and any obligations arising from or related to 
the property, which may include property taxes; the consumer may be 
required to pay the balance on the account in the future, for example, 
upon sale of the property; the balance on the account is not being 
canceled or forgiven; and the loan may be purchased, assigned, or 
transferred.
    (ii) Resuming compliance. (A) If a servicer fails at any time to 
treat a mortgage loan that is exempt under paragraph (e)(6)(i) of this 
section as charged off or charges any additional fees or interest on the 
account, the obligation to provide a periodic statement pursuant to this 
section resumes.
    (B) Prohibition on retroactive fees. A servicer may not 
retroactively assess fees or interest on the account for the period of 
time during which the exemption in paragraph (e)(6)(i) of this section 
applied.

                                * * * * *

    Effective Date Notes: 2. At 81 FR 72388, Oct. 19, 2016, Sec. 
1026.41 was amended by revising paragraph (e)(5), and adding paragraphs 
(f) and (g), effective Apr. 19, 2018. For the convenience of the user, 
the added and revised text is set forth as follows:



Sec. 1026.41  Periodic statements for residential mortgage loans.

                                * * * * *

    (e) * * *
    (5) Certain consumers in bankruptcy--(i) Exemption. Except as 
provided in paragraph (e)(5)(ii) of this section, a servicer is exempt 
from the requirements of this section with regard to a mortgage loan if:
    (A) Any consumer on the mortgage loan is a debtor in bankruptcy 
under title 11 of the United States Code or has discharged personal 
liability for the mortgage loan pursuant to 11 U.S.C. 727, 1141, 1228, 
or 1328; and
    (B) With regard to any consumer on the mortgage loan:
    (1) The consumer requests in writing that the servicer cease 
providing a periodic statement or coupon book;
    (2) The consumer's bankruptcy plan provides that the consumer will 
surrender the dwelling securing the mortgage loan, provides for the 
avoidance of the lien securing the mortgage loan, or otherwise does not 
provide for, as applicable, the payment of

[[Page 146]]

pre-bankruptcy arrearage or the maintenance of payments due under the 
mortgage loan;
    (3) A court enters an order in the bankruptcy case providing for the 
avoidance of the lien securing the mortgage loan, lifting the automatic 
stay pursuant to 11 U.S.C. 362 with regard to the dwelling securing the 
mortgage loan, or requiring the servicer to cease providing a periodic 
statement or coupon book; or
    (4) The consumer files with the court overseeing the bankruptcy case 
a statement of intention pursuant to 11 U.S.C. 521(a) identifying an 
intent to surrender the dwelling securing the mortgage loan and a 
consumer has not made any partial or periodic payment on the mortgage 
loan after the commencement of the consumer's bankruptcy case.
    (ii) Reaffirmation or consumer request to receive statement or 
coupon book. A servicer ceases to qualify for an exemption pursuant to 
paragraph (e)(5)(i) of this section with respect to a mortgage loan if 
the consumer reaffirms personal liability for the loan or any consumer 
on the loan requests in writing that the servicer provide a periodic 
statement or coupon book, unless a court enters an order in the 
bankruptcy case requiring the servicer to cease providing a periodic 
statement or coupon book.
    (iii) Exclusive address. A servicer may establish an address that a 
consumer must use to submit a written request under paragraph 
(e)(5)(i)(B)(1) or (e)(5)(ii) of this section, provided that the 
servicer notifies the consumer of the address in a manner that is 
reasonably designed to inform the consumer of the address. If a servicer 
designates a specific address for requests under paragraph 
(e)(5)(i)(B)(1) or (e)(5)(ii) of this section, the servicer shall 
designate the same address for purposes of both paragraphs 
(e)(5)(i)(B)(1) and (e)(5)(ii) of this section.
    (iv) Timing of compliance following transition--(A) Triggering 
events for transitioning to modified and unmodified periodic statements. 
A servicer transitions to providing a periodic statement or coupon book 
with the modifications set forth in paragraph (f) of this section or to 
providing a periodic statement or coupon book without such modifications 
when one of the following three events occurs:
    (1) A mortgage loan becomes subject to the requirements of paragraph 
(f) of this section;
    (2) A mortgage loan ceases to be subject to the requirements of 
paragraph (f) of this section; or
    (3) A servicer ceases to qualify for an exemption pursuant to 
paragraph (e)(5)(i) of this section with respect to a mortgage loan.
    (B) Transitional single-billing-cycle exemption. A servicer is 
exempt from the requirements of this section with respect to a single 
billing cycle when the payment due date for that billing cycle is no 
more than 14 days after the date on which one of the events listed in 
paragraph (e)(5)(iv)(A) of this section occurs.
    (C) Timing of first modified or unmodified statement after 
transition. When one of the events listed in paragraph (e)(5)(iv)(A) of 
this section occurs, a servicer must provide the next modified or 
unmodified periodic statement or coupon book that complies with the 
requirements of this section by delivering or placing it in the mail 
within a reasonably prompt time after the first payment due date, or the 
end of any courtesy period for the payment's corresponding billing 
cycle, that is more than 14 days after the date on which the applicable 
event listed in paragraph (e)(5)(iv)(A) of this section occurs.

                                * * * * *

    (f) Modified periodic statements and coupon books for certain 
consumers in bankruptcy. While any consumer on a mortgage loan is a 
debtor in bankruptcy under title 11 of the United States Code, or if 
such consumer has discharged personal liability for the mortgage loan 
pursuant to 11 U.S.C. 727, 1141, 1228, or 1328, the requirements of this 
section are subject to the following modifications with regard to that 
mortgage loan:
    (1) Requirements not applicable. The periodic statement may omit the 
information set forth in paragraphs (d)(1)(ii) and (d)(8)(i), (ii), and 
(v) of this section. The requirement in paragraph (d)(1)(iii) of this 
section that the amount due must be shown more prominently than other 
disclosures on the page shall not apply.
    (2) Bankruptcy notices. The periodic statement must include the 
following:
    (i) A statement identifying the consumer's status as a debtor in 
bankruptcy or the discharged status of the mortgage loan; and
    (ii) A statement that the periodic statement is for informational 
purposes only.
    (3) Chapter 12 and chapter 13 consumers. In addition to any other 
provisions of this paragraph (f) that may apply, with regard to a 
mortgage loan for which any consumer with primary liability is a debtor 
in a chapter 12 or chapter 13 bankruptcy case, the requirements of this 
section are subject to the following modifications:
    (i) Requirements not applicable. In addition to omitting the 
information set forth in paragraph (f)(1) of this section, the periodic 
statement may also omit the information set forth in paragraphs 
(d)(8)(iii), (iv), (vi), and (vii) of this section.
    (ii) Amount due. The amount due information set forth in paragraph 
(d)(1) of this section may be limited to the date and amount of the 
post-petition payments due and any post-petition fees and charges 
imposed by the servicer.

[[Page 147]]

    (iii) Explanation of amount due. The explanation of amount due 
information set forth in paragraph (d)(2) of this section may be limited 
to:
    (A) The monthly post-petition payment amount, including a breakdown 
showing how much, if any, will be applied to principal, interest, and 
escrow;
    (B) The total sum of any post-petition fees or charges imposed since 
the last statement; and
    (C) Any post-petition payment amount past due.
    (iv) Transaction activity. The transaction activity information set 
forth in paragraph (d)(4) of this section must include all payments the 
servicer has received since the last statement, including all post-
petition and pre-petition payments and payments of post-petition fees 
and charges, and all post-petition fees and charges the servicer has 
imposed since the last statement. The brief description of the activity 
need not identify the source of any payments.
    (v) Pre-petition arrearage. If applicable, a servicer must disclose, 
grouped in close proximity to each other and located on the first page 
of the statement or, alternatively, on a separate page enclosed with the 
periodic statement or in a separate letter:
    (A) The total of all pre-petition payments received since the last 
statement;
    (B) The total of all pre-petition payments received since the 
beginning of the consumer's bankruptcy case; and
    (C) The current balance of the consumer's pre-petition arrearage.
    (vi) Additional disclosures. The periodic statement must include, as 
applicable:
    (A) A statement that the amount due includes only post-petition 
payments and does not include other payments that may be due under the 
terms of the consumer's bankruptcy plan;
    (B) If the consumer's bankruptcy plan requires the consumer to make 
the post-petition mortgage payments directly to a bankruptcy trustee, a 
statement that the consumer should send the payment to the trustee and 
not to the servicer;
    (C) A statement that the information disclosed on the periodic 
statement may not include payments the consumer has made to the trustee 
and may not be consistent with the trustee's records;
    (D) A statement that encourages the consumer to contact the 
consumer's attorney or the trustee with questions regarding the 
application of payments; and
    (E) If the consumer is more than 45 days delinquent on post-petition 
payments, a statement that the servicer has not received all the 
payments that became due since the consumer filed for bankruptcy.
    (4) Multiple obligors. If this paragraph (f) applies in connection 
with a mortgage loan with more than one primary obligor, the servicer 
may provide the modified statement to any or all of the primary 
obligors, even if a primary obligor to whom the servicer provides the 
modified statement is not a debtor in bankruptcy.
    (5) Coupon books. A servicer that provides a coupon book instead of 
a periodic statement under paragraph (e)(3) of this section must include 
in the coupon book the disclosures set forth in paragraphs (f)(2) and 
(f)(3)(vi) of this section, as applicable. The servicer may include 
these disclosures anywhere in the coupon book provided to the consumer 
or on a separate page enclosed with the coupon book. The servicer must 
make available upon request to the consumer by telephone, in writing, in 
person, or electronically, if the consumer consents, the information 
listed in paragraph (f)(3)(v) of this section, as applicable. The 
modifications set forth in paragraphs (f)(1) and (f)(3)(i) through (iv) 
and (vi) of this section apply to a coupon book and other information a 
servicer provides to the consumer under paragraph (e)(3) of this 
section.
    (g) Successor in interest. If, upon confirmation, a servicer 
provides a confirmed successor in interest who is not liable on the 
mortgage loan obligation with a written notice and acknowledgment form 
in accordance with Regulation X, Sec. 1024.32(c)(1) of this chapter, 
the servicer is not required to provide to the confirmed successor in 
interest any written disclosure required by this section unless and 
until the confirmed successor in interest either assumes the mortgage 
loan obligation under State law or has provided the servicer an executed 
acknowledgment in accordance with Regulation X, Sec. 1024.32(c)(1)(iv) 
of this chapter, that the confirmed successor in interest has not 
revoked.



Sec. 1026.42  Valuation independence.

    (a) Scope. This section applies to any consumer credit transaction 
secured by the consumer's principal dwelling.
    (b) Definitions. For purposes of this section:
    (1) ``Covered person'' means a creditor with respect to a covered 
transaction or a person that provides ``settlement services,'' as 
defined in 12 U.S.C. 2602(3) and implementing regulations, in connection 
with a covered transaction.
    (2) ``Covered transaction'' means an extension of consumer credit 
that is or will be secured by the consumer's principal dwelling, as 
defined in Sec. 1026.2(a)(19).
    (3) ``Valuation'' means an estimate of the value of the consumer's 
principal dwelling in written or electronic form,

[[Page 148]]

other than one produced solely by an automated model or system.
    (4) ``Valuation management functions'' means:
    (i) Recruiting, selecting, or retaining a person to prepare a 
valuation;
    (ii) Contracting with or employing a person to prepare a valuation;
    (iii) Managing or overseeing the process of preparing a valuation, 
including by providing administrative services such as receiving orders 
for and receiving a valuation, submitting a completed valuation to 
creditors and underwriters, collecting fees from creditors and 
underwriters for services provided in connection with a valuation, and 
compensating a person that prepares valuations; or
    (iv) Reviewing or verifying the work of a person that prepares 
valuations.
    (c) Valuation of consumer's principal dwelling--(1) Coercion. In 
connection with a covered transaction, no covered person shall or shall 
attempt to directly or indirectly cause the value assigned to the 
consumer's principal dwelling to be based on any factor other than the 
independent judgment of a person that prepares valuations, through 
coercion, extortion, inducement, bribery, or intimidation of, 
compensation or instruction to, or collusion with a person that prepares 
valuations or performs valuation management functions.
    (i) Examples of actions that violate paragraph (c)(1) include:
    (A) Seeking to influence a person that prepares a valuation to 
report a minimum or maximum value for the consumer's principal dwelling;
    (B) Withholding or threatening to withhold timely payment to a 
person that prepares a valuation or performs valuation management 
functions because the person does not value the consumer's principal 
dwelling at or above a certain amount;
    (C) Implying to a person that prepares valuations that current or 
future retention of the person depends on the amount at which the person 
estimates the value of the consumer's principal dwelling;
    (D) Excluding a person that prepares a valuation from consideration 
for future engagement because the person reports a value for the 
consumer's principal dwelling that does not meet or exceed a 
predetermined threshold; and
    (E) Conditioning the compensation paid to a person that prepares a 
valuation on consummation of the covered transaction.
    (2) Mischaracterization of value--(i) Misrepresentation. In 
connection with a covered transaction, no person that prepares 
valuations shall materially misrepresent the value of the consumer's 
principal dwelling in a valuation. A misrepresentation is material for 
purposes of this paragraph (c)(2)(i) if it is likely to significantly 
affect the value assigned to the consumer's principal dwelling. A bona 
fide error shall not be a misrepresentation.
    (ii) Falsification or alteration. In connection with a covered 
transaction, no covered person shall falsify and no covered person other 
than a person that prepares valuations shall materially alter a 
valuation. An alteration is material for purposes of this paragraph 
(c)(2)(ii) if it is likely to significantly affect the value assigned to 
the consumer's principal dwelling.
    (iii) Inducement of mischaracterization. In connection with a 
covered transaction, no covered person shall induce a person to violate 
paragraph (c)(2)(i) or (ii) of this section.
    (3) Permitted actions. Examples of actions that do not violate 
paragraph (c)(1) or (c)(2) include:
    (i) Asking a person that prepares a valuation to consider 
additional, appropriate property information, including information 
about comparable properties, to make or support a valuation;
    (ii) Requesting that a person that prepares a valuation provide 
further detail, substantiation, or explanation for the person's 
conclusion about the value of the consumer's principal dwelling;
    (iii) Asking a person that prepares a valuation to correct errors in 
the valuation;
    (iv) Obtaining multiple valuations for the consumer's principal 
dwelling to select the most reliable valuation;
    (v) Withholding compensation due to breach of contract or 
substandard performance of services; and
    (vi) Taking action permitted or required by applicable Federal or 
state

[[Page 149]]

statute, regulation, or agency guidance.
    (d) Prohibition on conflicts of interest--(1)(i) In general. No 
person preparing a valuation or performing valuation management 
functions for a covered transaction may have a direct or indirect 
interest, financial or otherwise, in the property or transaction for 
which the valuation is or will be performed.
    (ii) Employees and affiliates of creditors; providers of multiple 
settlement services. In any covered transaction, no person violates 
paragraph (d)(1)(i) of this section based solely on the fact that the 
person:
    (A) Is an employee or affiliate of the creditor; or
    (B) Provides a settlement service in addition to preparing 
valuations or performing valuation management functions, or based solely 
on the fact that the person's affiliate performs another settlement 
service.
    (2) Employees and affiliates of creditors with assets of more than 
$250 million for both of the past two calendar years. For any covered 
transaction in which the creditor had assets of more than $250 million 
as of December 31st for both of the past two calendar years, a person 
subject to paragraph (d)(1)(i) of this section who is employed by or 
affiliated with the creditor does not have a conflict of interest in 
violation of paragraph (d)(1)(i) of this section based on the person's 
employment or affiliate relationship with the creditor if:
    (i) The compensation of the person preparing a valuation or 
performing valuation management functions is not based on the value 
arrived at in any valuation;
    (ii) The person preparing a valuation or performing valuation 
management functions reports to a person who is not part of the 
creditor's loan production function, as defined in paragraph (d)(5)(i) 
of this section, and whose compensation is not based on the closing of 
the transaction to which the valuation relates; and
    (iii) No employee, officer or director in the creditor's loan 
production function, as defined in paragraph (d)(5)(i) of this section, 
is directly or indirectly involved in selecting, retaining, recommending 
or influencing the selection of the person to prepare a valuation or 
perform valuation management functions, or to be included in or excluded 
from a list of approved persons who prepare valuations or perform 
valuation management functions.
    (3) Employees and affiliates of creditors with assets of $250 
million or less for either of the past two calendar years. For any 
covered transaction in which the creditor had assets of $250 million or 
less as of December 31st for either of the past two calendar years, a 
person subject to paragraph (d)(1)(i) of this section who is employed by 
or affiliated with the creditor does not have a conflict of interest in 
violation of paragraph (d)(1)(i) of this section based on the person's 
employment or affiliate relationship with the creditor if:
    (i) The compensation of the person preparing a valuation or 
performing valuation management functions is not based on the value 
arrived at in any valuation; and
    (ii) The creditor requires that any employee, officer or director of 
the creditor who orders, performs, or reviews a valuation for a covered 
transaction abstain from participating in any decision to approve, not 
approve, or set the terms of that transaction.
    (4) Providers of multiple settlement services. For any covered 
transaction, a person who prepares a valuation or performs valuation 
management functions in addition to performing another settlement 
service for the transaction, or whose affiliate performs another 
settlement service for the transaction, does not have a conflict of 
interest in violation of paragraph (d)(1)(i) of this section as a result 
of the person or the person's affiliate performing another settlement 
service for the transaction if:
    (i) The creditor had assets of more than $250 million as of December 
31st for both of the past two calendar years and the conditions in 
paragraph (d)(2)(i)-(iii) are met; or
    (ii) The creditor had assets of $250 million or less as of December 
31st for either of the past two calendar years and the conditions in 
paragraph (d)(3)(i)-(ii) are met.
    (5) Definitions. For purposes of this paragraph (d), the following 
definitions apply:

[[Page 150]]

    (i) Loan production function. The term ``loan production function'' 
means an employee, officer, director, department, division, or other 
unit of a creditor with responsibility for generating covered 
transactions, approving covered transactions, or both.
    (ii) Settlement service. The term ``settlement service'' has the 
same meaning as in the Real Estate Settlement Procedures Act, 12 U.S.C. 
2601 et seq.
    (iii) Affiliate. The term ``affiliate'' has the same meaning as in 
Regulation Y of the Board of Governors of the Federal Reserve System, 12 
CFR 225.2(a).
    (e) When extension of credit prohibited. In connection with a 
covered transaction, a creditor that knows, at or before consummation, 
of a violation of paragraph (c) or (d) of this section in connection 
with a valuation shall not extend credit based on the valuation, unless 
the creditor documents that it has acted with reasonable diligence to 
determine that the valuation does not materially misstate or 
misrepresent the value of the consumer's principal dwelling. For 
purposes of this paragraph (e), a valuation materially misstates or 
misrepresents the value of the consumer's principal dwelling if the 
valuation contains a misstatement or misrepresentation that affects the 
credit decision or the terms on which credit is extended.
    (f) Customary and reasonable compensation--(1) Requirement to 
provide customary and reasonable compensation to fee appraisers. In any 
covered transaction, the creditor and its agents shall compensate a fee 
appraiser for performing appraisal services at a rate that is customary 
and reasonable for comparable appraisal services performed in the 
geographic market of the property being appraised. For purposes of 
paragraph (f) of this section, ``agents'' of the creditor do not include 
any fee appraiser as defined in paragraph (f)(4)(i) of this section.
    (2) Presumption of compliance. A creditor and its agents shall be 
presumed to comply with paragraph (f)(1) of this section if:
    (i) The creditor or its agents compensate the fee appraiser in an 
amount that is reasonably related to recent rates paid for comparable 
appraisal services performed in the geographic market of the property 
being appraised. In determining this amount, a creditor or its agents 
shall review the factors below and make any adjustments to recent rates 
paid in the relevant geographic market necessary to ensure that the 
amount of compensation is reasonable:
    (A) The type of property,
    (B) The scope of work,
    (C) The time in which the appraisal services are required to be 
performed,
    (D) Fee appraiser qualifications,
    (E) Fee appraiser experience and professional record, and
    (F) Fee appraiser work quality; and
    (ii) The creditor and its agents do not engage in any 
anticompetitive acts in violation of state or Federal law that affect 
the compensation paid to fee appraisers, including:
    (A) Entering into any contracts or engaging in any conspiracies to 
restrain trade through methods such as price fixing or market 
allocation, as prohibited under section 1 of the Sherman Antitrust Act, 
15 U.S.C. 1, or any other relevant antitrust laws; or
    (B) Engaging in any acts of monopolization such as restricting any 
person from entering the relevant geographic market or causing any 
person to leave the relevant geographic market, as prohibited under 
section 2 of the Sherman Antitrust Act, 15 U.S.C. 2, or any other 
relevant antitrust laws.
    (3) Alternative presumption of compliance. A creditor and its agents 
shall be presumed to comply with paragraph (f)(1) of this section if the 
creditor or its agents determine the amount of compensation paid to the 
fee appraiser by relying on information about rates that:
    (i) Is based on objective third-party information, including fee 
schedules, studies, and surveys prepared by independent third parties 
such as government agencies, academic institutions, and private research 
firms;
    (ii) Is based on recent rates paid to a representative sample of 
providers of appraisal services in the geographic market of the property 
being appraised or the fee schedules of those providers; and
    (iii) In the case of information based on fee schedules, studies, 
and surveys, such fee schedules, studies, or surveys,

[[Page 151]]

or the information derived therefrom, excludes compensation paid to fee 
appraisers for appraisals ordered by appraisal management companies, as 
defined in paragraph (f)(4)(iii) of this section.
    (4) Definitions. For purposes of this paragraph (f), the following 
definitions apply:
    (i) Fee appraiser. The term ``fee appraiser'' means:
    (A) A natural person who is a state-licensed or state-certified 
appraiser and receives a fee for performing an appraisal, but who is not 
an employee of the person engaging the appraiser; or
    (B) An organization that, in the ordinary course of business, 
employs state-licensed or state-certified appraisers to perform 
appraisals, receives a fee for performing appraisals, and is not subject 
to the requirements of section 1124 of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3353).
    (ii) Appraisal services. The term ``appraisal services'' means the 
services required to perform an appraisal, including defining the scope 
of work, inspecting the property, reviewing necessary and appropriate 
public and private data sources (for example, multiple listing services, 
tax assessment records and public land records), developing and 
rendering an opinion of value, and preparing and submitting the 
appraisal report.
    (iii) Appraisal management company. The term ``appraisal management 
company'' means any person authorized to perform one or more of the 
following actions on behalf of the creditor:
    (A) Recruit, select, and retain fee appraisers;(B) Contract with fee 
appraisers to perform appraisal services;
    (C) Manage the process of having an appraisal performed, including 
providing administrative services such as receiving appraisal orders and 
appraisal reports, submitting completed appraisal reports to creditors 
and underwriters, collecting fees from creditors and underwriters for 
services provided, and compensating fee appraisers for services 
performed; or
    (D) Review and verify the work of fee appraisers.
    (g) Mandatory reporting--(1) Reporting required. Any covered person 
that reasonably believes an appraiser has not complied with the Uniform 
Standards of Professional Appraisal Practice or ethical or professional 
requirements for appraisers under applicable state or Federal statutes 
or regulations shall refer the matter to the appropriate state agency if 
the failure to comply is material. For purposes of this paragraph 
(g)(1), a failure to comply is material if it is likely to significantly 
affect the value assigned to the consumer's principal dwelling.
    (2) Timing of reporting. A covered person shall notify the 
appropriate state agency within a reasonable period of time after the 
person determines that there is a reasonable basis to believe that a 
failure to comply required to be reported under paragraph (g)(1) of this 
section has occurred.
    (3) Definition. For purposes of this paragraph (g), ``state agency'' 
means ``state appraiser certifying and licensing agency'' under 12 
U.S.C. 3350(1) and any implementing regulations. The appropriate state 
agency to which a covered person must refer a matter under paragraph 
(g)(1) of this section is the agency for the state in which the 
consumer's principal dwelling is located.
    (h) The Bureau issued a joint rule to implement the appraisal 
management company minimum requirements in the Financial Institutions 
Reform, Recovery, and Enforcement Act, as amended by section 1473 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act. See 12 CFR 
part 34.

[76 FR 79772, Dec. 22, 2011, as amended at 80 FR 32687, June 9, 2015]



Sec. 1026.43  Minimum standards for transactions secured by a dwelling.

    (a) Scope. This section applies to any consumer credit transaction 
that is secured by a dwelling, as defined in Sec. 1026.2(a)(19), 
including any real property attached to a dwelling, other than:
    (1) A home equity line of credit subject to Sec. 1026.40;
    (2) A mortgage transaction secured by a consumer's interest in a 
timeshare plan, as defined in 11 U.S.C. 101(53(D)); or
    (3) For purposes of paragraphs (c) through (f) of this section:

[[Page 152]]

    (i) A reverse mortgage subject to Sec. 1026.33;
    (ii) A temporary or ``bridge'' loan with a term of 12 months or 
less, such as a loan to finance the purchase of a new dwelling where the 
consumer plans to sell a current dwelling within 12 months or a loan to 
finance the initial construction of a dwelling;
    (iii) A construction phase of 12 months or less of a construction-
to-permanent loan;
    (iv) An extension of credit made pursuant to a program administered 
by a Housing Finance Agency, as defined under 24 CFR 266.5;
    (v) An extension of credit made by:
    (A) A creditor designated as a Community Development Financial 
Institution, as defined under 12 CFR 1805.104(h);
    (B) A creditor designated as a Downpayment Assistance through 
Secondary Financing Provider, pursuant to 24 CFR 200.194(a), operating 
in accordance with regulations prescribed by the U.S. Department of 
Housing and Urban Development applicable to such persons;
    (C) A creditor designated as a Community Housing Development 
Organization provided that the creditor has entered into a commitment 
with a participating jurisdiction and is undertaking a project under the 
HOME program, pursuant to the provisions of 24 CFR 92.300(a), and as the 
terms community housing development organization, commitment, 
participating jurisdiction, and project are defined under 24 CFR 92.2; 
or
    (D) A creditor with a tax exemption ruling or determination letter 
from the Internal Revenue Service under section 501(c)(3) of the 
Internal Revenue Code of 1986 (26 U.S.C. 501(c)(3); 26 CFR 1.501(c)(3)-
1), provided that:
    (1) During the calendar year preceding receipt of the consumer's 
application, the creditor extended credit secured by a dwelling no more 
than 200 times, except as provided in paragraph (a)(3)(vii) of this 
section;
    (2) During the calendar year preceding receipt of the consumer's 
application, the creditor extended credit secured by a dwelling only to 
consumers with income that did not exceed the low- and moderate-income 
household limit as established pursuant to section 102 of the Housing 
and Community Development Act of 1974 (42 U.S.C. 5302(a)(20)) and 
amended from time to time by the U.S. Department of Housing and Urban 
Development, pursuant to 24 CFR 570.3;
    (3) The extension of credit is to a consumer with income that does 
not exceed the household limit specified in paragraph (a)(3)(v)(D)(2) of 
this section; and
    (4) The creditor determines, in accordance with written procedures, 
that the consumer has a reasonable ability to repay the extension of 
credit.
    (vi) An extension of credit made pursuant to a program authorized by 
sections 101 and 109 of the Emergency Economic Stabilization Act of 2008 
(12 U.S.C. 5211; 5219);
    (vii) Consumer credit transactions that meet the following criteria 
are not considered in determining whether a creditor exceeds the credit 
extension limitation in paragraph (a)(3)(v)(D)(1) of this section:
    (A) The transaction is secured by a subordinate lien;
    (B) The transaction is for the purpose of:
    (1) Downpayment, closing costs, or other similar home buyer 
assistance, such as principal or interest subsidies;
    (2) Property rehabilitation assistance;
    (3) Energy efficiency assistance; or
    (4) Foreclosure avoidance or prevention;
    (C) The credit contract does not require payment of interest;
    (D) The credit contract provides that repayment of the amount of the 
credit extended is:
    (1) Forgiven either incrementally or in whole, at a date certain, 
and subject only to specified ownership and occupancy conditions, such 
as a requirement that the consumer maintain the property as the 
consumer's principal dwelling for five years;
    (2) Deferred for a minimum of 20 years after consummation of the 
transaction;
    (3) Deferred until sale of the property securing the transaction; or
    (4) Deferred until the property securing the transaction is no 
longer the principal dwelling of the consumer;

[[Page 153]]

    (E) The total of costs payable by the consumer in connection with 
the transaction at consummation is less than 1 percent of the amount of 
credit extended and includes no charges other than:
    (1) Fees for recordation of security instruments, deeds, and similar 
documents;
    (2) A bona fide and reasonable application fee; and
    (3) A bona fide and reasonable fee for housing counseling services; 
and
    (F) The creditor complies with all other applicable requirements of 
this part in connection with the transaction.
    (b) Definitions. For purposes of this section:
    (1) Covered transaction means a consumer credit transaction that is 
secured by a dwelling, as defined in Sec. 1026.2(a)(19), including any 
real property attached to a dwelling, other than a transaction exempt 
from coverage under paragraph (a) of this section.
    (2) Fully amortizing payment means a periodic payment of principal 
and interest that will fully repay the loan amount over the loan term.
    (3) Fully indexed rate means the interest rate calculated using the 
index or formula that will apply after recast, as determined at the time 
of consummation, and the maximum margin that can apply at any time 
during the loan term.
    (4) Higher-priced covered transaction means a covered transaction 
with an annual percentage rate that exceeds the average prime offer rate 
for a comparable transaction as of the date the interest rate is set by 
1.5 or more percentage points for a first-lien covered transaction, 
other than a qualified mortgage under paragraph (e)(5), (e)(6), or (f) 
of this section; by 3.5 or more percentage points for a first-lien 
covered transaction that is a qualified mortgage under paragraph (e)(5), 
(e)(6), or (f) of this section; or by 3.5 or more percentage points for 
a subordinate-lien covered transaction.
    (5) Loan amount means the principal amount the consumer will borrow 
as reflected in the promissory note or loan contract.
    (6) Loan term means the period of time to repay the obligation in 
full.
    (7) Maximum loan amount means the loan amount plus any increase in 
principal balance that results from negative amortization, as defined in 
Sec. 1026.18(s)(7)(v), based on the terms of the legal obligation 
assuming:
    (i) The consumer makes only the minimum periodic payments for the 
maximum possible time, until the consumer must begin making fully 
amortizing payments; and
    (ii) The maximum interest rate is reached at the earliest possible 
time.
    (8) Mortgage-related obligations mean property taxes; premiums and 
similar charges identified in Sec. 1026.4(b)(5), (7), (8), and (10) 
that are required by the creditor; fees and special assessments imposed 
by a condominium, cooperative, or homeowners association; ground rent; 
and leasehold payments.
    (9) Points and fees has the same meaning as in Sec. 1026.32(b)(1).
    (10) Prepayment penalty has the same meaning as in Sec. 
1026.32(b)(6).
    (11) Recast means:
    (i) For an adjustable-rate mortgage, as defined in Sec. 
1026.18(s)(7)(i), the expiration of the period during which payments 
based on the introductory fixed interest rate are permitted under the 
terms of the legal obligation;
    (ii) For an interest-only loan, as defined in Sec. 
1026.18(s)(7)(iv), the expiration of the period during which interest-
only payments are permitted under the terms of the legal obligation; and
    (iii) For a negative amortization loan, as defined in Sec. 
1026.18(s)(7)(v), the expiration of the period during which negatively 
amortizing payments are permitted under the terms of the legal 
obligation.
    (12) Simultaneous loan means another covered transaction or home 
equity line of credit subject to Sec. 1026.40 that will be secured by 
the same dwelling and made to the same consumer at or before 
consummation of the covered transaction or, if to be made after 
consummation, will cover closing costs of the first covered transaction.
    (13) Third-party record means:
    (i) A document or other record prepared or reviewed by an 
appropriate person other than the consumer, the creditor, or the 
mortgage broker, as defined in Sec. 1026.36(a)(2), or an agent of the 
creditor or mortgage broker;

[[Page 154]]

    (ii) A copy of a tax return filed with the Internal Revenue Service 
or a State taxing authority;
    (iii) A record the creditor maintains for an account of the consumer 
held by the creditor; or
    (iv) If the consumer is an employee of the creditor or the mortgage 
broker, a document or other record maintained by the creditor or 
mortgage broker regarding the consumer's employment status or employment 
income.
    (c) Repayment ability--(1) General requirement. A creditor shall not 
make a loan that is a covered transaction unless the creditor makes a 
reasonable and good faith determination at or before consummation that 
the consumer will have a reasonable ability to repay the loan according 
to its terms.
    (2) Basis for determination. Except as provided otherwise in 
paragraphs (d), (e), and (f) of this section, in making the repayment 
ability determination required under paragraph (c)(1) of this section, a 
creditor must consider the following:
    (i) The consumer's current or reasonably expected income or assets, 
other than the value of the dwelling, including any real property 
attached to the dwelling, that secures the loan;
    (ii) If the creditor relies on income from the consumer's employment 
in determining repayment ability, the consumer's current employment 
status;
    (iii) The consumer's monthly payment on the covered transaction, 
calculated in accordance with paragraph (c)(5) of this section;
    (iv) The consumer's monthly payment on any simultaneous loan that 
the creditor knows or has reason to know will be made, calculated in 
accordance with paragraph (c)(6) of this section;
    (v) The consumer's monthly payment for mortgage-related obligations;
    (vi) The consumer's current debt obligations, alimony, and child 
support;
    (vii) The consumer's monthly debt-to-income ratio or residual income 
in accordance with paragraph (c)(7) of this section; and
    (viii) The consumer's credit history.
    (3) Verification using third-party records. A creditor must verify 
the information that the creditor relies on in determining a consumer's 
repayment ability under Sec. 1026.43(c)(2) using reasonably reliable 
third-party records, except that:
    (i) For purposes of paragraph (c)(2)(i) of this section, a creditor 
must verify a consumer's income or assets that the creditor relies on in 
accordance with Sec. 1026.43(c)(4);
    (ii) For purposes of paragraph (c)(2)(ii) of this section, a 
creditor may verify a consumer's employment status orally if the 
creditor prepares a record of the information obtained orally; and
    (iii) For purposes of paragraph (c)(2)(vi) of this section, if a 
creditor relies on a consumer's credit report to verify a consumer's 
current debt obligations and a consumer's application states a current 
debt obligation not shown in the consumer's credit report, the creditor 
need not independently verify such an obligation.
    (4) Verification of income or assets. A creditor must verify the 
amounts of income or assets that the creditor relies on under Sec. 
1026.43(c)(2)(i) to determine a consumer's ability to repay a covered 
transaction using third-party records that provide reasonably reliable 
evidence of the consumer's income or assets. A creditor may verify the 
consumer's income using a tax-return transcript issued by the Internal 
Revenue Service (IRS). Examples of other records the creditor may use to 
verify the consumer's income or assets include:
    (i) Copies of tax returns the consumer filed with the IRS or a State 
taxing authority;
    (ii) IRS Form W-2s or similar IRS forms used for reporting wages or 
tax withholding;
    (iii) Payroll statements, including military Leave and Earnings 
Statements;
    (iv) Financial institution records;
    (v) Records from the consumer's employer or a third party that 
obtained information from the employer;
    (vi) Records from a Federal, State, or local government agency 
stating the consumer's income from benefits or entitlements;
    (vii) Receipts from the consumer's use of check cashing services; 
and
    (viii) Receipts from the consumer's use of a funds transfer service.

[[Page 155]]

    (5) Payment calculation--(i) General rule. Except as provided in 
paragraph (c)(5)(ii) of this section, a creditor must make the 
consideration required under paragraph (c)(2)(iii) of this section 
using:
    (A) The fully indexed rate or any introductory interest rate, 
whichever is greater; and
    (B) Monthly, fully amortizing payments that are substantially equal.
    (ii) Special rules for loans with a balloon payment, interest-only 
loans, and negative amortization loans. A creditor must make the 
consideration required under paragraph (c)(2)(iii) of this section for:
    (A) A loan with a balloon payment, as defined in Sec. 
1026.18(s)(5)(i), using:
    (1) The maximum payment scheduled during the first five years after 
the date on which the first regular periodic payment will be due for a 
loan that is not a higher-priced covered transaction; or
    (2) The maximum payment in the payment schedule, including any 
balloon payment, for a higher-priced covered transaction;
    (B) An interest-only loan, as defined in Sec. 1026.18(s)(7)(iv), 
using:
    (1) The fully indexed rate or any introductory interest rate, 
whichever is greater; and
    (2) Substantially equal, monthly payments of principal and interest 
that will repay the loan amount over the term of the loan remaining as 
of the date the loan is recast.
    (C) A negative amortization loan, as defined in Sec. 
1026.18(s)(7)(v), using:
    (1) The fully indexed rate or any introductory interest rate, 
whichever is greater; and
    (2) Substantially equal, monthly payments of principal and interest 
that will repay the maximum loan amount over the term of the loan 
remaining as of the date the loan is recast.
    (6) Payment calculation for simultaneous loans. For purposes of 
making the evaluation required under paragraph (c)(2)(iv) of this 
section, a creditor must consider, taking into account any mortgage-
related obligations, a consumer's payment on a simultaneous loan that 
is:
    (i) A covered transaction, by following paragraph (c)(5)of this 
section; or
    (ii) A home equity line of credit subject to Sec. 1026.40, by using 
the periodic payment required under the terms of the plan and the amount 
of credit to be drawn at or before consummation of the covered 
transaction.
    (7) Monthly debt-to-income ratio or residual income--(i) 
Definitions. For purposes of this paragraph (c)(7), the following 
definitions apply:
    (A) Total monthly debt obligations. The term total monthly debt 
obligations means the sum of: the payment on the covered transaction, as 
required to be calculated by paragraphs (c)(2)(iii) and (c)(5) of this 
section; simultaneous loans, as required by paragraphs (c)(2)(iv) and 
(c)(6) of this section; mortgage-related obligations, as required by 
paragraph (c)(2)(v) of this section; and current debt obligations, 
alimony, and child support, as required by paragraph (c)(2)(vi) of this 
section.
    (B) Total monthly income. The term total monthly income means the 
sum of the consumer's current or reasonably expected income, including 
any income from assets, as required by paragraphs (c)(2)(i) and (c)(4) 
of this section.
    (ii) Calculations--(A) Monthly debt-to-income ratio. If a creditor 
considers the consumer's monthly debt-to-income ratio under paragraph 
(c)(2)(vii) of this section, the creditor must consider the ratio of the 
consumer's total monthly debt obligations to the consumer's total 
monthly income.
    (B) Monthly residual income. If a creditor considers the consumer's 
monthly residual income under paragraph (c)(2)(vii) of this section, the 
creditor must consider the consumer's remaining income after subtracting 
the consumer's total monthly debt obligations from the consumer's total 
monthly income.
    (d) Refinancing of non-standard mortgages--(1) Definitions. For 
purposes of this paragraph (d), the following definitions apply:
    (i) Non-standard mortgage. The term non-standard mortgage means a 
covered transaction that is:

[[Page 156]]

    (A) An adjustable-rate mortgage, as defined in Sec. 
1026.18(s)(7)(i), with an introductory fixed interest rate for a period 
of one year or longer;
    (B) An interest-only loan, as defined in Sec. 1026.18(s)(7)(iv); or
    (C) A negative amortization loan, as defined in Sec. 
1026.18(s)(7)(v).
    (ii) Standard mortgage. The term standard mortgage means a covered 
transaction:
    (A) That provides for regular periodic payments that do not:
    (1) Cause the principal balance to increase;
    (2) Allow the consumer to defer repayment of principal; or
    (3) Result in a balloon payment, as defined in Sec. 
1026.18(s)(5)(i);
    (B) For which the total points and fees payable in connection with 
the transaction do not exceed the amounts specified in paragraph (e)(3) 
of this section;
    (C) For which the term does not exceed 40 years;
    (D) For which the interest rate is fixed for at least the first five 
years after consummation; and
    (E) For which the proceeds from the loan are used solely for the 
following purposes:
    (1) To pay off the outstanding principal balance on the non-standard 
mortgage; and
    (2) To pay closing or settlement charges required to be disclosed 
under the Real Estate Settlement Procedures Act, 12 U.S.C. 2601 et seq.
    (iii) Refinancing. The term refinancing has the same meaning as in 
Sec. 1026.20(a).
    (2) Scope. The provisions of this paragraph (d) apply to the 
refinancing of a non-standard mortgage into a standard mortgage when the 
following conditions are met:
    (i) The creditor for the standard mortgage is the current holder of 
the existing non-standard mortgage or the servicer acting on behalf of 
the current holder;
    (ii) The monthly payment for the standard mortgage is materially 
lower than the monthly payment for the non-standard mortgage, as 
calculated under paragraph (d)(5) of this section.
    (iii) The creditor receives the consumer's written application for 
the standard mortgage no later than two months after the non-standard 
mortgage has recast.
    (iv) The consumer has made no more than one payment more than 30 
days late on the non-standard mortgage during the 12 months immediately 
preceding the creditor's receipt of the consumer's written application 
for the standard mortgage.
    (v) The consumer has made no payments more than 30 days late during 
the six months immediately preceding the creditor's receipt of the 
consumer's written application for the standard mortgage; and
    (vi) If the non-standard mortgage was consummated on or after 
January 10, 2014, the non-standard mortgage was made in accordance with 
paragraph (c) or (e) of this section, as applicable.
    (3) Exemption from repayment ability requirements. A creditor is not 
required to comply with the requirements of paragraph (c) of this 
section if:
    (i) The conditions in paragraph (d)(2) of this section are met; and
    (ii) The creditor has considered whether the standard mortgage 
likely will prevent a default by the consumer on the non-standard 
mortgage once the loan is recast.
    (4) Offer of rate discounts and other favorable terms. A creditor 
making a covered transaction under this paragraph (d) may offer to the 
consumer rate discounts and terms that are the same as, or better than, 
the rate discounts and terms that the creditor offers to new consumers, 
consistent with the creditor's documented underwriting practices and to 
the extent not prohibited by applicable State or Federal law.
    (5) Payment calculations. For purposes of determining whether the 
consumer's monthly payment for a standard mortgage will be materially 
lower than the monthly payment for the non-standard mortgage, the 
following provisions shall be used:
    (i) Non-standard mortgage. For purposes of the comparison conducted 
pursuant to paragraph (d)(2)(ii) of this section, the creditor must 
calculate the monthly payment for a non-standard mortgage based on 
substantially equal, monthly, fully amortizing payments of principal and 
interest using:
    (A) The fully indexed rate as of a reasonable period of time before 
or after

[[Page 157]]

the date on which the creditor receives the consumer's written 
application for the standard mortgage;
    (B) The term of the loan remaining as of the date on which the 
recast occurs, assuming all scheduled payments have been made up to the 
recast date and the payment due on the recast date is made and credited 
as of that date; and
    (C) A remaining loan amount that is:
    (1) For an adjustable-rate mortgage under paragraph (d)(1)(i)(A) of 
this section, the outstanding principal balance as of the date of the 
recast, assuming all scheduled payments have been made up to the recast 
date and the payment due on the recast date is made and credited as of 
that date;
    (2) For an interest-only loan under paragraph (d)(1)(i)(B) of this 
section, the outstanding principal balance as of the date of the recast, 
assuming all scheduled payments have been made up to the recast date and 
the payment due on the recast date is made and credited as of that date; 
or
    (3) For a negative amortization loan under paragraph (d)(1)(i)(C) of 
this section, the maximum loan amount, determined after adjusting for 
the outstanding principal balance.
    (ii) Standard mortgage. For purposes of the comparison conducted 
pursuant to paragraph (d)(2)(ii) of this section, the monthly payment 
for a standard mortgage must be based on substantially equal, monthly, 
fully amortizing payments based on the maximum interest rate that may 
apply during the first five years after consummation.
    (e) Qualified mortgages--(1) Safe harbor and presumption of 
compliance--(i) Safe harbor for loans that are not higher-priced covered 
transactions. A creditor or assignee of a qualified mortgage, as defined 
in paragraphs (e)(2), (e)(4), (e)(5), (e)(6), or (f) of this section, 
that is not a higher-priced covered transaction, as defined in paragraph 
(b)(4) of this section, complies with the repayment ability requirements 
of paragraph (c) of this section.
    (ii) Presumption of compliance for higher-priced covered 
transactions. (A) A creditor or assignee of a qualified mortgage, as 
defined in paragraph (e)(2), (e)(4), (e)(5), (e)(6), or (f) of this 
section, that is a higher-priced covered transaction, as defined in 
paragraph (b)(4) of this section, is presumed to comply with the 
repayment ability requirements of paragraph (c) of this section.
    (B) To rebut the presumption of compliance described in paragraph 
(e)(1)(ii)(A) of this section, it must be proven that, despite meeting 
the prerequisites of paragraph (e)(2), (e)(4), (e)(5), (e)(6), or (f) of 
this section, the creditor did not make a reasonable and good faith 
determination of the consumer's repayment ability at the time of 
consummation, by showing that the consumer's income, debt obligations, 
alimony, child support, and the consumer's monthly payment (including 
mortgage-related obligations) on the covered transaction and on any 
simultaneous loans of which the creditor was aware at consummation would 
leave the consumer with insufficient residual income or assets other 
than the value of the dwelling (including any real property attached to 
the dwelling) that secures the loan with which to meet living expenses, 
including any recurring and material non-debt obligations of which the 
creditor was aware at the time of consummation.
    (2) Qualified mortgage defined--general. Except as provided in 
paragraph (e)(4), (e)(5), (e)(6), or (f) of this section, a qualified 
mortgage is a covered transaction:
    (i) That provides for regular periodic payments that are 
substantially equal, except for the effect that any interest rate change 
after consummation has on the payment in the case of an adjustable-rate 
or step-rate mortgage, that do not:
    (A) Result in an increase of the principal balance;
    (B) Allow the consumer to defer repayment of principal, except as 
provided in paragraph (f) of this section; or
    (C) Result in a balloon payment, as defined in Sec. 
1026.18(s)(5)(i), except as provided in paragraph (f) of this section;
    (ii) For which the loan term does not exceed 30 years;
    (iii) For which the total points and fees payable in connection with 
the loan do not exceed the amounts specified in paragraph (e)(3) of this 
section;

[[Page 158]]

    (iv) For which the creditor underwrites the loan, taking into 
account the monthly payment for mortgage-related obligations, using:
    (A) The maximum interest rate that may apply during the first five 
years after the date on which the first regular periodic payment will be 
due; and
    (B) Periodic payments of principal and interest that will repay 
either:
    (1) The outstanding principal balance over the remaining term of the 
loan as of the date the interest rate adjusts to the maximum interest 
rate set forth in paragraph (e)(2)(iv)(A) of this section, assuming the 
consumer will have made all required payments as due prior to that date; 
or
    (2) The loan amount over the loan term;
    (v) For which the creditor considers and verifies at or before 
consummation the following:
    (A) The consumer's current or reasonably expected income or assets 
other than the value of the dwelling (including any real property 
attached to the dwelling) that secures the loan, in accordance with 
appendix Q and paragraphs (c)(2)(i) and (c)(4) of this section; and
    (B) The consumer's current debt obligations, alimony, and child 
support in accordance with appendix Q and paragraphs (c)(2)(vi) and 
(c)(3) of this section; and
    (vi) For which the ratio of the consumer's total monthly debt to 
total monthly income at the time of consummation does not exceed 43 
percent. For purposes of this paragraph (e)(2)(vi), the ratio of the 
consumer's total monthly debt to total monthly income is determined:
    (A) Except as provided in paragraph (e)(2)(vi)(B) of this section, 
in accordance with the standards in appendix Q;
    (B) Using the consumer's monthly payment on:
    (1) The covered transaction, including the monthly payment for 
mortgage-related obligations, in accordance with paragraph (e)(2)(iv) of 
this section; and
    (2) Any simultaneous loan that the creditor knows or has reason to 
know will be made, in accordance with paragraphs (c)(2)(iv) and (c)(6) 
of this section.
    (3) Limits on points and fees for qualified mortgages. (i) Except as 
provided in paragraph (e)(3)(iii) of this section, a covered transaction 
is not a qualified mortgage unless the transaction's total points and 
fees, as defined in Sec. 1026.32(b)(1), do not exceed:
    (A) For a loan amount greater than or equal to $100,000 (indexed for 
inflation): 3 percent of the total loan amount;
    (B) For a loan amount greater than or equal to $60,000 (indexed for 
inflation) but less than $100,000 (indexed for inflation): $3,000 
(indexed for inflation);
    (C) For a loan amount greater than or equal to $20,000 (indexed for 
inflation) but less than $60,000 (indexed for inflation): 5 percent of 
the total loan amount;
    (D) For a loan amount greater than or equal to $12,500 (indexed for 
inflation) but less than $20,000 (indexed for inflation): $1,000 
(indexed for inflation);
    (E) For a loan amount less than $12,500 (indexed for inflation): 8 
percent of the total loan amount.
    (ii) The dollar amounts, including the loan amounts, in paragraph 
(e)(3)(i) of this section shall be adjusted annually on January 1 by the 
annual percentage change in the Consumer Price Index for All Urban 
Consumers (CPI-U) that was reported on the preceding June 1. See the 
official commentary to this paragraph (e)(3)(ii) for the current dollar 
amounts.
    (iii) For covered transactions consummated on or before January 10, 
2021, if the creditor or assignee determines after consummation that the 
transaction's total points and fees exceed the applicable limit under 
paragraph (e)(3)(i) of this section, the loan is not precluded from 
being a qualified mortgage, provided:
    (A) The loan otherwise meets the requirements of paragraphs (e)(2), 
(e)(4), (e)(5), (e)(6), or (f) of this section, as applicable;
    (B) The creditor or assignee pays to the consumer the amount 
described in paragraph (e)(3)(iv) of this section within 210 days after 
consummation and prior to the occurrence of any of the following events:
    (1) The institution of any action by the consumer in connection with 
the loan;

[[Page 159]]

    (2) The receipt by the creditor, assignee, or servicer of written 
notice from the consumer that the transaction's total points and fees 
exceed the applicable limit under paragraph (e)(3)(i) of this section; 
or
    (3) The consumer becoming 60 days past due on the legal obligation; 
and
    (C) The creditor or assignee, as applicable, maintains and follows 
policies and procedures for post-consummation review of points and fees 
and for making payments to consumers in accordance with paragraphs 
(e)(3)(iii)(B) and (e)(3)(iv) of this section.
    (iv) For purposes of paragraph (e)(3)(iii) of this section, the 
creditor or assignee must pay to the consumer an amount that is not less 
than the sum of the following:
    (A) The dollar amount by which the transaction's total points and 
fees exceeds the applicable limit under paragraph (e)(3)(i) of this 
section; and
    (B) Interest on the dollar amount described in paragraph 
(e)(3)(iv)(A) of this section, calculated using the contract interest 
rate applicable during the period from consummation until the payment 
described in this paragraph (e)(3)(iv) is made to the consumer.
    (4) Qualified mortgage defined--special rules--(i) General. 
Notwithstanding paragraph (e)(2) of this section, a qualified mortgage 
is a covered transaction that satisfies:
    (A) The requirements of paragraphs (e)(2)(i) through (iii) of this 
section; and
    (B) One or more of the criteria in paragraph (e)(4)(ii) of this 
section.
    (ii) Eligible loans. A qualified mortgage under this paragraph 
(e)(4) must be one of the following at consummation:
    (A) A loan that is eligible, except with regard to matters wholly 
unrelated to ability to repay:
    (1) To be purchased or guaranteed by the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation operating 
under the conservatorship or receivership of the Federal Housing Finance 
Agency pursuant to section 1367(a) of the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617(a)); or
    (2) To be purchased or guaranteed by any limited-life regulatory 
entity succeeding the charter of either the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation pursuant to 
section 1367(i) of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (12 U.S.C. 4617(i));
    (B) A loan that is eligible to be insured, except with regard to 
matters wholly unrelated to ability to repay, by the U.S. Department of 
Housing and Urban Development under the National Housing Act (12 U.S.C. 
1707 et seq.);
    (C) A loan that is eligible to be guaranteed, except with regard to 
matters wholly unrelated to ability to repay, by the U.S. Department of 
Veterans Affairs;
    (D) A loan that is eligible to be guaranteed, except with regard to 
matters wholly unrelated to ability to repay, by the U.S. Department of 
Agriculture pursuant to 42 U.S.C. 1472(h); or
    (E) A loan that is eligible to be insured, except with regard to 
matters wholly unrelated to ability to repay, by the Rural Housing 
Service.
    (iii) Sunset of special rules. (A) Each respective special rule 
described in paragraph (e)(4)(ii)(B), (C), (D), or (E) of this section 
shall expire on the effective date of a rule issued by each respective 
agency pursuant to its authority under TILA section 129C(b)(3)(ii) to 
define a qualified mortgage.
    (B) Unless otherwise expired under paragraph (e)(4)(iii)(A) of this 
section, the special rules in this paragraph (e)(4) are available only 
for covered transactions consummated on or before January 10, 2021.
    (5) Qualified mortgage defined--small creditor portfolio loans. (i) 
Notwithstanding paragraph (e)(2) of this section, a qualified mortgage 
is a covered transaction:
    (A) That satisfies the requirements of paragraph (e)(2) of this 
section other than the requirements of paragraph (e)(2)(vi) and without 
regard to the standards in appendix Q to this part;
    (B) For which the creditor considers at or before consummation the 
consumer's monthly debt-to-income ratio or residual income and verifies 
the debt obligations and income used to determine that ratio in 
accordance with

[[Page 160]]

paragraph (c)(7) of this section, except that the calculation of the 
payment on the covered transaction for purposes of determining the 
consumer's total monthly debt obligations in paragraph (c)(7)(i)(A) 
shall be determined in accordance with paragraph (e)(2)(iv) of this 
section instead of paragraph (c)(5) of this section;
    (C) That is not subject, at consummation, to a commitment to be 
acquired by another person, other than a person that satisfies the 
requirements of paragraph (e)(5)(i)(D) of this section; and
    (D) For which the creditor satisfies the requirements stated in 
Sec. 1026.35(b)(2)(iii)(B) and (C).
    (ii) A qualified mortgage extended pursuant to paragraph (e)(5)(i) 
of this section immediately loses its status as a qualified mortgage 
under paragraph (e)(5)(i) if legal title to the qualified mortgage is 
sold, assigned, or otherwise transferred to another person except when:
    (A) The qualified mortgage is sold, assigned, or otherwise 
transferred to another person three years or more after consummation of 
the qualified mortgage;
    (B) The qualified mortgage is sold, assigned, or otherwise 
transferred to a creditor that satisfies the requirements of paragraph 
(e)(5)(i)(D) of this section;
    (C) The qualified mortgage is sold, assigned, or otherwise 
transferred to another person pursuant to a capital restoration plan or 
other action under 12 U.S.C. 1831o, actions or instructions of any 
person acting as conservator, receiver, or bankruptcy trustee, an order 
of a State or Federal government agency with jurisdiction to examine the 
creditor pursuant to State or Federal law, or an agreement between the 
creditor and such an agency; or
    (D) The qualified mortgage is sold, assigned, or otherwise 
transferred pursuant to a merger of the creditor with another person or 
acquisition of the creditor by another person or of another person by 
the creditor.
    (6) Qualified mortgage defined--temporary balloon-payment qualified 
mortgage rules. (i) Notwithstanding paragraph (e)(2) of this section, a 
qualified mortgage is a covered transaction:
    (A) That satisfies the requirements of paragraph (f) of this section 
other than the requirements of paragraph (f)(1)(vi); and
    (B) For which the creditor satisfies the requirements stated in 
Sec. 1026.35(b)(2)(iii)(B) and (C).
    (ii) The provisions of this paragraph (e)(6) apply only to covered 
transactions for which the application was received before April 1, 
2016.
    (f) Balloon-payment qualified mortgages made by certain creditors--
(1) Exemption. Notwithstanding paragraph (e)(2) of this section, a 
qualified mortgage may provide for a balloon payment, provided:
    (i) The loan satisfies the requirements for a qualified mortgage in 
paragraphs (e)(2)(i)(A), (e)(2)(ii), (e)(2)(iii), and (e)(2)(v) of this 
section, but without regard to the standards in appendix Q;
    (ii) The creditor determines at or before consummation that the 
consumer can make all of the scheduled payments under the terms of the 
legal obligation, as described in paragraph (f)(1)(iv) of this section, 
together with the consumer's monthly payments for all mortgage-related 
obligations and excluding the balloon payment, from the consumer's 
current or reasonably expected income or assets other than the dwelling 
that secures the loan;
    (iii) The creditor considers at or before consummation the 
consumer's monthly debt-to-income ratio or residual income and verifies 
the debt obligations and income used to determine that ratio in 
accordance with paragraph (c)(7) of this section, except that the 
calculation of the payment on the covered transaction for purposes of 
determining the consumer's total monthly debt obligations in 
(c)(7)(i)(A) shall be determined in accordance with paragraph (f)(iv)(A) 
of this section, together with the consumer's monthly payments for all 
mortgage-related obligations and excluding the balloon payment;
    (iv) The legal obligation provides for:
    (A) Scheduled payments that are substantially equal, calculated 
using an amortization period that does not exceed 30 years;
    (B) An interest rate that does not increase over the term of the 
loan; and

[[Page 161]]

    (C) A loan term of five years or longer.
    (v) The loan is not subject, at consummation, to a commitment to be 
acquired by another person, other than a person that satisfies the 
requirements of paragraph (f)(1)(vi) of this section; and
    (vi) The creditor satisfies the requirements stated in Sec. 
1026.35(b)(2)(iii)(A), (B), and (C).
    (2) Post-consummation transfer of balloon-payment qualified 
mortgage. A balloon-payment qualified mortgage, extended pursuant to 
paragraph (f)(1), immediately loses its status as a qualified mortgage 
under paragraph (f)(1) if legal title to the balloon-payment qualified 
mortgage is sold, assigned, or otherwise transferred to another person 
except when:
    (i) The balloon-payment qualified mortgage is sold, assigned, or 
otherwise transferred to another person three years or more after 
consummation of the balloon-payment qualified mortgage;
    (ii) The balloon-payment qualified mortgage is sold, assigned, or 
otherwise transferred to a creditor that satisfies the requirements of 
paragraph (f)(1)(vi) of this section;
    (iii) The balloon-payment qualified mortgage is sold, assigned, or 
otherwise transferred to another person pursuant to a capital 
restoration plan or other action under 12 U.S.C. 1831o, actions or 
instructions of any person acting as conservator, receiver or bankruptcy 
trustee, an order of a State or Federal governmental agency with 
jurisdiction to examine the creditor pursuant to State or Federal law, 
or an agreement between the creditor and such an agency; or
    (iv) The balloon-payment qualified mortgage is sold, assigned, or 
otherwise transferred pursuant to a merger of the creditor with another 
person or acquisition of the creditor by another person or of another 
person by the creditor.
    (g) Prepayment penalties--(1) When permitted. A covered transaction 
must not include a prepayment penalty unless:
    (i) The prepayment penalty is otherwise permitted by law; and
    (ii) The transaction:
    (A) Has an annual percentage rate that cannot increase after 
consummation;
    (B) Is a qualified mortgage under paragraph (e)(2), (e)(4), (e)(5), 
(e)(6), or (f) of this section; and
    (C) Is not a higher-priced mortgage loan, as defined in Sec. 
1026.35(a).
    (2) Limits on prepayment penalties. A prepayment penalty:
    (i) Must not apply after the three-year period following 
consummation; and
    (ii) Must not exceed the following percentages of the amount of the 
outstanding loan balance prepaid:
    (A) 2 percent, if incurred during the first two years following 
consummation; and
    (B) 1 percent, if incurred during the third year following 
consummation.
    (3) Alternative offer required. A creditor must not offer a consumer 
a covered transaction with a prepayment penalty unless the creditor also 
offers the consumer an alternative covered transaction without a 
prepayment penalty and the alternative covered transaction:
    (i) Has an annual percentage rate that cannot increase after 
consummation and has the same type of interest rate as the covered 
transaction with a prepayment penalty; for purposes of this paragraph 
(g), the term ``type of interest rate'' refers to whether a transaction:
    (A) Is a fixed-rate mortgage, as defined in Sec. 
1026.18(s)(7)(iii); or
    (B) Is a step-rate mortgage, as defined in Sec. 1026.18(s)(7)(ii);
    (ii) Has the same loan term as the loan term for the covered 
transaction with a prepayment penalty;
    (iii) Satisfies the periodic payment conditions under paragraph 
(e)(2)(i) of this section;
    (iv) Satisfies the points and fees conditions under paragraph 
(e)(2)(iii) of this section, based on the information known to the 
creditor at the time the transaction is offered; and
    (v) Is a transaction for which the creditor has a good faith belief 
that the consumer likely qualifies, based on the information known to 
the creditor at the time the creditor offers the covered transaction 
without a prepayment penalty.

[[Page 162]]

    (4) Offer through a mortgage broker. If the creditor offers a 
covered transaction with a prepayment penalty to the consumer through a 
mortgage broker, as defined in Sec. 1026.36(a)(2), the creditor must:
    (i) Present the mortgage broker an alternative covered transaction 
without a prepayment penalty that satisfies the requirements of 
paragraph (g)(3) of this section; and
    (ii) Establish by agreement that the mortgage broker must present 
the consumer an alternative covered transaction without a prepayment 
penalty that satisfies the requirements of paragraph (g)(3) of this 
section, offered by:
    (A) The creditor; or
    (B) Another creditor, if the transaction offered by the other 
creditor has a lower interest rate or a lower total dollar amount of 
discount points and origination points or fees.
    (5) Creditor that is a loan originator. If the creditor is a loan 
originator, as defined in Sec. 1026.36(a)(1), and the creditor presents 
the consumer a covered transaction offered by a person to which the 
creditor would assign the covered transaction after consummation, the 
creditor must present the consumer an alternative covered transaction 
without a prepayment penalty that satisfies the requirements of 
paragraph (g)(3) of this section, offered by:
    (i) The assignee; or
    (ii) Another person, if the transaction offered by the other person 
has a lower interest rate or a lower total dollar amount of origination 
discount points and points or fees.
    (6) Applicability. This paragraph (g) applies only if a covered 
transaction is consummated with a prepayment penalty and is not violated 
if:
    (i) A covered transaction is consummated without a prepayment 
penalty; or
    (ii) The creditor and consumer do not consummate a covered 
transaction.
    (h) Evasion; open-end credit. In connection with credit secured by a 
consumer's dwelling that does not meet the definition of open-end credit 
in Sec. 1026.2(a)(20), a creditor shall not structure the loan as an 
open-end plan to evade the requirements of this section.

[78 FR 6584, Jan. 30, 2013, as amended at 78 FR 35502, June 12, 2013; 78 
FR 44718, July 24, 2013; 78 FR 60442, Oct. 1, 2013; 78 FR 63005, Oct. 
23, 2013; 79 FR 65323, Nov. 3, 2014; 80 FR 59968, Oct. 2, 2015]



Sec. Sec. 1026.44-1026.45  [Reserved]



           Subpart F_Special Rules for Private Education Loans



Sec. 1026.46  Special disclosure requirements for private education
loans.

    (a) Coverage. The requirements of this subpart apply to private 
education loans as defined in Sec. 1026.46(b)(5). A creditor may, at 
its option, comply with the requirements of this subpart for an 
extension of credit subject to Sec. Sec. 1026.17 and 1026.18 that is 
extended to a consumer for expenses incurred after graduation from a 
law, medical, dental, veterinary, or other graduate school and related 
to relocation, study for a bar or other examination, participation in an 
internship or residency program, or similar purposes.
    (1) Relation to other subparts in this part. Except as otherwise 
specifically provided, the requirements and limitations of this subpart 
are in addition to and not in lieu of those contained in other subparts 
of this part.
    (2) [Reserved]
    (b) Definitions. For purposes of this subpart, the following 
definitions apply:
    (1) Covered educational institution means:
    (i) An educational institution that meets the definition of an 
institution of higher education, as defined in paragraph (b)(2) of this 
section, without regard to the institution's accreditation status; and
    (ii) Includes an agent, officer, or employee of the institution of 
higher education. An agent means an institution-affiliated organization 
as defined by section 151 of the Higher Education Act of 1965 (20 U.S.C. 
1019) or an officer or employee of an institution-affiliated 
organization.
    (2) Institution of higher education has the same meaning as in 
sections 101 and 102 of the Higher Education Act of

[[Page 163]]

1965 (20 U.S.C. 1001-1002) and the implementing regulations published by 
the U.S. Department of Education.
    (3) Postsecondary educational expenses means any of the expenses 
that are listed as part of the cost of attendance, as defined under 
section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), of a 
student at a covered educational institution. These expenses include 
tuition and fees, books, supplies, miscellaneous personal expenses, room 
and board, and an allowance for any loan fee, origination fee, or 
insurance premium charged to a student or parent for a loan incurred to 
cover the cost of the student's attendance.
    (4) Preferred lender arrangement has the same meaning as in section 
151 of the Higher Education Act of 1965 (20 U.S.C. 1019).
    (5) Private education loan means an extension of credit that:
    (i) Is not made, insured, or guaranteed under title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1070 et seq.);
    (ii) Is extended to a consumer expressly, in whole or in part, for 
postsecondary educational expenses, regardless of whether the loan is 
provided by the educational institution that the student attends;
    (iii) Does not include open-end credit or any loan that is secured 
by real property or a dwelling; and
    (iv) Does not include an extension of credit in which the covered 
educational institution is the creditor if:
    (A) The term of the extension of credit is 90 days or less; or
    (B) an interest rate will not be applied to the credit balance and 
the term of the extension of credit is one year or less, even if the 
credit is payable in more than four installments.
    (c) Form of disclosures--(1) Clear and conspicuous. The disclosures 
required by this subpart shall be made clearly and conspicuously.
    (2) Transaction disclosures. (i) The disclosures required under 
Sec. Sec. 1026.47(b) and (c) shall be made in writing, in a form that 
the consumer may keep. The disclosures shall be grouped together, shall 
be segregated from everything else, and shall not contain any 
information not directly related to the disclosures required under 
Sec. Sec. 1026.47(b) and (c), which include the disclosures required 
under Sec. 1026.18.
    (ii) The disclosures may include an acknowledgement of receipt, the 
date of the transaction, and the consumer's name, address, and account 
number. The following disclosures may be made together with or 
separately from other required disclosures: the creditor's identity 
under Sec. 1026.18(a), insurance or debt cancellation under Sec. 
1026.18(n), and certain security interest charges under Sec. 
1026.18(o).
    (iii) The term ``finance charge'' and corresponding amount, when 
required to be disclosed under Sec. 1026.18(d), and the interest rate 
required to be disclosed under Sec. Sec. 1026.47(b)(1)(i) and (c)(1), 
shall be more conspicuous than any other disclosure, except the 
creditor's identity under Sec. 1026.18(a).
    (3) Electronic disclosures. The disclosures required under 
Sec. Sec. 1026.47(b) and (c) may be provided to the consumer in 
electronic form, subject to compliance with the consumer consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). The 
disclosures required by Sec. 1026.47(a) may be provided to the consumer 
in electronic form on or with an application or solicitation that is 
accessed by the consumer in electronic form without regard to the 
consumer consent or other provisions of the E-Sign Act. The form 
required to be received under Sec. 1026.48(e) may be accepted by the 
creditor in electronic form as provided for in that section.
    (d) Timing of disclosures--(1) Application or solicitation 
disclosures. (i) The disclosures required by Sec. 1026.47(a) shall be 
provided on or with any application or solicitation. For purposes of 
this subpart, the term solicitation means an offer of credit that does 
not require the consumer to complete an application. A ``firm offer of 
credit'' as defined in section 603(l) of the Fair Credit Reporting Act 
(15 U.S.C. 1681a(l)) is a solicitation for purposes of this section.
    (ii) The creditor may, at its option, disclose orally the 
information in Sec. 1026.47(a) in a telephone application or 
solicitation. Alternatively, if the creditor does not disclose orally 
the information in Sec. 1026.47(a), the creditor must provide the 
disclosures or place them

[[Page 164]]

in the mail no later than three business days after the consumer has 
applied for the credit, except that, if the creditor either denies the 
consumer's application or provides or places in the mail the disclosures 
in Sec. 1026.47(b) no later than three business days after the consumer 
requests the credit, the creditor need not also provide the Sec. 
1026.47(a) disclosures.
    (iii) Notwithstanding paragraph (d)(1)(i) of this section, for a 
loan that the consumer may use for multiple purposes including, but not 
limited to, postsecondary educational expenses, the creditor need not 
provide the disclosures required by Sec. 1026.47(a).
    (2) Approval disclosures. The creditor shall provide the disclosures 
required by Sec. 1026.47(b) before consummation on or with any notice 
of approval provided to the consumer. If the creditor mails notice of 
approval, the disclosures must be mailed with the notice. If the 
creditor communicates notice of approval by telephone, the creditor must 
mail the disclosures within three business days of providing the notice 
of approval. If the creditor communicates notice of approval 
electronically, the creditor may provide the disclosures in electronic 
form in accordance with Sec. 1026.46(d)(3); otherwise the creditor must 
mail the disclosures within three business days of communicating the 
notice of approval. If the creditor communicates approval in person, the 
creditor must provide the disclosures to the consumer at that time.
    (3) Final disclosures. The disclosures required by Sec. 1026.47(c) 
shall be provided after the consumer accepts the loan in accordance with 
Sec. 1026.48(c)(1).
    (4) Receipt of mailed disclosures. If the disclosures under 
paragraphs (d)(1), (d)(2) or (d)(3) of this section are mailed to the 
consumer, the consumer is considered to have received them three 
business days after they are mailed.
    (e) Basis of disclosures and use of estimates--(1) Legal obligation. 
Disclosures shall reflect the terms of the legal obligation between the 
parties.
    (2) Estimates. If any information necessary for an accurate 
disclosure is unknown to the creditor, the creditor shall make the 
disclosure based on the best information reasonably available at the 
time the disclosure is provided, and shall state clearly that the 
disclosure is an estimate.
    (f) Multiple creditors; multiple consumers. If a transaction 
involves more than one creditor, only one set of disclosures shall be 
given and the creditors shall agree among themselves which creditor will 
comply with the requirements that this part imposes on any or all of 
them. If there is more than one consumer, the disclosures may be made to 
any consumer who is primarily liable on the obligation.
    (g) Effect of subsequent events--(1) Approval disclosures. If a 
disclosure under Sec. 1026.47(b) becomes inaccurate because of an event 
that occurs after the creditor delivers the required disclosures, the 
inaccuracy is not a violation of Regulation Z (12 CFR part 1026), 
although new disclosures may be required under Sec. 1026.48(c).
    (2) Final disclosures. If a disclosure under Sec. 1026.47(c) 
becomes inaccurate because of an event that occurs after the creditor 
delivers the required disclosures, the inaccuracy is not a violation of 
Regulation Z (12 CFR part 1026).



Sec. 1026.47  Content of disclosures.

    (a) Application or solicitation disclosures. A creditor shall 
provide the disclosures required under paragraph (a) of this section on 
or with a solicitation or an application for a private education loan.
    (1) Interest Rates. (i) The interest rate or range of interest rates 
applicable to the loan and actually offered by the creditor at the time 
of application or solicitation. If the rate will depend, in part, on a 
later determination of the consumer's creditworthiness or other factors, 
a statement that the rate for which the consumer may qualify will depend 
on the consumer's creditworthiness and other factors, if applicable.
    (ii) Whether the interest rates applicable to the loan are fixed or 
variable.
    (iii) If the interest rate may increase after consummation of the 
transaction, any limitations on the interest rate adjustments, or lack 
thereof; a statement that the consumer's actual rate could be higher or 
lower than the rates disclosed under paragraph (a)(1)(i) of this 
section, if applicable; and, if the limitation is determined by 
applicable law, that fact.

[[Page 165]]

    (iv) Whether the applicable interest rates typically will be higher 
if the loan is not co-signed or guaranteed.
    (2) Fees and default or late payment costs. (i) An itemization of 
the fees or range of fees required to obtain the private education loan.
    (ii) Any fees, changes to the interest rate, and adjustments to 
principal based on the consumer's defaults or late payments.
    (3) Repayment terms. (i) The term of the loan, which is the period 
during which regularly scheduled payments of principal and interest will 
be due.
    (ii) A description of any payment deferral options, or, if the 
consumer does not have the option to defer payments, that fact.
    (iii) For each payment deferral option applicable while the student 
is enrolled at a covered educational institution:
    (A) Whether interest will accrue during the deferral period; and
    (B) If interest accrues, whether payment of interest may be deferred 
and added to the principal balance.
    (iv) A statement that if the consumer files for bankruptcy, the 
consumer may still be required to pay back the loan.
    (4) Cost estimates. An example of the total cost of the loan 
calculated as the total of payments over the term of the loan:
    (i) Using the highest rate of interest disclosed under paragraph 
(a)(1) of this section and including all finance charges applicable to 
loans at that rate;
    (ii) Using an amount financed of $10,000, or $5000 if the creditor 
only offers loans of this type for less than $10,000; and
    (iii) Calculated for each payment option.
    (5) Eligibility. Any age or school enrollment eligibility 
requirements relating to the consumer or cosigner.
    (6) Alternatives to private education loans. (i) A statement that 
the consumer may qualify for Federal student financial assistance 
through a program under title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.).
    (ii) The interest rates available under each program under title IV 
of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.) and whether 
the rates are fixed or variable.
    (iii) A statement that the consumer may obtain additional 
information concerning Federal student financial assistance from the 
institution of higher education that the student attends, or at the Web 
site of the U.S. Department of Education, including an appropriate Web 
site address.
    (iv) A statement that a covered educational institution may have 
school-specific education loan benefits and terms not detailed on the 
disclosure form.
    (7) Rights of the consumer. A statement that if the loan is 
approved, the terms of the loan will be available and will not change 
for 30 days except as a result of adjustments to the interest rate and 
other changes permitted by law.
    (8) Self-certification information. A statement that, before the 
loan may be consummated, the consumer must complete the self-
certification form and that the form may be obtained from the 
institution of higher education that the student attends.
    (b) Approval disclosures. On or with any notice of approval provided 
to the consumer, the creditor shall disclose the information required 
under Sec. 1026.18 and the following information:
    (1) Interest rate. (i) The interest rate applicable to the loan.
    (ii) Whether the interest rate is fixed or variable.
    (iii) If the interest rate may increase after consummation of the 
transaction, any limitations on the rate adjustments, or lack thereof.
    (2) Fees and default or late payment costs. (i) An itemization of 
the fees or range of fees required to obtain the private education loan.
    (ii) Any fees, changes to the interest rate, and adjustments to 
principal based on the consumer's defaults or late payments.
    (3) Repayment terms. (i) The principal amount of the loan for which 
the consumer has been approved.
    (ii) The term of the loan, which is the period during which 
regularly scheduled payments of principal and interest will be due.
    (iii) A description of the payment deferral option chosen by the 
consumer,

[[Page 166]]

if applicable, and any other payment deferral options that the consumer 
may elect at a later time.
    (iv) Any payments required while the student is enrolled at a 
covered educational institution, based on the deferral option chosen by 
the consumer.
    (v) The amount of any unpaid interest that will accrue while the 
student is enrolled at a covered educational institution, based on the 
deferral option chosen by the consumer.
    (vi) A statement that if the consumer files for bankruptcy, the 
consumer may still be required to pay back the loan.
    (vii) An estimate of the total amount of payments calculated based 
on:
    (A) The interest rate applicable to the loan. Compliance with Sec. 
1026.18(h) constitutes compliance with this requirement.
    (B) The maximum possible rate of interest for the loan or, if a 
maximum rate cannot be determined, a rate of 25%.
    (C) If a maximum rate cannot be determined, the estimate of the 
total amount for repayment must include a statement that there is no 
maximum rate and that the total amount for repayment disclosed under 
paragraph (b)(3)(vii)(B) of this section is an estimate and will be 
higher if the applicable interest rate increases.
    (viii) The maximum monthly payment based on the maximum rate of 
interest for the loan or, if a maximum rate cannot be determined, a rate 
of 25%. If a maximum cannot be determined, a statement that there is no 
maximum rate and that the monthly payment amount disclosed is an 
estimate and will be higher if the applicable interest rate increases.
    (4) Alternatives to private education loans. (i) A statement that 
the consumer may qualify for Federal student financial assistance 
through a program under title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.).
    (ii) The interest rates available under each program under title IV 
of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.), and 
whether the rates are fixed or variable.
    (iii) A statement that the consumer may obtain additional 
information concerning Federal student financial assistance from the 
institution of higher education that the student attends, or at the Web 
site of the U.S. Department of Education, including an appropriate Web 
site address.
    (5) Rights of the consumer. (i) A statement that the consumer may 
accept the terms of the loan until the acceptance period under Sec. 
1026.48(c)(1) has expired. The statement must include the specific date 
on which the acceptance period expires, based on the date upon which the 
consumer receives the disclosures required under this subsection for the 
loan. The disclosure must also specify the method or methods by which 
the consumer may communicate acceptance.
    (ii) A statement that, except for changes to the interest rate and 
other changes permitted by law, the rates and terms of the loan may not 
be changed by the creditor during the period described in paragraph 
(b)(5)(i) of this section.
    (c) Final disclosures. After the consumer has accepted the loan in 
accordance with Sec. 1026.48(c)(1), the creditor shall disclose to the 
consumer the information required by Sec. 1026.18 and the following 
information:
    (1) Interest rate. Information required to be disclosed under Sec. 
1026.47(b)(1).
    (2) Fees and default or late payment costs. Information required to 
be disclosed under Sec. 1026.47(b)(2).
    (3) Repayment terms. Information required to be disclosed under 
Sec. 1026.47(b)(3).
    (4) Cancellation right. A statement that:
    (i) The consumer has the right to cancel the loan, without penalty, 
at any time before the cancellation period under Sec. 1026.48(d) 
expires, and
    (ii) Loan proceeds will not be disbursed until after the 
cancellation period under Sec. 1026.48(d) expires. The statement must 
include the specific date on which the cancellation period expires and 
state that the consumer may cancel by that date. The statement must also 
specify the method or methods by which the consumer may cancel. If the 
creditor permits cancellation by mail, the statement must specify that 
the consumer's mailed request will be deemed timely if placed in the 
mail not later than the cancellation date specified on the disclosure.

[[Page 167]]

The disclosures required by this paragraph (c)(4) must be made more 
conspicuous than any other disclosure required under this section, 
except for the finance charge, the interest rate, and the creditor's 
identity, which must be disclosed in accordance with the requirements of 
Sec. 1026.46(c)(2)(iii).



Sec. 1026.48  Limitations on private education loans.

    (a) Co-branding prohibited. (1) Except as provided in paragraph (b) 
of this section, a creditor, other than the covered educational 
institution itself, shall not use the name, emblem, mascot, or logo of a 
covered educational institution, or other words, pictures, or symbols 
identified with a covered educational institution, in the marketing of 
private education loans in a way that implies that the covered education 
institution endorses the creditor's loans.
    (2) A creditor's marketing of private education loans does not imply 
that the covered education institution endorses the creditor's loans if 
the marketing includes a clear and conspicuous disclosure that is 
equally prominent and closely proximate to the reference to the covered 
educational institution that the covered educational institution does 
not endorse the creditor's loans and that the creditor is not affiliated 
with the covered educational institution.
    (b) Endorsed lender arrangements. If a creditor and a covered 
educational institution have entered into an arrangement where the 
covered educational institution agrees to endorse the creditor's private 
education loans, and such arrangement is not prohibited by other 
applicable law or regulation, paragraph (a)(1) of this section does not 
apply if the private education loan marketing includes a clear and 
conspicuous disclosure that is equally prominent and closely proximate 
to the reference to the covered educational institution that the 
creditor's loans are not offered or made by the covered educational 
institution, but are made by the creditor.
    (c) Consumer's right to accept. (1) The consumer has the right to 
accept the terms of a private education loan at any time within 30 
calendar days following the date on which the consumer receives the 
disclosures required under Sec. 1026.47(b).
    (2) Except for changes permitted under paragraphs (c)(3) and (c)(4), 
the rate and terms of the private education loan that are required to be 
disclosed under Sec. Sec. 1026.47(b) and (c) may not be changed by the 
creditor prior to the earlier of:
    (i) The date of disbursement of the loan; or
    (ii) The expiration of the 30 calendar day period described in 
paragraph (c)(1) of this section if the consumer has not accepted the 
loan within that time.
    (3) Exceptions not requiring re-disclosure. (i) Notwithstanding 
paragraph (c)(2) of this section, nothing in this section prevents the 
creditor from:
    (A) Withdrawing an offer before consummation of the transaction if 
the extension of credit would be prohibited by law or if the creditor 
has reason to believe that the consumer has committed fraud in 
connection with the loan application;
    (B) Changing the interest rate based on adjustments to the index 
used for a loan;
    (C) Changing the interest rate and terms if the change will 
unequivocally benefit the consumer; or
    (D) Reducing the loan amount based upon a certification or other 
information received from the covered educational institution, or from 
the consumer, indicating that the student's cost of attendance has 
decreased or the consumer's other financial aid has increased. A 
creditor may make corresponding changes to the rate and other terms only 
to the extent that the consumer would have received the terms if the 
consumer had applied for the reduced loan amount.
    (ii) If the creditor changes the rate or terms of the loan under 
this paragraph (c)(3), the creditor need not provide the disclosures 
required under Sec. 1026.47(b) for the new loan terms, nor need the 
creditor provide an additional 30-day period to the consumer to accept 
the new terms of the loan under paragraph (c)(1) of this section.
    (4) Exceptions requiring re-disclosure. (i) Notwithstanding 
paragraphs (c)(2) or (c)(3) of this section, nothing in this section 
prevents the creditor, at its option, from changing the rate or terms

[[Page 168]]

of the loan to accommodate a specific request by the consumer. For 
example, if the consumer requests a different repayment option, the 
creditor may, but need not, offer to provide the requested repayment 
option and make any other changes to the rate and terms.
    (ii) If the creditor changes the rate or terms of the loan under 
this paragraph (c)(4), the creditor shall provide the disclosures 
required under Sec. 1026.47(b) and shall provide the consumer the 30-
day period to accept the loan under paragraph (c)(1) of this section. 
The creditor shall not make further changes to the rates and terms of 
the loan, except as specified in paragraphs (c)(3) and (4) of this 
section. Except as permitted under Sec. 1026.48(c)(3), unless the 
consumer accepts the loan offered by the creditor in response to the 
consumer's request, the creditor may not withdraw or change the rates or 
terms of the loan for which the consumer was approved prior to the 
consumer's request for a change in loan terms.
    (d) Consumer's right to cancel. The consumer may cancel a private 
education loan, without penalty, until midnight of the third business 
day following the date on which the consumer receives the disclosures 
required by Sec. 1026.47(c). No funds may be disbursed for a private 
education loan until the three-business day period has expired.
    (e) Self-certification form. For a private education loan intended 
to be used for the postsecondary educational expenses of a student while 
the student is attending an institution of higher education, the 
creditor shall obtain from the consumer or the institution of higher 
education the form developed by the Secretary of Education under section 
155 of the Higher Education Act of 1965, signed by the consumer, in 
written or electronic form, before consummating the private education 
loan.
    (f) Provision of information by preferred lenders. A creditor that 
has a preferred lender arrangement with a covered educational 
institution shall provide to the covered educational institution the 
information required under Sec. Sec. 1026.47(a)(1) through (5), for 
each type of private education loan that the lender plans to offer to 
consumers for students attending the covered educational institution for 
the period beginning July 1 of the current year and ending June 30 of 
the following year. The creditor shall provide the information annually 
by the later of the 1st day of April, or within 30 days after entering 
into, or learning the creditor is a party to, a preferred lender 
arrangement.



Subpart G_Special Rules Applicable to Credit Card Accounts and Open-End 
                   Credit Offered to College Students



Sec. 1026.51  Ability to Pay.

    (a) General rule--(1)(i) Consideration of ability to pay. A card 
issuer must not open a credit card account for a consumer under an open-
end (not home-secured) consumer credit plan, or increase any credit 
limit applicable to such account, unless the card issuer considers the 
consumer's ability to make the required minimum periodic payments under 
the terms of the account based on the consumer's income or assets and 
the consumer's current obligations.
    (ii) Reasonable policies and procedures. Card issuers must establish 
and maintain reasonable written policies and procedures to consider the 
consumer's ability to make the required minimum payments under the terms 
of the account based on a consumer's income or assets and a consumer's 
current obligations. Reasonable policies and procedures include treating 
any income and assets to which the consumer has a reasonable expectation 
of access as the consumer's income or assets, or limiting consideration 
of the consumer's income or assets to the consumer's independent income 
and assets. Reasonable policies and procedures also include 
consideration of at least one of the following: The ratio of debt 
obligations to income; the ratio of debt obligations to assets; or the 
income the consumer will have after paying debt obligations. It would be 
unreasonable for a card issuer not to review any information about a 
consumer's income or assets and current obligations, or to issue a 
credit card to a consumer who does not have any income or assets.
    (2) Minimum periodic payments--(i) Reasonable method. For purposes 
of paragraph (a)(1) of this section, a card

[[Page 169]]

issuer must use a reasonable method for estimating the minimum periodic 
payments the consumer would be required to pay under the terms of the 
account.
    (ii) Safe harbor. A card issuer complies with paragraph (a)(2)(i) of 
this section if it estimates required minimum periodic payments using 
the following method:
    (A) The card issuer assumes utilization, from the first day of the 
billing cycle, of the full credit line that the issuer is considering 
offering to the consumer; and
    (B) The card issuer uses a minimum payment formula employed by the 
issuer for the product the issuer is considering offering to the 
consumer or, in the case of an existing account, the minimum payment 
formula that currently applies to that account, provided that:
    (1) If the applicable minimum payment formula includes interest 
charges, the card issuer estimates those charges using an interest rate 
that the issuer is considering offering to the consumer for purchases 
or, in the case of an existing account, the interest rate that currently 
applies to purchases; and
    (2) If the applicable minimum payment formula includes mandatory 
fees, the card issuer must assume that such fees have been charged to 
the account.
    (b) Rules affecting young consumers--(1) Applications from young 
consumers. A card issuer may not open a credit card account under an 
open-end (not home-secured) consumer credit plan for a consumer less 
than 21 years old, unless the consumer has submitted a written 
application and the card issuer has:
    (i) Financial information indicating the consumer has an independent 
ability to make the required minimum periodic payments on the proposed 
extension of credit in connection with the account; or
    (ii)(A) A signed agreement of a cosigner, guarantor, or joint 
applicant who is at least 21 years old to be either secondarily liable 
for any debt on the account incurred by the consumer before the consumer 
has attained the age of 21 or jointly liable with the consumer for any 
debt on the account; and
    (B) Financial information indicating such cosigner, guarantor, or 
joint applicant has the ability to make the required minimum periodic 
payments on such debts, consistent with paragraph (a) of this section.
    (2) Credit line increases for young consumers. (i) If a credit card 
account has been opened pursuant to paragraph (b)(1)(i) of this section, 
no increase in the credit limit may be made on such account before the 
consumer attains the age of 21 unless:
    (A) At the time of the contemplated increase, the consumer has an 
independent ability to make the required minimum periodic payments on 
the increased limit consistent with paragraph (b)(1)(i) of this section; 
or
    (B) A cosigner, guarantor, or joint applicant who is at least 21 
years old agrees in writing to assume liability for any debt incurred on 
the account, consistent with paragraph (b)(1)(ii) of this section.
    (ii) If a credit card account has been opened pursuant to paragraph 
(b)(1)(ii) of this section, no increase in the credit limit may be made 
on such account before the consumer attains the age of 21 unless the 
cosigner, guarantor, or joint accountholder who assumed liability at 
account opening agrees in writing to assume liability on the increase.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 25837, May 3, 2013]



Sec. 1026.52  Limitations on fees.

    (a) Limitations prior to account opening and during first year after 
account opening--(1) General rule. Except as provided in paragraph 
(a)(2) of this section, the total amount of fees a consumer is required 
to pay with respect to a credit card account under an open-end (not 
home-secured) consumer credit plan during the first year after account 
opening must not exceed 25 percent of the credit limit in effect when 
the account is opened. For purposes of this paragraph, an account is 
considered open no earlier than the date on which the account may first 
be used by the consumer to engage in transactions.
    (2) Fees not subject to limitations. Paragraph (a) of this section 
does not apply to:

[[Page 170]]

    (i) Late payment fees, over-the-limit fees, and returned-payment 
fees; or
    (ii) Fees that the consumer is not required to pay with respect to 
the account.
    (3) Rule of construction. Paragraph (a) of this section does not 
authorize the imposition or payment of fees or charges otherwise 
prohibited by law.
    (b) Limitations on penalty fees. A card issuer must not impose a fee 
for violating the terms or other requirements of a credit card account 
under an open-end (not home-secured) consumer credit plan unless the 
dollar amount of the fee is consistent with paragraphs (b)(1) and (b)(2) 
of this section.
    (1) General rule. Except as provided in paragraph (b)(2) of this 
section, a card issuer may impose a fee for violating the terms or other 
requirements of a credit card account under an open-end (not home-
secured) consumer credit plan if the dollar amount of the fee is 
consistent with either paragraph (b)(1)(i) or (b)(1)(ii) of this 
section.
    (i) Fees based on costs. A card issuer may impose a fee for 
violating the terms or other requirements of an account if the card 
issuer has determined that the dollar amount of the fee represents a 
reasonable proportion of the total costs incurred by the card issuer as 
a result of that type of violation. A card issuer must reevaluate this 
determination at least once every twelve months. If as a result of the 
reevaluation the card issuer determines that a lower fee represents a 
reasonable proportion of the total costs incurred by the card issuer as 
a result of that type of violation, the card issuer must begin imposing 
the lower fee within 45 days after completing the reevaluation. If as a 
result of the reevaluation the card issuer determines that a higher fee 
represents a reasonable proportion of the total costs incurred by the 
card issuer as a result of that type of violation, the card issuer may 
begin imposing the higher fee after complying with the notice 
requirements in Sec. 1026.9.
    (ii) Safe harbors. A card issuer may impose a fee for violating the 
terms or other requirements of an account if the dollar amount of the 
fee does not exceed, as applicable:
    (A) $27
    (B) $38 if the card issuer previously imposed a fee pursuant to 
paragraph (b)(1)(ii)(A) of this section for a violation of the same type 
that occurred during the same billing cycle or one of the next six 
billing cycles; or
    (C) Three percent of the delinquent balance on a charge card account 
that requires payment of outstanding balances in full at the end of each 
billing cycle if the card issuer has not received the required payment 
for two or more consecutive billing cycles.
    (D) The amounts in paragraphs (b)(1)(ii)(A) and (b)(1)(ii)(B) of 
this section will be adjusted annually by the Bureau to reflect changes 
in the Consumer Price Index.
    (2) Prohibited fees--(i) Fees that exceed dollar amount associated 
with violation--(A) Generally. A card issuer must not impose a fee for 
violating the terms or other requirements of a credit card account under 
an open-end (not home-secured) consumer credit plan that exceeds the 
dollar amount associated with the violation.
    (B) No dollar amount associated with violation. A card issuer must 
not impose a fee for violating the terms or other requirements of a 
credit card account under an open-end (not home-secured) consumer credit 
plan when there is no dollar amount associated with the violation. For 
purposes of paragraph (b)(2)(i) of this section, there is no dollar 
amount associated with the following violations:
    (1) Transactions that the card issuer declines to authorize;
    (2) Account inactivity; and
    (3) The closure or termination of an account.
    (ii) Multiple fees based on a single event or transaction. A card 
issuer must not impose more than one fee for violating the terms or 
other requirements of a credit card account under an open-end (not home-
secured) consumer credit plan based on a single event or transaction. A 
card issuer may, at its option, comply with this prohibition by imposing 
no more than one fee for violating the terms or other requirements of an 
account during a billing cycle.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 18797, Mar. 28, 2013; 
78 FR 76035, Dec. 16, 2013; 79 FR 48017, Aug. 15, 2014; 80 FR 56898, 
Sept. 21, 2015; 81 FR 41421, June 27, 2016]

[[Page 171]]


    Effective Date Note: At 81 FR 84370, Nov. 22, 2016, Sec. 1026.52 
was amended by revising the heading for paragraph (a), effective Oct. 1, 
2017. For the convenience of the user, the revised text is set forth as 
follows:



Sec. 1026.52  Limitations on fees.

    (a) Limitations during first year after account opening--* * *

                                * * * * *



Sec. 1026.53  Allocation of payments.

    (a) General rule. Except as provided in paragraph (b) of this 
section, when a consumer makes a payment in excess of the required 
minimum periodic payment for a credit card account under an open-end 
(not home-secured) consumer credit plan, the card issuer must allocate 
the excess amount first to the balance with the highest annual 
percentage rate and any remaining portion to the other balances in 
descending order based on the applicable annual percentage rate.
    (b) Special rules--(1) Accounts with balances subject to deferred 
interest or similar program. When a balance on a credit card account 
under an open-end (not home-secured) consumer credit plan is subject to 
a deferred interest or similar program that provides that a consumer 
will not be obligated to pay interest that accrues on the balance if the 
balance is paid in full prior to the expiration of a specified period of 
time:
    (i) Last two billing cycles. The card issuer must allocate any 
amount paid by the consumer in excess of the required minimum periodic 
payment consistent with paragraph (a) of this section, except that, 
during the two billing cycles immediately preceding expiration of the 
specified period, the excess amount must be allocated first to the 
balance subject to the deferred interest or similar program and any 
remaining portion allocated to any other balances consistent with 
paragraph (a) of this section; or
    (ii) Consumer request. The card issuer may at its option allocate 
any amount paid by the consumer in excess of the required minimum 
periodic payment among the balances on the account in the manner 
requested by the consumer.
    (2) Accounts with secured balances. When a balance on a credit card 
account under an open-end (not home-secured) consumer credit plan is 
secured, the card issuer may at its option allocate any amount paid by 
the consumer in excess of the required minimum periodic payment to that 
balance if requested by the consumer.



Sec. 1026.54  Limitations on the imposition of finance charges.

    (a) Limitations on imposing finance charges as a result of the loss 
of a grace period--(1) General rule. Except as provided in paragraph (b) 
of this section, a card issuer must not impose finance charges as a 
result of the loss of a grace period on a credit card account under an 
open-end (not home-secured) consumer credit plan if those finance 
charges are based on:
    (i) Balances for days in billing cycles that precede the most recent 
billing cycle; or
    (ii) Any portion of a balance subject to a grace period that was 
repaid prior to the expiration of the grace period.
    (2) Definition of grace period. For purposes of paragraph (a)(1) of 
this section, ``grace period'' has the same meaning as in Sec. 
1026.5(b)(2)(ii)(B)(3).
    (b) Exceptions. Paragraph (a) of this section does not apply to:
    (1) Adjustments to finance charges as a result of the resolution of 
a dispute under Sec. 1026.12 or Sec. 1026.13; or
    (2) Adjustments to finance charges as a result of the return of a 
payment.



Sec. 1026.55  Limitations on increasing annual percentage rates,
fees, and charges.

    (a) General rule. Except as provided in paragraph (b) of this 
section, a card issuer must not increase an annual percentage rate or a 
fee or charge required to be disclosed under Sec. 1026.6(b)(2)(ii), 
(b)(2)(iii), or (b)(2)(xii) on a credit card account under an open-end 
(not home-secured) consumer credit plan.
    (b) Exceptions. A card issuer may increase an annual percentage rate 
or a fee or charge required to be disclosed under Sec. 
1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) pursuant to an exception 
set forth in this paragraph even if that increase would not be permitted 
under a different exception.
    (1) Temporary rate, fee, or charge exception. A card issuer may 
increase an annual percentage rate or a fee or

[[Page 172]]

charge required to be disclosed under Sec. 1026.6(b)(2)(ii), 
(b)(2)(iii), or (b)(2)(xii) upon the expiration of a specified period of 
six months or longer, provided that:
    (i) Prior to the commencement of that period, the card issuer 
disclosed in writing to the consumer, in a clear and conspicuous manner, 
the length of the period and the annual percentage rate, fee, or charge 
that would apply after expiration of the period; and
    (ii) Upon expiration of the specified period:
    (A) The card issuer must not apply an annual percentage rate, fee, 
or charge to transactions that occurred prior to the period that exceeds 
the annual percentage rate, fee, or charge that applied to those 
transactions prior to the period;
    (B) If the disclosures required by paragraph (b)(1)(i) of this 
section are provided pursuant to Sec. 1026.9(c), the card issuer must 
not apply an annual percentage rate, fee, or charge to transactions that 
occurred within 14 days after provision of the notice that exceeds the 
annual percentage rate, fee, or charge that applied to that category of 
transactions prior to provision of the notice; and
    (C) The card issuer must not apply an annual percentage rate, fee, 
or charge to transactions that occurred during the period that exceeds 
the increased annual percentage rate, fee, or charge disclosed pursuant 
to paragraph (b)(1)(i) of this section.
    (2) Variable rate exception. A card issuer may increase an annual 
percentage rate when:
    (i) The annual percentage rate varies according to an index that is 
not under the card issuer's control and is available to the general 
public; and
    (ii) The increase in the annual percentage rate is due to an 
increase in the index.
    (3) Advance notice exception. A card issuer may increase an annual 
percentage rate or a fee or charge required to be disclosed under Sec. 
1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) after complying with the 
applicable notice requirements in Sec. 1026.9(b), (c), or (g), provided 
that:
    (i) If a card issuer discloses an increased annual percentage rate, 
fee, or charge pursuant to Sec. 1026.9(b), the card issuer must not 
apply that rate, fee, or charge to transactions that occurred prior to 
provision of the notice;
    (ii) If a card issuer discloses an increased annual percentage rate, 
fee, or charge pursuant to Sec. 1026.9(c) or (g), the card issuer must 
not apply that rate, fee, or charge to transactions that occurred prior 
to or within 14 days after provision of the notice; and
    (iii) This exception does not permit a card issuer to increase an 
annual percentage rate or a fee or charge required to be disclosed under 
Sec. 1026.6(b)(2)(ii), (iii), or (xii) during the first year after the 
account is opened, while the account is closed, or while the card issuer 
does not permit the consumer to use the account for new transactions. 
For purposes of this paragraph, an account is considered open no earlier 
than the date on which the account may first be used by the consumer to 
engage in transactions.
    (4) Delinquency exception. A card issuer may increase an annual 
percentage rate or a fee or charge required to be disclosed under Sec. 
1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) due to the card issuer not 
receiving the consumer's required minimum periodic payment within 60 
days after the due date for that payment, provided that:
    (i) The card issuer must disclose in a clear and conspicuous manner 
in the notice of the increase pursuant to Sec. 1026.9(c) or (g):
    (A) A statement of the reason for the increase; and
    (B) That the increased annual percentage rate, fee, or charge will 
cease to apply if the card issuer receives six consecutive required 
minimum periodic payments on or before the payment due date beginning 
with the first payment due following the effective date of the increase; 
and
    (ii) If the card issuer receives six consecutive required minimum 
periodic payments on or before the payment due date beginning with the 
first payment due following the effective date of the increase, the card 
issuer must reduce any annual percentage rate, fee, or charge increased 
pursuant to this exception to the annual percentage rate, fee, or charge 
that applied prior to the increase with respect to transactions

[[Page 173]]

that occurred prior to or within 14 days after provision of the Sec. 
1026.9(c) or (g) notice.
    (5) Workout and temporary hardship arrangement exception. A card 
issuer may increase an annual percentage rate or a fee or charge 
required to be disclosed under Sec. 1026.6(b)(2)(ii), (b)(2)(iii), or 
(b)(2)(xii) due to the consumer's completion of a workout or temporary 
hardship arrangement or the consumer's failure to comply with the terms 
of such an arrangement, provided that:
    (i) Prior to commencement of the arrangement (except as provided in 
Sec. 1026.9(c)(2)(v)(D)), the card issuer has provided the consumer 
with a clear and conspicuous written disclosure of the terms of the 
arrangement (including any increases due to the completion or failure of 
the arrangement); and
    (ii) Upon the completion or failure of the arrangement, the card 
issuer must not apply to any transactions that occurred prior to 
commencement of the arrangement an annual percentage rate, fee, or 
charge that exceeds the annual percentage rate, fee, or charge that 
applied to those transactions prior to commencement of the arrangement.
    (6) Servicemembers Civil Relief Act exception. If an annual 
percentage rate or a fee or charge required to be disclosed under Sec. 
1026.6(b)(2)(ii), (iii), or (xii) has been decreased pursuant to 50 
U.S.C. app. 527 or a similar Federal or state statute or regulation, a 
card issuer may increase that annual percentage rate, fee, or charge 
once 50 U.S.C. app. 527 or the similar statute or regulation no longer 
applies, provided that the card issuer must not apply to any 
transactions that occurred prior to the decrease an annual percentage 
rate, fee, or charge that exceeds the annual percentage rate, fee, or 
charge that applied to those transactions prior to the decrease.
    (c) Treatment of protected balances--(1) Definition of protected 
balance. For purposes of this paragraph, ``protected balance'' means the 
amount owed for a category of transactions to which an increased annual 
percentage rate or an increased fee or charge required to be disclosed 
under Sec. 1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) cannot be 
applied after the annual percentage rate, fee, or charge for that 
category of transactions has been increased pursuant to paragraph (b)(3) 
of this section.
    (2) Repayment of protected balance. The card issuer must not require 
repayment of the protected balance using a method that is less 
beneficial to the consumer than one of the following methods:
    (i) The method of repayment for the account before the effective 
date of the increase;
    (ii) An amortization period of not less than five years, beginning 
no earlier than the effective date of the increase; or
    (iii) A required minimum periodic payment that includes a percentage 
of the balance that is equal to no more than twice the percentage 
required before the effective date of the increase.
    (d) Continuing application. This section continues to apply to a 
balance on a credit card account under an open-end (not home-secured) 
consumer credit plan after:
    (1) The account is closed or acquired by another creditor; or
    (2) The balance is transferred from a credit card account under an 
open-end (not home-secured) consumer credit plan issued by a creditor to 
another credit account issued by the same creditor or its affiliate or 
subsidiary (unless the account to which the balance is transferred is 
subject to Sec. 1026.40).
    (e) Promotional waivers or rebates of interest, fees, and other 
charges. If a card issuer promotes the waiver or rebate of finance 
charges due to a periodic interest rate or fees or charges required to 
be disclosed under Sec. 1026.6(b)(2)(ii), (iii), or (xii) and applies 
the waiver or rebate to a credit card account under an open-end (not 
home-secured) consumer credit plan, any cessation of the waiver or 
rebate on that account constitutes an increase in an annual percentage 
rate, fee, or charge for purposes of this section.



Sec. 1026.56  Requirements for over-the-limit transactions.

    (a) Definition. For purposes of this section, the term ``over-the-
limit transaction'' means any extension of credit by a card issuer to 
complete a transaction that causes a consumer's

[[Page 174]]

credit card account balance to exceed the credit limit.
    (b) Opt-in requirement--(1) General. A card issuer shall not assess 
a fee or charge on a consumer's credit card account under an open-end 
(not home-secured) consumer credit plan for an over-the-limit 
transaction unless the card issuer:
    (i) Provides the consumer with an oral, written or electronic 
notice, segregated from all other information, describing the consumer's 
right to affirmatively consent, or opt in, to the card issuer's payment 
of an over-the-limit transaction;
    (ii) Provides a reasonable opportunity for the consumer to 
affirmatively consent, or opt in, to the card issuer's payment of over-
the-limit transactions;
    (iii) Obtains the consumer's affirmative consent, or opt-in, to the 
card issuer's payment of such transactions;
    (iv) Provides the consumer with confirmation of the consumer's 
consent in writing, or if the consumer agrees, electronically; and
    (v) Provides the consumer notice in writing of the right to revoke 
that consent following the assessment of an over-the-limit fee or 
charge.
    (2) Completion of over-the-limit transactions without consumer 
consent. Notwithstanding the absence of a consumer's affirmative consent 
under paragraph (b)(1)(iii) of this section, a card issuer may pay any 
over-the-limit transaction on a consumer's account provided that the 
card issuer does not impose any fee or charge on the account for paying 
that over-the-limit transaction.
    (c) Method of election. A card issuer may permit a consumer to 
consent to the card issuer's payment of any over-the-limit transaction 
in writing, orally, or electronically, at the card issuer's option. The 
card issuer must also permit the consumer to revoke his or her consent 
using the same methods available to the consumer for providing consent.
    (d) Timing and placement of notices--(1) Initial notice--(i) 
General. The notice required by paragraph (b)(1)(i) of this section 
shall be provided prior to the assessment of any over-the-limit fee or 
charge on a consumer's account.
    (ii) Oral or electronic consent. If a consumer consents to the card 
issuer's payment of any over-the-limit transaction by oral or electronic 
means, the card issuer must provide the notice required by paragraph 
(b)(1)(i) of this section immediately prior to obtaining that consent.
    (2) Confirmation of opt-in. The notice required by paragraph 
(b)(1)(iv) of this section may be provided no later than the first 
periodic statement sent after the consumer has consented to the card 
issuer's payment of over-the-limit transactions.
    (3) Notice of right of revocation. The notice required by paragraph 
(b)(1)(v) of this section shall be provided on the front of any page of 
each periodic statement that reflects the assessment of an over-the-
limit fee or charge on a consumer's account.
    (e) Content--(1) Initial notice. The notice required by paragraph 
(b)(1)(i) of this section shall include all applicable items in this 
paragraph (e)(1) and may not contain any information not specified in or 
otherwise permitted by this paragraph.
    (i) Fees. The dollar amount of any fees or charges assessed by the 
card issuer on a consumer's account for an over-the-limit transaction;
    (ii) APRs. Any increased periodic rate(s) (expressed as an annual 
percentage rate(s)) that may be imposed on the account as a result of an 
over-the-limit transaction; and
    (iii) Disclosure of opt-in right. An explanation of the consumer's 
right to affirmatively consent to the card issuer's payment of over-the-
limit transactions, including the method(s) by which the consumer may 
consent.
    (2) Subsequent notice. The notice required by paragraph (b)(1)(v) of 
this section shall describe the consumer's right to revoke any consent 
provided under paragraph (b)(1)(iii) of this section, including the 
method(s) by which the consumer may revoke.
    (3) Safe harbor. Use of Model Forms G-25(A) or G-25(B) of appendix G 
to this part, or substantially similar notices, constitutes compliance 
with the notice content requirements of paragraph (e) of this section.
    (f) Joint relationships. If two or more consumers are jointly liable 
on a credit

[[Page 175]]

card account under an open-end (not home-secured) consumer credit plan, 
the card issuer shall treat the affirmative consent of any of the joint 
consumers as affirmative consent for that account. Similarly, the card 
issuer shall treat a revocation of consent by any of the joint consumers 
as revocation of consent for that account.
    (g) Continuing right to opt in or revoke opt-in. A consumer may 
affirmatively consent to the card issuer's payment of over-the-limit 
transactions at any time in the manner described in the notice required 
by paragraph (b)(1)(i) of this section. Similarly, the consumer may 
revoke the consent at any time in the manner described in the notice 
required by paragraph (b)(1)(v) of this section.
    (h) Duration of opt-in. A consumer's affirmative consent to the card 
issuer's payment of over-the-limit transactions is effective until 
revoked by the consumer, or until the card issuer decides for any reason 
to cease paying over-the-limit transactions for the consumer.
    (i) Time to comply with revocation request. A card issuer must 
comply with a consumer's revocation request as soon as reasonably 
practicable after the card issuer receives it.
    (j) Prohibited practices. Notwithstanding a consumer's affirmative 
consent to a card issuer's payment of over-the-limit transactions, a 
card issuer is prohibited from engaging in the following practices:
    (1) Fees or charges imposed per cycle--(i) General rule. A card 
issuer may not impose more than one over-the-limit fee or charge on a 
consumer's credit card account per billing cycle, and, in any event, 
only if the credit limit was exceeded during the billing cycle. In 
addition, except as provided in paragraph (j)(1)(ii) of this section, a 
card issuer may not impose an over-the-limit fee or charge on the 
consumer's credit card account for more than three billing cycles for 
the same over-the-limit transaction where the consumer has not reduced 
the account balance below the credit limit by the payment due date for 
either of the last two billing cycles.
    (ii) Exception. The prohibition in paragraph (j)(1)(i) of this 
section on imposing an over-the-limit fee or charge in more than three 
billing cycles for the same over-the-limit transaction(s) does not apply 
if another over-the-limit transaction occurs during either of the last 
two billing cycles.
    (2) Failure to promptly replenish. A card issuer may not impose an 
over-the-limit fee or charge solely because of the card issuer's failure 
to promptly replenish the consumer's available credit following the 
crediting of the consumer's payment under Sec. 1026.10.
    (3) Conditioning. A card issuer may not condition the amount of a 
consumer's credit limit on the consumer affirmatively consenting to the 
card issuer's payment of over-the-limit transactions if the card issuer 
assesses a fee or charge for such service.
    (4) Over-the-limit fees attributed to fees or interest. A card 
issuer may not impose an over-the-limit fee or charge for a billing 
cycle if a consumer exceeds a credit limit solely because of fees or 
interest charged by the card issuer to the consumer's account during 
that billing cycle. For purposes of this paragraph (j)(4), the relevant 
fees or interest charges are charges imposed as part of the plan under 
Sec. 1026.6(b)(3).



Sec. 1026.57  Reporting and marketing rules for college student
open-end credit.

    (a) Definitions--(1) College student credit card. The term ``college 
student credit card'' as used in this section means a credit card issued 
under a credit card account under an open-end (not home-secured) 
consumer credit plan to any college student.
    (2) College student. The term ``college student'' as used in this 
section means a consumer who is a full-time or part-time student of an 
institution of higher education.
    (3) Institution of higher education. The term ``institution of 
higher education'' as used in this section has the same meaning as in 
sections 101 and 102 of the Higher Education Act of 1965 (20 U.S.C. 1001 
and 1002).
    (4) Affiliated organization. The term ``affiliated organization'' as 
used in this section means an alumni organization or foundation 
affiliated with or related to an institution of higher education.

[[Page 176]]

    (5) College credit card agreement. The term ``college credit card 
agreement'' as used in this section means any business, marketing or 
promotional agreement between a card issuer and an institution of higher 
education or an affiliated organization in connection with which college 
student credit cards are issued to college students currently enrolled 
at that institution.
    (b) Public disclosure of agreements. An institution of higher 
education shall publicly disclose any contract or other agreement made 
with a card issuer or creditor for the purpose of marketing a credit 
card.
    (c) Prohibited inducements. No card issuer or creditor may offer a 
college student any tangible item to induce such student to apply for or 
open an open-end consumer credit plan offered by such card issuer or 
creditor, if such offer is made:
    (1) On the campus of an institution of higher education;
    (2) Near the campus of an institution of higher education; or
    (3) At an event sponsored by or related to an institution of higher 
education.
    (d) Annual report to the Bureau--(1) Requirement to report. Any card 
issuer that was a party to one or more college credit card agreements in 
effect at any time during a calendar year must submit to the Bureau an 
annual report regarding those agreements in the form and manner 
prescribed by the Bureau.
    (2) Contents of report. The annual report to the Bureau must include 
the following:
    (i) Identifying information about the card issuer and the agreements 
submitted, including the issuer's name, address, and identifying number 
(such as an RSSD ID number or tax identification number);
    (ii) A copy of any college credit card agreement to which the card 
issuer was a party that was in effect at any time during the period 
covered by the report;
    (iii) A copy of any memorandum of understanding in effect at any 
time during the period covered by the report between the card issuer and 
an institution of higher education or affiliated organization that 
directly or indirectly relates to the college credit card agreement or 
that controls or directs any obligations or distribution of benefits 
between any such entities;
    (iv) The total dollar amount of any payments pursuant to a college 
credit card agreement from the card issuer to an institution of higher 
education or affiliated organization during the period covered by the 
report, and the method or formula used to determine such amounts;
    (v) The total number of credit card accounts opened pursuant to any 
college credit card agreement during the period covered by the report; 
and
    (vi) The total number of credit card accounts opened pursuant to any 
such agreement that were open at the end of the period covered by the 
report.
    (3) Timing of reports. Except for the initial report described in 
this paragraph (d)(3), a card issuer must submit its annual report for 
each calendar year to the Bureau by the first business day on or after 
March 31 of the following calendar year.



Sec. 1026.58  Internet posting of credit card agreements.

    (a) Applicability. The requirements of this section apply to any 
card issuer that issues credit cards under a credit card account under 
an open-end (not home-secured) consumer credit plan.
    (b) Definitions--(1) Agreement. For purposes of this section, 
``agreement'' or ``credit card agreement'' means the written document or 
documents evidencing the terms of the legal obligation, or the 
prospective legal obligation, between a card issuer and a consumer for a 
credit card account under an open-end (not home-secured) consumer credit 
plan. ``Agreement'' or ``credit card agreement'' also includes the 
pricing information, as defined in Sec. 1026.58(b)(7).
    (2) Amends. For purposes of this section, an issuer ``amends'' an 
agreement if it makes a substantive change (an ``amendment'') to the 
agreement. A change is substantive if it alters the rights or 
obligations of the card issuer or the consumer under the agreement. Any 
change in the pricing information, as defined in Sec. 1026.58(b)(7), is 
deemed to be substantive.
    (3) Business day. For purposes of this section, ``business day'' 
means a day on

[[Page 177]]

which the creditor's offices are open to the public for carrying on 
substantially all of its business functions.
    (4) Card issuer. For purposes of this section, ``card issuer'' or 
``issuer'' means the entity to which a consumer is legally obligated, or 
would be legally obligated, under the terms of a credit card agreement.
    (5) Offers. For purposes of this section, an issuer ``offers'' or 
``offers to the public'' an agreement if the issuer is soliciting or 
accepting applications for accounts that would be subject to that 
agreement.
    (6) Open account. For purposes of this section, an account is an 
``open account'' or ``open credit card account'' if it is a credit card 
account under an open-end (not home-secured) consumer credit plan and 
either:
    (i) The cardholder can obtain extensions of credit on the account; 
or
    (ii) There is an outstanding balance on the account that has not 
been charged off. An account that has been suspended temporarily (for 
example, due to a report by the cardholder of unauthorized use of the 
card) is considered an ``open account'' or ``open credit card account.''
    (7) Pricing information. For purposes of this section, ``pricing 
information'' means the information listed in Sec. 1026.6(b)(2)(i) 
through (b)(2)(xii). Pricing information does not include temporary or 
promotional rates and terms or rates and terms that apply only to 
protected balances.
    (8) Private label credit card account and private label credit card 
plan. For purposes of this section:
    (i) ``private label credit card account'' means a credit card 
account under an open-end (not home-secured) consumer credit plan with a 
credit card that can be used to make purchases only at a single merchant 
or an affiliated group of merchants; and
    (ii) ``private label credit card plan'' means all of the private 
label credit card accounts issued by a particular issuer with credit 
cards usable at the same single merchant or affiliated group of 
merchants.
    (c) Submission of agreements to Bureau--(1) Quarterly submissions. A 
card issuer must make quarterly submissions to the Bureau, in the form 
and manner specified by the Bureau. Quarterly submissions must be sent 
to the Bureau no later than the first business day on or after January 
31, April 30, July 31, and October 31 of each year. Each submission must 
contain:
    (i) Identifying information about the card issuer and the agreements 
submitted, including the issuer's name, address, and identifying number 
(such as an RSSD ID number or tax identification number);
    (ii) The credit card agreements that the card issuer offered to the 
public as of the last business day of the preceding calendar quarter 
that the card issuer has not previously submitted to the Bureau;
    (iii) Any credit card agreement previously submitted to the Bureau 
that was amended during the preceding calendar quarter and that the card 
issuer offered to the public as of the last business day of the 
preceding calendar quarter, as described in Sec. 1026.58(c)(3); and
    (iv) Notification regarding any credit card agreement previously 
submitted to the Bureau that the issuer is withdrawing, as described in 
Sec. 1026.58(c)(4), (c)(5), (c)(6), and (c)(7).
    (2) [Reserved]
    (3) Amended agreements. If a credit card agreement has been 
submitted to the Bureau, the agreement has not been amended and the card 
issuer continues to offer the agreement to the public, no additional 
submission regarding that agreement is required. If a credit card 
agreement that previously has been submitted to the Bureau is amended 
and the card issuer offered the amended agreement to the public as of 
the last business day of the calendar quarter in which the change became 
effective, the card issuer must submit the entire amended agreement to 
the Bureau, in the form and manner specified by the Bureau, by the first 
quarterly submission deadline after the last day of the calendar quarter 
in which the change became effective.
    (4) Withdrawal of agreements. If a card issuer no longer offers to 
the public a credit card agreement that previously has been submitted to 
the Bureau, the card issuer must notify the Bureau, in the form and 
manner specified by the

[[Page 178]]

Bureau, by the first quarterly submission deadline after the last day of 
the calendar quarter in which the issuer ceased to offer the agreement.
    (5) De minimis exception. (i) A card issuer is not required to 
submit any credit card agreements to the Bureau if the card issuer had 
fewer than 10,000 open credit card accounts as of the last business day 
of the calendar quarter.
    (ii) If an issuer that previously qualified for the de minimis 
exception ceases to qualify, the card issuer must begin making quarterly 
submissions to the Bureau no later than the first quarterly submission 
deadline after the date as of which the issuer ceased to qualify.
    (iii) If a card issuer that did not previously qualify for the de 
minimis exception qualifies for the de minimis exception, the card 
issuer must continue to make quarterly submissions to the Bureau until 
the issuer notifies the Bureau that the card issuer is withdrawing all 
agreements it previously submitted to the Bureau.
    (6) Private label credit card exception. (i) A card issuer is not 
required to submit to the Bureau a credit card agreement if, as of the 
last business day of the calendar quarter, the agreement:
    (A) Is offered for accounts under one or more private label credit 
card plans each of which has fewer than 10,000 open accounts; and
    (B) Is not offered to the public other than for accounts under such 
a plan.
    (ii) If an agreement that previously qualified for the private label 
credit card exception ceases to qualify, the card issuer must submit the 
agreement to the Bureau no later than the first quarterly submission 
deadline after the date as of which the agreement ceased to qualify.
    (iii) If an agreement that did not previously qualify for the 
private label credit card exception qualifies for the exception, the 
card issuer must continue to make quarterly submissions to the Bureau 
with respect to that agreement until the issuer notifies the Bureau that 
the agreement is being withdrawn.
    (7) Product testing exception. (i) A card issuer is not required to 
submit to the Bureau a credit card agreement if, as of the last business 
day of the calendar quarter, the agreement:
    (A) Is offered as part of a product test offered to only a limited 
group of consumers for a limited period of time;
    (B) Is used for fewer than 10,000 open accounts; and
    (C) Is not offered to the public other than in connection with such 
a product test.
    (ii) If an agreement that previously qualified for the product 
testing exception ceases to qualify, the card issuer must submit the 
agreement to the Bureau no later than the first quarterly submission 
deadline after the date as of which the agreement ceased to qualify.
    (iii) If an agreement that did not previously qualify for the 
product testing exception qualifies for the exception, the card issuer 
must continue to make quarterly submissions to the Bureau with respect 
to that agreement until the issuer notifies the Bureau that the 
agreement is being withdrawn.
    (8) Form and content of agreements submitted to the Bureau--(i) Form 
and content generally. (A) Each agreement must contain the provisions of 
the agreement and the pricing information in effect as of the last 
business day of the preceding calendar quarter.
    (B) Agreements must not include any personally identifiable 
information relating to any cardholder, such as name, address, telephone 
number, or account number.
    (C) The following are not deemed to be part of the agreement for 
purposes of Sec. 1026.58, and therefore are not required to be included 
in submissions to the Bureau:
    (1) Disclosures required by state or Federal law, such as affiliate 
marketing notices, privacy policies, billing rights notices, or 
disclosures under the E-Sign Act;
    (2) Solicitation materials;
    (3) Periodic statements;
    (4) Ancillary agreements between the issuer and the consumer, such 
as debt cancellation contracts or debt suspension agreements;
    (5) Offers for credit insurance or other optional products and other 
similar advertisements; and
    (6) Documents that may be sent to the consumer along with the credit 
card or credit card agreement such as a

[[Page 179]]

cover letter, a validation sticker on the card, or other information 
about card security.
    (D) Agreements must be presented in a clear and legible font.
    (ii) Pricing information. (A) Pricing information must be set forth 
in a single addendum to the agreement. The addendum must contain all of 
the pricing information, as defined by Sec. 1026.58(b)(7). The addendum 
may, but is not required to, contain any other information listed in 
Sec. 1026.6(b), provided that information is complete and accurate as 
of the applicable date under Sec. 1026.58. The addendum may not contain 
any other information.
    (B) Pricing information that may vary from one cardholder to another 
depending on the cardholder's creditworthiness or state of residence or 
other factors must be disclosed either by setting forth all the possible 
variations (such as purchase APRs of 13 percent, 15 percent, 17 percent, 
and 19 percent) or by providing a range of possible variations (such as 
purchase APRs ranging from 13 percent to 19 percent).
    (C) If a rate included in the pricing information is a variable 
rate, the issuer must identify the index or formula used in setting the 
rate and the margin. Rates that may vary from one cardholder to another 
must be disclosed by providing the index and the possible margins (such 
as the prime rate plus 5 percent, 8 percent, 10 percent, or 12 percent) 
or range of margins (such as the prime rate plus from 5 to 12 percent). 
The value of the rate and the value of the index are not required to be 
disclosed.
    (iii) Optional variable terms addendum. Provisions of the agreement 
other than the pricing information that may vary from one cardholder to 
another depending on the cardholder's creditworthiness or state of 
residence or other factors may be set forth in a single addendum to the 
agreement separate from the pricing information addendum.
    (iv) Integrated agreement. Issuers may not provide provisions of the 
agreement or pricing information in the form of change-in-terms notices 
or riders (other than the pricing information addendum and the optional 
variable terms addendum). Changes in provisions or pricing information 
must be integrated into the text of the agreement, the pricing 
information addendum or the optional variable terms addendum, as 
appropriate.
    (d) Posting of agreements offered to the public. (1) Except as 
provided below, a card issuer must post and maintain on its publicly 
available Web site the credit card agreements that the issuer is 
required to submit to the Bureau under Sec. 1026.58(c). With respect to 
an agreement offered solely for accounts under one or more private label 
credit card plans, an issuer may fulfill this requirement by posting and 
maintaining the agreement in accordance with the requirements of this 
section on the publicly available Web site of at least one of the 
merchants at which credit cards issued under each private label credit 
card plan with 10,000 or more open accounts may be used.
    (2) Except as provided in Sec. 1026.58(d), agreements posted 
pursuant to Sec. 1026.58(d) must conform to the form and content 
requirements for agreements submitted to the Bureau specified in Sec. 
1026.58(c)(8).
    (3) Agreements posted pursuant to Sec. 1026.58(d) may be posted in 
any electronic format that is readily usable by the general public. 
Agreements must be placed in a location that is prominent and readily 
accessible by the public and must be accessible without submission of 
personally identifiable information.
    (4) The card issuer must update the agreements posted on its Web 
site pursuant to Sec. 1026.58(d) at least as frequently as the 
quarterly schedule required for submission of agreements to the Bureau 
under Sec. 1026.58(c). If the issuer chooses to update the agreements 
on its Web site more frequently, the agreements posted on the issuer's 
Web site may contain the provisions of the agreement and the pricing 
information in effect as of a date other than the last business day of 
the preceding calendar quarter.
    (e) Agreements for all open accounts--(1) Availability of individual 
cardholder's agreement. With respect to any open credit card account, a 
card issuer must either:
    (i) Post and maintain the cardholder's agreement on its Web site; or

[[Page 180]]

    (ii) Promptly provide a copy of the cardholder's agreement to the 
cardholder upon the cardholder's request. If the card issuer makes an 
agreement available upon request, the issuer must provide the cardholder 
with the ability to request a copy of the agreement both by using the 
issuer's Web site (such as by clicking on a clearly identified box to 
make the request) and by calling a readily available telephone line the 
number for which is displayed on the issuer's Web site and clearly 
identified as to purpose. The card issuer must send to the cardholder or 
otherwise make available to the cardholder a copy of the cardholder's 
agreement in electronic or paper form no later than 30 days after the 
issuer receives the cardholder's request.
    (2) Special rule for issuers without interactive Web sites. An 
issuer that does not maintain a Web site from which cardholders can 
access specific information about their individual accounts, instead of 
complying with Sec. 1026.58(e)(1), may make agreements available upon 
request by providing the cardholder with the ability to request a copy 
of the agreement by calling a readily available telephone line, the 
number for which is displayed on the issuer's Web site and clearly 
identified as to purpose or included on each periodic statement sent to 
the cardholder and clearly identified as to purpose. The issuer must 
send to the cardholder or otherwise make available to the cardholder a 
copy of the cardholder's agreement in electronic or paper form no later 
than 30 days after the issuer receives the cardholder's request.
    (3) Form and content of agreements. (i) Except as provided in Sec. 
1026.58(e), agreements posted on the card issuer's Web site pursuant to 
Sec. 1026.58(e)(1)(i) or made available upon the cardholder's request 
pursuant to Sec. 1026.58(e)(1)(ii) or (e)(2) must conform to the form 
and content requirements for agreements submitted to the Bureau 
specified in Sec. 1026.58(c)(8).
    (ii) If the card issuer posts an agreement on its Web site or 
otherwise provides an agreement to a cardholder electronically under 
Sec. 1026.58(e), the agreement may be posted or provided in any 
electronic format that is readily usable by the general public and must 
be placed in a location that is prominent and readily accessible to the 
cardholder.
    (iii) Agreements posted or otherwise provided pursuant to Sec. 
1026.58(e) may contain personally identifiable information relating to 
the cardholder, such as name, address, telephone number, or account 
number, provided that the issuer takes appropriate measures to make the 
agreement accessible only to the cardholder or other authorized persons.
    (iv) Agreements posted or otherwise provided pursuant to Sec. 
1026.58(e) must set forth the specific provisions and pricing 
information applicable to the particular cardholder. Provisions and 
pricing information must be complete and accurate as of a date no more 
than 60 days prior to:
    (A) The date on which the agreement is posted on the card issuer's 
Web site under Sec. 1026.58(e)(1)(i); or
    (B) The date the cardholder's request is received under Sec. 
1026.58(e)(1)(ii) or (e)(2).
    (v) Agreements provided upon cardholder request pursuant to Sec. 
1026.58(e)(1)(ii) or (e)(2) may be provided by the issuer in either 
electronic or paper form, regardless of the form of the cardholder's 
request.
    (f) E-Sign Act requirements. Card issuers may provide credit card 
agreements in electronic form under Sec. 1026.58(d) and (e) without 
regard to the consumer notice and consent requirements of section 101(c) 
of the Electronic Signatures in Global and National Commerce Act (E-Sign 
Act) (15 U.S.C. 7001 et seq.).
    (g) Temporary suspension of agreement submission requirement--(1) 
Quarterly submissions. The quarterly submission requirement in paragraph 
(c) of this section is suspended for the submissions that would 
otherwise be due to the Bureau by the first business day on or after 
April 30, 2015; July 31, 2015; October 31, 2015; and January 31, 2016.
    (2) Posting of agreements offered to the public. Nothing in 
paragraph (g)(1) of this section shall affect the agreement posting 
requirements in paragraph (d) of this section.

[76 FR 79772, Dec. 22, 2011, as amended at 80 FR 21158, Apr. 17, 2015]

[[Page 181]]



Sec. 1026.59  Reevaluation of rate increases.

    (a) General rule--(1) Evaluation of increased rate. If a card issuer 
increases an annual percentage rate that applies to a credit card 
account under an open-end (not home-secured) consumer credit plan, based 
on the credit risk of the consumer, market conditions, or other factors, 
or increased such a rate on or after January 1, 2009, and 45 days' 
advance notice of the rate increase is required pursuant to Sec. 
1026.9(c)(2) or (g), the card issuer must:
    (i) Evaluate the factors described in paragraph (d) of this section; 
and
    (ii) Based on its review of such factors, reduce the annual 
percentage rate applicable to the consumer's account, as appropriate.
    (2) Rate reductions--(i) Timing. If a card issuer is required to 
reduce the rate applicable to an account pursuant to paragraph (a)(1) of 
this section, the card issuer must reduce the rate not later than 45 
days after completion of the evaluation described in paragraph (a)(1).
    (ii) Applicability of rate reduction. Any reduction in an annual 
percentage rate required pursuant to paragraph (a)(1) of this section 
shall apply to:
    (A) Any outstanding balances to which the increased rate described 
in paragraph (a)(1) of this section has been applied; and
    (B) New transactions that occur after the effective date of the rate 
reduction that would otherwise have been subject to the increased rate.
    (b) Policies and procedures. A card issuer must have reasonable 
written policies and procedures in place to conduct the review described 
in paragraph (a) of this section.
    (c) Timing. A card issuer that is subject to paragraph (a) of this 
section must conduct the review described in paragraph (a)(1) of this 
section not less frequently than once every six months after the rate 
increase.
    (d) Factors--(1) In general. Except as provided in paragraph (d)(2) 
of this section, a card issuer must review either:
    (i) The factors on which the increase in an annual percentage rate 
was originally based; or
    (ii) The factors that the card issuer currently considers when 
determining the annual percentage rates applicable to similar new credit 
card accounts under an open-end (not home-secured) consumer credit plan.
    (2) Rate increases imposed between January 1, 2009 and February 21, 
2010. For rate increases imposed between January 1, 2009 and February 
21, 2010, an issuer must consider the factors described in paragraph 
(d)(1)(ii) when conducting the first two reviews required under 
paragraph (a) of this section, unless the rate increase subject to 
paragraph (a) of this section was based solely upon factors specific to 
the consumer, such as a decline in the consumer's credit risk, the 
consumer's delinquency or default, or a violation of the terms of the 
account.
    (e) Rate increases due to delinquency. If an issuer increases a rate 
applicable to a consumer's account pursuant to Sec. 1026.55(b)(4) based 
on the card issuer not receiving the consumer's required minimum 
periodic payment within 60 days after the due date, the issuer is not 
required to perform the review described in paragraph (a) of this 
section prior to the sixth payment due date after the effective date of 
the increase. However, if the annual percentage rate applicable to the 
consumer's account is not reduced pursuant to Sec. 1026.55(b)(4)(ii), 
the card issuer must perform the review described in paragraph (a) of 
this section. The first such review must occur no later than six months 
after the sixth payment due following the effective date of the rate 
increase.
    (f) Termination of obligation to review factors. The obligation to 
review factors described in paragraph (a) and (d) of this section ceases 
to apply:
    (1) If the issuer reduces the annual percentage rate applicable to a 
credit card account under an open-end (not home-secured) consumer credit 
plan to the rate applicable immediately prior to the increase, or, if 
the rate applicable immediately prior to the increase was a variable 
rate, to a variable rate determined by the same formula (index and 
margin) that was used to calculate the rate applicable immediately prior 
to the increase; or
    (2) If the issuer reduces the annual percentage rate to a rate that 
is lower

[[Page 182]]

than the rate described in paragraph (f)(1) of this section.
    (g) Acquired accounts--(1) General. Except as provided in paragraph 
(g)(2) of this section, this section applies to credit card accounts 
that have been acquired by the card issuer from another card issuer. A 
card issuer that complies with this section by reviewing the factors 
described in paragraph (d)(1)(i) must review the factors considered by 
the card issuer from which it acquired the accounts in connection with 
the rate increase.
    (2) Review of acquired portfolio. If, not later than six months 
after the acquisition of such accounts, a card issuer reviews all of the 
credit card accounts it acquires in accordance with the factors that it 
currently considers in determining the rates applicable to its similar 
new credit card accounts:
    (i) Except as provided in paragraph (g)(2)(iii), the card issuer is 
required to conduct reviews described in paragraph (a) of this section 
only for rate increases that are imposed as a result of its review under 
this paragraph. See Sec. Sec. 1026.9 and 1026.55 for additional 
requirements regarding rate increases on acquired accounts.
    (ii) Except as provided in paragraph (g)(2)(iii) of this section, 
the card issuer is not required to conduct reviews in accordance with 
paragraph (a) of this section for any rate increases made prior to the 
card issuer's acquisition of such accounts.
    (iii) If as a result of the card issuer's review, an account is 
subject to, or continues to be subject to, an increased rate as a 
penalty, or due to the consumer's delinquency or default, the 
requirements of paragraph (a) of this section apply.
    (h) Exceptions--(1) Servicemembers Civil Relief Act exception. The 
requirements of this section do not apply to increases in an annual 
percentage rate that was previously decreased pursuant to 50 U.S.C. app. 
527, provided that such a rate increase is made in accordance with Sec. 
1026.55(b)(6).
    (2) Charged off accounts. The requirements of this section do not 
apply to accounts that the card issuer has charged off in accordance 
with loan-loss provisions.



Sec. 1026.60  Credit and charge card applications and solicitations.

    (a) General rules. The card issuer shall provide the disclosures 
required under this section on or with a solicitation or an application 
to open a credit or charge card account.
    (1) Definition of solicitation. For purposes of this section, the 
term solicitation means an offer by the card issuer to open a credit or 
charge card account that does not require the consumer to complete an 
application. A ``firm offer of credit'' as defined in section 603(l) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(l)) for a credit or 
charge card is a solicitation for purposes of this section.
    (2) Form of disclosures; tabular format. (i) The disclosures in 
paragraphs (b)(1) through (5) (except for (b)(1)(iv)(B)) and (b)(7) 
through (15) of this section made pursuant to paragraph (c), (d)(2), 
(e)(1) or (f) of this section generally shall be in the form of a table 
with headings, content, and format substantially similar to any of the 
applicable tables found in G-10 in appendix G to this part.
    (ii) The table described in paragraph (a)(2)(i) of this section 
shall contain only the information required or permitted by this 
section. Other information may be presented on or with an application or 
solicitation, provided such information appears outside the required 
table.
    (iii) Disclosures required by paragraphs (b)(1)(iv)(B), 
(b)(1)(iv)(C) and (b)(6) of this section must be placed directly beneath 
the table.
    (iv) When a tabular format is required, any annual percentage rate 
required to be disclosed pursuant to paragraph (b)(1) of this section, 
any introductory rate required to be disclosed pursuant to paragraph 
(b)(1)(ii) of this section, any rate that will apply after a premium 
initial rate expires required to be disclosed under paragraph 
(b)(1)(iii) of this section, and any fee or percentage amounts or 
maximum limits on fee amounts disclosed pursuant to paragraphs (b)(2), 
(b)(4), (b)(8) through (b)(13) of this section must be disclosed in bold 
text. However, bold text shall not be used for: The amount of any 
periodic fee disclosed pursuant to paragraph (b)(2) of this section that

[[Page 183]]

is not an annualized amount; and other annual percentage rates or fee 
amounts disclosed in the table.
    (v) For an application or a solicitation that is accessed by the 
consumer in electronic form, the disclosures required under this section 
may be provided to the consumer in electronic form on or with the 
application or solicitation.
    (vi)(A) Except as provided in paragraph (a)(2)(vi)(B) of this 
section, the table described in paragraph (a)(2)(i) of this section must 
be provided in a prominent location on or with an application or a 
solicitation.
    (B) If the table described in paragraph (a)(2)(i) of this section is 
provided electronically, it must be provided in close proximity to the 
application or solicitation.
    (3) Fees based on a percentage. If the amount of any fee required to 
be disclosed under this section is determined on the basis of a 
percentage of another amount, the percentage used and the identification 
of the amount against which the percentage is applied may be disclosed 
instead of the amount of the fee.
    (4) Fees that vary by state. Card issuers that impose fees referred 
to in paragraphs (b)(8) through (12) of this section that vary by state 
may, at the issuer's option, disclose in the table required by paragraph 
(a)(2)(i) of this section: The specific fee applicable to the consumer's 
account; or the range of the fees, if the disclosure includes a 
statement that the amount of the fee varies by state and refers the 
consumer to a disclosure provided with the table where the amount of the 
fee applicable to the consumer's account is disclosed. A card issuer may 
not list fees for multiple states in the table.
    (5) Exceptions. This section does not apply to:
    (i) Home-equity plans accessible by a credit or charge card that are 
subject to the requirements of Sec. 1026.40;
    (ii) Overdraft lines of credit tied to asset accounts accessed by 
check-guarantee cards or by debit cards;
    (iii) Lines of credit accessed by check-guarantee cards or by debit 
cards that can be used only at automated teller machines;
    (iv) Lines of credit accessed solely by account numbers;
    (v) Additions of a credit or charge card to an existing open-end 
plan;
    (vi) General purpose applications unless the application, or 
material accompanying it, indicates that it can be used to open a credit 
or charge card account; or
    (vii) Consumer-initiated requests for applications.
    (b) Required disclosures. The card issuer shall disclose the items 
in this paragraph on or with an application or a solicitation in 
accordance with the requirements of paragraphs (c), (d), (e)(1) or (f) 
of this section. A credit card issuer shall disclose all applicable 
items in this paragraph except for paragraph (b)(7) of this section. A 
charge card issuer shall disclose the applicable items in paragraphs 
(b)(2), (4), (7) through (12), and (15) of this section.
    (1) Annual percentage rate. Each periodic rate that may be used to 
compute the finance charge on an outstanding balance for purchases, a 
cash advance, or a balance transfer, expressed as an annual percentage 
rate (as determined by Sec. 1026.14(b)). When more than one rate 
applies for a category of transactions, the range of balances to which 
each rate is applicable shall also be disclosed. The annual percentage 
rate for purchases disclosed pursuant to this paragraph shall be in at 
least 16-point type, except for the following: Oral disclosures of the 
annual percentage rate for purchases; or a penalty rate that may apply 
upon the occurrence of one or more specific events.
    (i) Variable rate information. If a rate disclosed under paragraph 
(b)(1) of this section is a variable rate, the card issuer shall also 
disclose the fact that the rate may vary and how the rate is determined. 
In describing how the applicable rate will be determined, the card 
issuer must identify the type of index or formula that is used in 
setting the rate. The value of the index and the amount of the margin 
that are used to calculate the variable rate shall not be disclosed in 
the table. A disclosure of any applicable limitations on rate increases 
shall not be included in the table.
    (ii) Discounted initial rate. If the initial rate is an introductory 
rate, as

[[Page 184]]

that term is defined in Sec. 1026.16(g)(2)(ii), the card issuer must 
disclose in the table the introductory rate, the time period during 
which the introductory rate will remain in effect, and must use the term 
``introductory'' or ``intro'' in immediate proximity to the introductory 
rate. The card issuer also must disclose the rate that would otherwise 
apply to the account pursuant to paragraph (b)(1) of this section. Where 
the rate is not tied to an index or formula, the card issuer must 
disclose the rate that will apply after the introductory rate expires. 
In a variable-rate account, the card issuer must disclose a rate based 
on the applicable index or formula in accordance with the accuracy 
requirements set forth in paragraphs (c)(2), (d)(3), or (e)(4) of this 
section, as applicable.
    (iii) Premium initial rate. If the initial rate is temporary and is 
higher than the rate that will apply after the temporary rate expires, 
the card issuer must disclose the premium initial rate pursuant to 
paragraph (b)(1) of this section and the time period during which the 
premium initial rate will remain in effect. Consistent with paragraph 
(b)(1) of this section, the premium initial rate for purchases must be 
in at least 16-point type. The issuer must also disclose in the table 
the rate that will apply after the premium initial rate expires, in at 
least 16-point type.
    (iv) Penalty rates--(A) In general. Except as provided in paragraph 
(b)(1)(iv)(B) and (C) of this section, if a rate may increase as a 
penalty for one or more events specified in the account agreement, such 
as a late payment or an extension of credit that exceeds the credit 
limit, the card issuer must disclose pursuant to this paragraph (b)(1) 
the increased rate that may apply, a brief description of the event or 
events that may result in the increased rate, and a brief description of 
how long the increased rate will remain in effect.
    (B) Introductory rates. If the issuer discloses an introductory 
rate, as that term is defined in Sec. 1026.16(g)(2)(ii), in the table 
or in any written or electronic promotional materials accompanying 
applications or solicitations subject to paragraph (c) or (e) of this 
section, the issuer must briefly disclose directly beneath the table the 
circumstances, if any, under which the introductory rate may be revoked, 
and the type of rate that will apply after the introductory rate is 
revoked.
    (C) Employee preferential rates. If a card issuer discloses in the 
table a preferential annual percentage rate for which only employees of 
the card issuer, employees of a third party, or other individuals with 
similar affiliations with the card issuer or third party, such as 
executive officers, directors, or principal shareholders are eligible, 
the card issuer must briefly disclose directly beneath the table the 
circumstances under which such preferential rate may be revoked, and the 
rate that will apply after such preferential rate is revoked.
    (v) Rates that depend on consumer's creditworthiness. If a rate 
cannot be determined at the time disclosures are given because the rate 
depends, at least in part, on a later determination of the consumer's 
creditworthiness, the card issuer must disclose the specific rates or 
the range of rates that could apply and a statement that the rate for 
which the consumer may qualify at account opening will depend on the 
consumer's creditworthiness, and other factors if applicable. If the 
rate that depends, at least in part, on a later determination of the 
consumer's creditworthiness is a penalty rate, as described in paragraph 
(b)(1)(iv) of this section, the card issuer at its option may disclose 
the highest rate that could apply, instead of disclosing the specific 
rates or the range of rates that could apply.
    (vi) APRs that vary by state. Issuers imposing annual percentage 
rates that vary by state may, at the issuer's option, disclose in the 
table: the specific annual percentage rate applicable to the consumer's 
account; or the range of the annual percentage rates, if the disclosure 
includes a statement that the annual percentage rate varies by state and 
refers the consumer to a disclosure provided with the table where the 
annual percentage rate applicable to the consumer's account is 
disclosed. A card issuer may not list annual percentage rates for 
multiple states in the table.
    (2) Fees for issuance or availability. (i) Any annual or other 
periodic fee that may be imposed for the issuance or

[[Page 185]]

availability of a credit or charge card, including any fee based on 
account activity or inactivity; how frequently it will be imposed; and 
the annualized amount of the fee.
    (ii) Any non-periodic fee that relates to opening an account. A card 
issuer must disclose that the fee is a one-time fee.
    (3) Fixed finance charge; minimum interest charge. Any fixed finance 
charge and a brief description of the charge. Any minimum interest 
charge if it exceeds $1.00 that could be imposed during a billing cycle, 
and a brief description of the charge. The $1.00 threshold amount shall 
be adjusted periodically by the Bureau to reflect changes in the 
Consumer Price Index. The Bureau shall calculate each year a price level 
adjusted minimum interest charge using the Consumer Price Index in 
effect on June 1 of that year. When the cumulative change in the 
adjusted minimum value derived from applying the annual Consumer Price 
level to the current minimum interest charge threshold has risen by a 
whole dollar, the minimum interest charge will be increased by $1.00. 
The issuer may, at its option, disclose in the table minimum interest 
charges below this threshold.
    (4) Transaction charges. Any transaction charge imposed by the card 
issuer for the use of the card for purchases.
    (5) Grace period. The date by which or the period within which any 
credit extended for purchases may be repaid without incurring a finance 
charge due to a periodic interest rate and any conditions on the 
availability of the grace period. If no grace period is provided, that 
fact must be disclosed. If the length of the grace period varies, the 
card issuer may disclose the range of days, the minimum number of days, 
or the average number of days in the grace period, if the disclosure is 
identified as a range, minimum, or average. In disclosing in the tabular 
format a grace period that applies to all types of purchases, the phrase 
``How to Avoid Paying Interest on Purchases'' shall be used as the 
heading for the row describing the grace period. If a grace period is 
not offered on all types of purchases, in disclosing this fact in the 
tabular format, the phrase ``Paying Interest'' shall be used as the 
heading for the row describing this fact.
    (6) Balance computation method. The name of the balance computation 
method listed in paragraph (g) of this section that is used to determine 
the balance for purchases on which the finance charge is computed, or an 
explanation of the method used if it is not listed. In determining which 
balance computation method to disclose, the card issuer shall assume 
that credit extended for purchases will not be repaid within the grace 
period, if any.
    (7) Statement on charge card payments. A statement that charges 
incurred by use of the charge card are due when the periodic statement 
is received.
    (8) Cash advance fee. Any fee imposed for an extension of credit in 
the form of cash or its equivalent.
    (9) Late payment fee. Any fee imposed for a late payment.
    (10) Over-the-limit fee. Any fee imposed for exceeding a credit 
limit.
    (11) Balance transfer fee. Any fee imposed to transfer an 
outstanding balance.
    (12) Returned-payment fee. Any fee imposed by the card issuer for a 
returned payment.
    (13) Required insurance, debt cancellation or debt suspension 
coverage. (i) A fee for insurance described in Sec. 1026.4(b)(7) or 
debt cancellation or suspension coverage described in Sec. 
1026.4(b)(10), if the insurance or debt cancellation or suspension 
coverage is required as part of the plan; and
    (ii) A cross reference to any additional information provided about 
the insurance or coverage accompanying the application or solicitation, 
as applicable.
    (14) Available credit. If a card issuer requires fees for the 
issuance or availability of credit described in paragraph (b)(2) of this 
section, or requires a security deposit for such credit, and the total 
amount of those required fees and/or security deposit that will be 
imposed and charged to the account when the account is opened is 15 
percent or more of the minimum credit limit for the card, a card issuer 
must disclose the available credit remaining after these fees or 
security deposit are debited to the account, assuming that the

[[Page 186]]

consumer receives the minimum credit limit. In determining whether the 
15 percent threshold test is met, the issuer must only consider fees for 
issuance or availability of credit, or a security deposit, that are 
required. If fees for issuance or availability are optional, these fees 
should not be considered in determining whether the disclosure must be 
given. Nonetheless, if the 15 percent threshold test is met, the issuer 
in providing the disclosure must disclose the amount of available credit 
calculated by excluding those optional fees, and the available credit 
including those optional fees. This paragraph does not apply with 
respect to fees or security deposits that are not debited to the 
account.
    (15) Web site reference. A reference to the Web site established by 
the Bureau and a statement that consumers may obtain on the Web site 
information about shopping for and using credit cards. Until January 1, 
2013, issuers may substitute for this reference a reference to the Web 
site established by the Board of Governors of the Federal Reserve 
System.
    (c) Direct mail and electronic applications and solicitations--(1) 
General. The card issuer shall disclose the applicable items in 
paragraph (b) of this section on or with an application or solicitation 
that is mailed to consumers or provided to consumers in electronic form.
    (2) Accuracy. (i) Disclosures in direct mail applications and 
solicitations must be accurate as of the time the disclosures are 
mailed. An accurate variable annual percentage rate is one in effect 
within 60 days before mailing.
    (ii) Disclosures provided in electronic form must be accurate as of 
the time they are sent, in the case of disclosures sent to a consumer's 
email address, or as of the time they are viewed by the public, in the 
case of disclosures made available at a location such as a card issuer's 
Web site. An accurate variable annual percentage rate provided in 
electronic form is one in effect within 30 days before it is sent to a 
consumer's email address, or viewed by the public, as applicable.
    (d) Telephone applications and solicitations--(1) Oral disclosure. 
The card issuer shall disclose orally the information in paragraphs 
(b)(1) through (7) and (b)(14) of this section, to the extent 
applicable, in a telephone application or solicitation initiated by the 
card issuer.
    (2) Alternative disclosure. The oral disclosure under paragraph 
(d)(1) of this section need not be given if the card issuer either:
    (i)(A) Does not impose a fee described in paragraph (b)(2) of this 
section; or
    (B) Imposes such a fee but provides the consumer with a right to 
reject the plan consistent with Sec. 1026.5(b)(1)(iv); and
    (ii) The card issuer discloses in writing within 30 days after the 
consumer requests the card (but in no event later than the delivery of 
the card) the following:
    (A) The applicable information in paragraph (b) of this section; and
    (B) As applicable, the fact that the consumer has the right to 
reject the plan and not be obligated to pay fees described in paragraph 
(b)(2) or any other fees or charges until the consumer has used the 
account or made a payment on the account after receiving a billing 
statement.
    (3) Accuracy. (i) The oral disclosures under paragraph (d)(1) of 
this section must be accurate as of the time they are given.
    (ii) The alternative disclosures under paragraph (d)(2) of this 
section generally must be accurate as of the time they are mailed or 
delivered. A variable annual percentage rate is one that is accurate if 
it was:
    (A) In effect at the time the disclosures are mailed or delivered; 
or
    (B) In effect as of a specified date (which rate is then updated 
from time to time, but no less frequently than each calendar month).
    (e) Applications and solicitations made available to general public. 
The card issuer shall provide disclosures, to the extent applicable, on 
or with an application or solicitation that is made available to the 
general public, including one contained in a catalog, magazine, or other 
generally available publication. The disclosures shall be provided in 
accordance with paragraph (e)(1) or (e)(2) of this section.
    (1) Disclosure of required credit information. The card issuer may 
disclose in

[[Page 187]]

a prominent location on the application or solicitation the following:
    (i) The applicable information in paragraph (b) of this section;
    (ii) The date the required information was printed, including a 
statement that the required information was accurate as of that date and 
is subject to change after that date; and
    (iii) A statement that the consumer should contact the card issuer 
for any change in the required information since it was printed, and a 
toll-free telephone number or a mailing address for that purpose.
    (2) No disclosure of credit information. If none of the items in 
paragraph (b) of this section is provided on or with the application or 
solicitation, the card issuer may state in a prominent location on the 
application or solicitation the following:
    (i) There are costs associated with the use of the card; and
    (ii) The consumer may contact the card issuer to request specific 
information about the costs, along with a toll-free telephone number and 
a mailing address for that purpose.
    (3) Prompt response to requests for information. Upon receiving a 
request for any of the information referred to in this paragraph, the 
card issuer shall promptly and fully disclose the information requested.
    (4) Accuracy. The disclosures given pursuant to paragraph (e)(1) of 
this section must be accurate as of the date of printing. A variable 
annual percentage rate is accurate if it was in effect within 30 days 
before printing.
    (f) In-person applications and solicitations. A card issuer shall 
disclose the information in paragraph (b) of this section, to the extent 
applicable, on or with an application or solicitation that is initiated 
by the card issuer and given to the consumer in person. A card issuer 
complies with the requirements of this paragraph if the issuer provides 
disclosures in accordance with paragraph (c)(1) or (e)(1) of this 
section.
    (g) Balance computation methods defined. The following methods may 
be described by name. Methods that differ due to variations such as the 
allocation of payments, whether the finance charge begins to accrue on 
the transaction date or the date of posting the transaction, the 
existence or length of a grace period, and whether the balance is 
adjusted by charges such as late payment fees, annual fees and unpaid 
finance charges do not constitute separate balance computation methods.
    (1)(i) Average daily balance (including new purchases). This balance 
is figured by adding the outstanding balance (including new purchases 
and deducting payments and credits) for each day in the billing cycle, 
and then dividing by the number of days in the billing cycle.
    (ii) Average daily balance (excluding new purchases). This balance 
is figured by adding the outstanding balance (excluding new purchases 
and deducting payments and credits) for each day in the billing cycle, 
and then dividing by the number of days in the billing cycle.
    (2) Adjusted balance. This balance is figured by deducting payments 
and credits made during the billing cycle from the outstanding balance 
at the beginning of the billing cycle.
    (3) Previous balance. This balance is the outstanding balance at the 
beginning of the billing cycle.
    (4) Daily balance. For each day in the billing cycle, this balance 
is figured by taking the beginning balance each day, adding any new 
purchases, and subtracting any payment and credits.

    Effective Date Note: At 81 FR 84370, Nov. 22, 2016, Sec. 1026.60 
was amended by revising paragraph (a)(5)(iv) and paragraph (b) 
introductory text, effective Oct. 1, 2017. For the convenience of the 
user, the revised text is set forth as follows:



Sec. 1026.60  Credit and charge card applications and solicitations.

    (a) * * *
    (5) * * *
    (iv) Lines of credit accessed solely by account numbers except for a 
covered separate credit feature solely accessible by an account number 
that is a hybrid prepaid-credit card as defined in Sec. 1026.61;

                                * * * * *

    (b) Required disclosures. The card issuer shall disclose the items 
in this paragraph on or with an application or a solicitation in 
accordance with the requirements of paragraphs (c), (d), (e)(1), or (f) 
of this section. A credit card issuer shall disclose all applicable 
items in this paragraph except for paragraph (b)(7) of this section. A 
charge card issuer shall disclose the applicable items in paragraphs 
(b)(2), (4), (7) through (12), and

[[Page 188]]

(15) of this section. With respect to a covered separate credit feature 
that is a charge card account accessible by a hybrid prepaid-credit card 
as defined in Sec. 1026.61, a charge card issuer also shall disclose 
the applicable items in paragraphs (b)(3), (13), and (14) of this 
section.

                                * * * * *



Sec. 1026.61  Hybrid prepaid-credit cards.

    (a) Hybrid prepaid-credit card--(1) In general. (i) Credit offered 
in connection with a prepaid account is subject to this section and this 
regulation as specified below.
    (ii) For purposes of this regulation, except as provided in 
paragraph (a)(4) of this section, a prepaid card is a hybrid prepaid-
credit card with respect to a separate credit feature as described in 
paragraph (a)(2)(i) of this section when it can access credit from that 
credit feature, or with respect to a credit feature structured as a 
negative balance on the asset feature of the prepaid account as 
described in paragraph (a)(3) of this section when it can access credit 
from that credit feature. A hybrid prepaid-credit card is a credit card 
for purposes of this regulation with respect to those credit features.
    (iii) A prepaid card is not a hybrid prepaid-credit card or a credit 
card for purposes of this regulation if the only credit offered in 
connection with the prepaid account meets the conditions set forth in 
paragraph (a)(4) of this section.
    (2) Prepaid card can access credit from a covered separate credit 
feature--(i) Covered separate credit feature. (A) A separate credit 
feature that can be accessed by a hybrid prepaid-credit card as 
described in this paragraph (a)(2)(i) is defined as a covered separate 
credit feature. A prepaid card is a hybrid prepaid-credit card with 
respect to a separate credit feature when it is a single device that can 
be used from time to time to access the separate credit feature where 
the following two conditions are both satisfied:
    (1) The card can be used to draw, transfer, or authorize the draw or 
transfer of credit from the separate credit feature in the course of 
authorizing, settling, or otherwise completing transactions conducted 
with the card to obtain goods or services, obtain cash, or conduct 
person-to-person transfers; and
    (2) The separate credit feature is offered by the prepaid account 
issuer, its affiliate, or its business partner.
    (B) A separate credit feature that meets the conditions set forth in 
paragraph (a)(2)(i)(A) of this section is a covered separate credit 
feature accessible by a hybrid prepaid-credit card even with respect to 
credit that is drawn or transferred, or authorized to be drawn or 
transferred, from the credit feature outside the course of a transaction 
conducted with the card to obtain goods or services, obtain cash, or 
conduct person-to-person transfers.
    (ii) Non-covered separate credit feature. A separate credit feature 
that does not meet the two conditions set forth in paragraph (a)(2)(i) 
of this section is defined as a non-covered separate credit feature. A 
prepaid card is not a hybrid prepaid-credit card with respect to a non-
covered separate credit feature, even if the prepaid card is a hybrid 
prepaid-credit card with respect to a covered separate credit feature as 
described in paragraph (a)(2)(i) of this section. A non-covered separate 
credit feature is not subject to the rules applicable to hybrid prepaid-
credit cards; however, it may be subject to this regulation depending on 
its own terms and conditions, independent of the connection to the 
prepaid account.
    (3) Prepaid card can access credit extended through a negative 
balance on the asset feature of the prepaid account--(i) In general. 
Except as provided in paragraph (a)(4) of this section, a prepaid card 
is a hybrid prepaid-credit card when it is a single device that can be 
used from time to time to access credit extended through a negative 
balance on the asset feature of the prepaid account.
    (ii) Negative asset balances. Notwithstanding paragraph (a)(3)(i) of 
this section with regard to coverage under this regulation, structuring 
a hybrid prepaid-credit card to access credit through a negative balance 
on the asset feature violates paragraph (b) of this section. A prepaid 
account issuer can use a negative asset balance structure to extend 
credit on an asset feature of a prepaid account only if the prepaid card 
is not a hybrid prepaid-

[[Page 189]]

credit card as described in paragraph (a)(4) of this section.
    (4) Exception. A prepaid card is not a hybrid prepaid-credit card 
and is not a credit card for purposes of this regulation where:
    (i) The prepaid card cannot access credit from a covered separate 
credit feature as described in paragraph (a)(2)(i) of this section; and
    (ii) The prepaid card only can access credit extended through a 
negative balance on the asset feature of the prepaid account where both 
paragraphs (a)(4)(ii)(A) and (B) of this section are satisfied.
    (A) The prepaid account issuer has an established policy and 
practice of either declining to authorize any transaction for which it 
reasonably believes the consumer has insufficient or unavailable funds 
in the asset feature of the prepaid account at the time the transaction 
is authorized to cover the amount of the transaction, or declining to 
authorize any such transactions except in one or more of the following 
circumstances:
    (1) The amount of the transaction will not cause the asset feature 
balance to become negative by more than $10 at the time of the 
authorization; or
    (2) In cases where the prepaid account issuer has received an 
instruction or confirmation for an incoming electronic fund transfer 
originated from a separate asset account to load funds to the prepaid 
account or where the prepaid account issuer has received a request from 
the consumer to load funds to the prepaid account from a separate asset 
account but in either case the funds from the separate asset account 
have not yet settled, the amount of the transaction will not cause the 
asset feature balance to become negative at the time of the 
authorization by more than the incoming or requested load amount, as 
applicable.
    (B) The following fees or charges are not imposed on the asset 
feature of the prepaid account:
    (1) Any fees or charges for opening, issuing, or holding a negative 
balance on the asset feature, or for the availability of credit, whether 
imposed on a one-time or periodic basis. This paragraph does not include 
fees or charges to open, issue, or hold the prepaid account where the 
amount of the fee or charge imposed on the asset feature is not higher 
based on whether credit might be offered or has been accepted, whether 
or how much credit the consumer has accessed, or the amount of credit 
available;
    (2) Any fees or charges that will be imposed only when credit is 
extended on the asset feature or when there is a negative balance on the 
asset feature, except that a prepaid account issuer may impose fees or 
charges for the actual costs of collecting the credit extended if 
otherwise permitted by law; or
    (3) Any fees or charges where the amount of the fee or charge is 
higher when credit is extended on the asset feature or when there is a 
negative balance on the asset feature.
    (C) A prepaid account issuer may still satisfy the exception in 
paragraph (a)(4) of this section even if it debits fees or charges from 
the asset feature when there are insufficient or unavailable funds in 
the asset feature to cover those fees or charges at the time they are 
imposed, so long as those fees or charges are not the type of fees or 
charges enumerated in paragraph (a)(4)(ii)(B) of this section.
    (5) Definitions. For purposes of this section and other provisions 
in the regulation that relate to hybrid prepaid-credit cards:
    (i) Affiliate means any company that controls, is controlled by, or 
is under common control with another company, as set forth in the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).
    (ii) Asset feature means an asset account that is a prepaid account, 
or an asset subaccount of a prepaid account.
    (iii) Business partner means a person (other than the prepaid 
account issuer or its affiliates) that can extend credit through a 
separate credit feature where the person or its affiliate has an 
arrangement with a prepaid account issuer or its affiliate.
    (iv) Credit feature means a separate credit account or a credit 
subaccount of a prepaid account through which credit can be extended in 
connection with a prepaid card, or a negative balance on an asset 
feature of a prepaid

[[Page 190]]

account through which credit can be extended in connection with a 
prepaid card.
    (v) Prepaid account means a prepaid account as defined in Regulation 
E, 12 CFR 1005.2(b)(3).
    (vi) Prepaid account issuer means a financial institution as defined 
in Regulation E, 12 CFR 1005.2(i), with respect to a prepaid account.
    (vii) Prepaid card means any card, code, or other device that can be 
used to access a prepaid account.
    (viii) Separate credit feature means a credit account or a credit 
subaccount of a prepaid account through which credit can be extended in 
connection with a prepaid card that is separate from the asset feature 
of the prepaid account. This term does not include a negative balance on 
an asset feature of a prepaid account.
    (b) Structure of credit features accessible by hybrid prepaid-credit 
cards. With respect to a credit feature that is accessible by a hybrid 
prepaid-credit card, a card issuer shall not structure the credit 
feature as a negative balance on the asset feature of a prepaid account. 
A card issuer shall structure the credit feature as a separate credit 
feature, either as a separate credit account, or as a credit subaccount 
of a prepaid account that is separate from the asset feature of the 
prepaid account. The separate credit feature is a covered separate 
credit feature accessible by a hybrid prepaid-credit card under Sec. 
1026.61(a)(2)(i).
    (c) Timing requirement for credit card solicitation or application 
with respect to hybrid prepaid-credit cards. (1) With respect to a 
covered separate credit feature that could be accessible by a hybrid 
prepaid-credit card at any point, a card issuer must not do any of the 
following until 30 days after the prepaid account has been registered:
    (i) Open a covered separate credit feature that could be accessible 
by the hybrid prepaid-credit card;
    (ii) Make a solicitation or provide an application to open a covered 
separate credit feature that could be accessible by the hybrid prepaid-
credit card; or
    (iii) Allow an existing credit feature that was opened prior to the 
consumer obtaining the prepaid account to become a covered separate 
credit feature accessible by the hybrid prepaid-credit card.
    (2) For purposes of paragraph (c) of this section, the term 
solicitation has the meaning set forth in Sec. 1026.60(a)(1).

    Effective Date Note: At 81 FR 84370, Nov. 22, 2016, Sec. 1026.61 
was added, effective Oct. 1, 2017.



           Sec. Appendix A to Part 1026--Effect on State Laws

                        Request for Determination

    A request for a determination that a state law is inconsistent or 
that a state law is substantially the same as the Act and regulation 
shall be in writing and addressed to the Executive Secretary, Bureau of 
Consumer Financial Protection, 1700 G Street NW., Washington, DC 20006. 
The request shall be made pursuant to the procedures herein.

                          Supporting Documents

    A request for a determination shall include the following items:
    (1) The text of the state statute, regulation, or other document 
that is the subject of the request.
    (2) Any other statute, regulation, or judicial or administrative 
opinion that implements, interprets, or applies the relevant provision.
    (3) A comparison of the state law with the corresponding provision 
of the Federal law, including a full discussion of the basis for the 
requesting party's belief that the state provision is either 
inconsistent or substantially the same.
    (4) Any other information that the requesting party believes may 
assist the Bureau in its determination.

                     Public Notice of Determination

    Notice that the Bureau intends to make a determination (either on 
request or on its own motion) will be published in the Federal Register, 
with an opportunity for public comment, unless the Bureau finds that 
notice and opportunity for comment would be impracticable, unnecessary, 
or contrary to the public interest and publishes its reasons for such 
decision.
    Subject to the Bureau's rules on Disclosure of Records and 
Information (12 CFR Part 1070), all requests made, including any 
documents and other material submitted in support of the requests, will 
be made available for public inspection and copying.

                       Notice After Determination

    Notice of a final determination will be published in the Federal 
Register, and the Bureau will furnish a copy of such notice to the

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party who made the request and to the appropriate state official.

                        Reversal of Determination

    The Bureau reserves the right to reverse a determination for any 
reason bearing on the coverage or effect of state or Federal law.
    Notice of reversal of a determination will be published in the 
Federal Register and a copy furnished to the appropriate state official.



             Sec. Appendix B to Part 1026--State Exemptions

                               Application

    Any state may apply to the Bureau for a determination that a class 
of transactions subject to state law is exempt from the requirements of 
the Act and this part. An application shall be in writing and addressed 
to the Executive Secretary, Bureau of Consumer Financial Protection, 
1700 G Street, NW., Washington, DC 20006, and shall be signed by the 
appropriate state official. The application shall be made pursuant to 
the procedures herein.

                          Supporting Documents

    An application shall be accompanied by:
    (1) The text of the state statute or regulation that is the subject 
of the application, and any other statute, regulation, or judicial or 
administrative opinion that implements, interprets, or applies it.
    (2) A comparison of the state law with the corresponding provisions 
of the Federal law.
    (3) The text of the state statute or regulation that provides for 
civil and criminal liability and administrative enforcement of the state 
law.
    (4) A statement of the provisions for enforcement, including an 
identification of the state office that administers the relevant law, 
information on the funding and the number and qualifications of 
personnel engaged in enforcement, and a description of the enforcement 
procedures to be followed, including information on examination 
procedures, practices, and policies. If an exemption application extends 
to federally chartered institutions, the applicant must furnish evidence 
that arrangements have been made with the appropriate Federal agencies 
to ensure adequate enforcement of state law in regard to such creditors.
    (5) A statement of reasons to support the applicant's claim that an 
exemption should be granted.

                      Public Notice of Application

    Notice of an application will be published, with an opportunity for 
public comment, in the Federal Register, unless the Bureau finds that 
notice and opportunity for comment would be impracticable, unnecessary, 
or contrary to the public interest and publishes its reasons for such 
decision.
    Subject to the Bureau's rules on Disclosure of Records and 
Information (12 CFR Part 1070), all applications made, including any 
documents and other material submitted in support of the applications, 
will be made available for public inspection and copying.

                         Favorable Determination

    If the Bureau determines on the basis of the information before it 
that an exemption should be granted, notice of the exemption will be 
published in the Federal Register, and a copy furnished to the applicant 
and to each Federal official responsible for administrative enforcement.
    The appropriate state official shall inform the Bureau within 30 
days of any change in its relevant law or regulations. The official 
shall file with the Bureau such periodic reports as the Bureau may 
require.
    The Bureau will inform the appropriate state official of any 
subsequent amendments to the Federal law, regulation, interpretations, 
or enforcement policies that might require an amendment to state law, 
regulation, interpretations, or enforcement procedures.

                          Adverse Determination

    If the Bureau makes an initial determination that an exemption 
should not be granted, the Bureau will afford the applicant a reasonable 
opportunity to demonstrate further that an exemption is proper. If the 
Bureau ultimately finds that an exemption should not be granted, notice 
of an adverse determination will be published in the Federal Register 
and a copy furnished to the applicant.

                         Revocation of Exemption

    The Bureau reserves the right to revoke an exemption if at any time 
it determines that the standards required for an exemption are not met.
    Before taking such action, the Bureau will notify the appropriate 
state official of its intent, and will afford the official such 
opportunity as it deems appropriate in the circumstances to demonstrate 
that revocation is improper. If the Bureau ultimately finds that 
revocation is proper, notice of the Bureau's intention to revoke such 
exemption will be published in the Federal Register with a reasonable 
period of time for interested persons to comment.
    Notice of revocation of an exemption will be published in the 
Federal Register. A copy of such notice will be furnished to the 
appropriate state official and to the Federal officials responsible for 
enforcement. Upon revocation of an exemption, creditors in that state 
shall then be subject to the requirements of the Federal law.

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   Sec. Appendix C to Part 1026--Issuance of Official Interpretations

                        Official Interpretations

    Interpretations of this part issued by officials of the Bureau 
provide the protection afforded under section 130(f) of the Act. Except 
in unusual circumstances, such interpretations will not be issued 
separately but will be incorporated in an official commentary to the 
regulation which will be amended periodically.

            Requests for Issuance of Official Interpretations

    A request for an official interpretation shall be in writing and 
addressed to the Assistant Director, Office of Regulations, Division of 
Research, Markets, and Regulations, Bureau of Consumer Financial 
Protection, 1700 G Street, NW., Washington, DC 20006. The request shall 
contain a complete statement of all relevant facts concerning the issue, 
including copies of all pertinent documents.

                        Scope of Interpretations

    No interpretations will be issued approving creditors' forms, 
statements, or calculation tools or methods. This restriction does not 
apply to forms, statements, tools, or methods whose use is required or 
sanctioned by a government agency.



    Sec. Appendix D to Part 1026--Multiple Advance Construction Loans

    Section 1026.17(c)(6) permits creditors to treat multiple advance 
loans to finance construction of a dwelling that may be permanently 
financed by the same creditor either as a single transaction or as more 
than one transaction. If the actual schedule of advances is not known, 
the following methods may be used to estimate the interest portion of 
the finance charge and the annual percentage rate and to make 
disclosures. If the creditor chooses to disclose the construction phase 
separately, whether interest is payable periodically or at the end of 
construction, part I may be used. If the creditor chooses to disclose 
the construction and the permanent financing as one transaction, part II 
may be used.

            Part I--Construction Period Disclosed Separately

    A. If interest is payable only on the amount actually advanced for 
the time it is outstanding:
    1. Estimated interest--Assume that one-half of the commitment amount 
is outstanding at the contract interest rate for the entire construction 
period.
    2. Estimated annual percentage rate--Assume a single payment loan 
that matures at the end of the construction period. The finance charge 
is the sum of the estimated interest and any prepaid finance charge. The 
amount financed for computation purposes is determined by subtracting 
any prepaid finance charge from one-half of the commitment amount.
    3. Repayment schedule--The number and amounts of any interest 
payments may be omitted in disclosing the payment schedule under Sec. 
1026.18(g). The fact that interest payments are required and the timing 
of such payments shall be disclosed.
    4. Amount financed--The amount financed for disclosure purposes is 
the entire commitment amount less any prepaid finance charge.
    B. If interest is payable on the entire commitment amount without 
regard to the dates or amounts of actual disbursement:
    1. Estimated interest--Assume that the entire commitment amount is 
outstanding at the contract interest rate for the entire construction 
period.
    2. Estimated annual percentage rate--Assume a single payment loan 
that matures at the end of the construction period. The finance charge 
is the sum of the estimated interest and any prepaid finance charge. The 
amount financed for computation purposes is determined by subtracting 
any prepaid finance charge from one-half of the commitment amount.
    3. Repayment schedule--Interest payments shall be disclosed in 
making the repayment schedule disclosure under Sec. 1026.18(g).
    4. Amount financed--The amount financed for disclosure purposes is 
the entire commitment amount less any prepaid finance charge.

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[GRAPHIC] [TIFF OMITTED] TR22DE11.000

     Part II--Construction and Permanent Financing Disclosed as One 
                               Transaction

    A. The creditor shall estimate the interest payable during the 
construction period to be included in the total finance charge as 
follows:
    1. If interest is payable only on the amount actually advanced for 
the time it is outstanding, assume that one-half of the commitment 
amount is outstanding at the contract interest rate for the entire 
construction period.
    2. If interest is payable on the entire commitment amount without 
regard to the dates or amounts of actual disbursements, assume that the 
entire commitment amount is outstanding at the contract rate for the 
entire construction period.
    B. The creditor shall compute the estimated annual percentage rate 
as follows:
    1. Estimated interest payable during the construction period shall 
be treated for computation purposes as a prepaid finance charge 
(although it shall not be treated as a prepaid finance charge for 
disclosure purposes).
    2. The number of payment shall not include any payments of interest 
only that are made during the construction period.
    3. The first payment period shall consist of one-half of the 
construction period plus the period between the end of the construction 
period and the amortization payment.
    C. The creditor shall disclose the repayment schedule as follows:
    1. For loans under paragraph A.1 of part II, other than loans that 
are subject to Sec. 1026.19(e) and (f), without reflecting the number 
or amounts of payments of interest only that are made during the 
construction period. The fact that interest payments must be made and 
the timing of such payments shall be disclosed.
    2. For loans under paragraph A.2 of part II and loans under 
paragraph A.1 of part II that are subject to Sec. 1026.19(e) and (f), 
including any payments of interest only that are made during the 
construction period.
    D. The creditor shall disclose the amount financed as the entire 
commitment amount less any prepaid finance charge.

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[GRAPHIC] [TIFF OMITTED] TR22DE11.001


[[Page 195]]


[GRAPHIC] [TIFF OMITTED] TR22DE11.002


[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 80130, Dec. 31, 2013]



  Sec. Appendix E to Part 1026--Rules for Card Issuers That Bill on a 
                    Transaction-by-Transaction Basis

    The following provisions of Subpart B apply if credit cards are 
issued and the card issuer and the seller are the same or related 
persons; no finance charge is imposed; consumers are billed in full for 
each use of the card on a transaction-by-transaction basis, by means of 
an invoice or other statement reflecting each use of the card; and no 
cumulative account is maintained which reflects the transactions by each 
consumer during a period of time, such as a month. The term ``related 
person'' refers to, for example, a franchised or licensed seller of a 
creditor's product or service or a seller who assigns or sells sales 
accounts to a creditor or arranges for credit under a plan that allows 
the consumer to use the credit only in transactions with that seller. A 
seller is not related to the creditor merely because the seller and the 
creditor have an agreement authorizing the seller to honor the 
creditor's credit card.
    1. Section 1026.6(a)(5) or Sec. 1026.6(b)(5)(iii).
    2. Section 1026.6(a)(2) or Sec. 1026.6(b)(3)(ii)(B), as applicable. 
The disclosure required by Sec. 1026.6(a)(2) or Sec. 
1026.6(b)(3)(ii)(B) shall be limited to those charges that are or may be 
imposed as a result of the deferral of payment by use of the card, such 
as late payment or delinquency charges. A tabular format is not 
required.
    3. Section 1026.6(a)(4) or Sec. 1026.6(b)(5)(ii).

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    4. Section 1026.7(a)(2) or Sec. 1026.7(b)(2), as applicable; Sec. 
1026.7(a)(9) or Sec. 1026.7(b)(9), as applicable. Creditors may comply 
by placing the required disclosures on the invoice or statement sent to 
the consumer for each transaction.
    5. Section 1026.9(a). Creditors may comply by mailing or delivering 
the statement required by Sec. 1026.6(a)(5) or Sec. 1026.6(b)(5)(iii) 
(see appendix G-3 and G-3(A) to this part) to each consumer receiving a 
transaction invoice during a one-month period chosen by the card issuer 
or by sending either the statement prescribed by Sec. 1026.6(a)(5) or 
Sec. 1026.6(b)(5)(iii), or an alternative billing error rights 
statement substantially similar to that in appendix G-4 and G-4(A) to 
this part, with each invoice sent to a consumer.
    6. Section 1026.9(c). A tabular format is not required.
    7. Section 1026.10.
    8. Section 1026.11(a). This section applies when a card issuer 
receives a payment or other credit that exceeds by more than $1 the 
amount due, as shown on the transaction invoice. The requirement to 
credit amounts to an account may be complied with by other reasonable 
means, such as by a credit memorandum. Since no periodic statement is 
provided, a notice of the credit balance shall be sent to the consumer 
within a reasonable period of time following its occurrence unless a 
refund of the credit balance is mailed or delivered to the consumer 
within seven business days of its receipt by the card issuer.
    9. Section 1026.12 including Sec. 1026.12(c) and (d), as 
applicable. Section 1026.12(e) is inapplicable.
    10. Section 1026.13, as applicable. All references to ``periodic 
statement'' shall be read to indicate the invoice or other statement for 
the relevant transaction. All actions with regard to correcting and 
adjusting a consumer's account may be taken by issuing a refund or a new 
invoice, or by other appropriate means consistent with the purposes of 
the section.
    11. Section 1026.15, as applicable.



     Sec. Appendix F to Part 1026--Optional Annual Percentage Rate 
 Computations for Creditors Offering Open-End Credit Plans Secured by a 
                           Consumer's Dwelling

    In determining the denominator of the fraction under Sec. 
1026.14(c)(3), no amount will be used more than once when adding the sum 
of the balances subject to periodic rates to the sum of the amounts 
subject to specific transaction charges. (Where a portion of the finance 
charge is determined by application of one or more daily periodic rates, 
the phrase ``sum of the balances'' shall also mean the ``average of 
daily balances.'') In every case, the full amount of transactions 
subject to specific transaction charges shall be included in the 
denominator. Other balances or parts of balances shall be included 
according to the manner of determining the balance subject to a periodic 
rate, as illustrated in the following examples of accounts on monthly 
billing cycles:
    1. Previous balance--none.
    A specific transaction of $100 occurs on the first day of the 
billing cycle. The average daily balance is $100. A specific transaction 
charge of 3% is applicable to the specific transaction. The periodic 
rate is 1\1/2\% applicable to the average daily balance. The numerator 
is the amount of the finance charge, which is $4.50. The denominator is 
the amount of the transaction (which is $100), plus the amount by which 
the balance subject to the periodic rate exceeds the amount of the 
specific transactions (such excess in this case is 0), totaling $100.
    The annual percentage rate is the quotient (which is 4\1/2\%) 
multiplied by 12 (the number of months in a year), i.e., 54%.
    2. Previous balance--$100.
    A specific transaction of $100 occurs at the midpoint of the billing 
cycle. The average daily balance is $150. A specific transaction charge 
of 3% is applicable to the specific transaction. The periodic rate is 
1\1/2\% applicable to the average daily balance. The numerator is the 
amount of the finance charge which is $5.25. The denominator is the 
amount of the transaction (which is $100), plus the amount by which the 
balance subject to the periodic rate exceeds the amount of the specific 
transaction (such excess in this case is $50), totaling $150. As 
explained in example 1, the annual percentage rate is 3\1/2\% x 12 = 
42%.
    3. If, in example 2, the periodic rate applies only to the previous 
balance, the numerator is $4.50 and the denominator is $200 (the amount 
of the transaction, $100, plus the balance subject only to the periodic 
rate, the $100 previous balance). As explained in example 1, the annual 
percentage rate is 2\1/4\% x 12 = 27%.
    4. If, in example 2, the periodic rate applies only to an adjusted 
balance (previous balance less payments and credits) and the consumer 
made a payment of $50 at the midpoint of the billing cycle, the 
numerator is $3.75 and the denominator is $150 (the amount of the 
transaction, $100, plus the balance subject to the periodic rate, the 
$50 adjusted balance). As explained in example 1, the annual percentage 
rate is 2\1/2\% x 12 = 30%.
    5. Previous balance--$100.
    A specific transaction (check) of $100 occurs at the midpoint of the 
billing cycle. The average daily balance is $150. The specific 
transaction charge is $.25 per check. The periodic rate is 1\1/2\% 
applied to the average daily balance. The numerator is the amount

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of the finance charge, which is $2.50 and includes the $.25 check charge 
and the $2.25 resulting from the application of the periodic rate. The 
denominator is the full amount of the specific transaction (which is 
$100) plus the amount by which the average daily balance exceeds the 
amount of the specific transaction (which in this case is $50), totaling 
$150. As explained in example 1, the annual percentage rate would be 1-
2/3% x 12 = 20%.
    6. Previous balance--none.
    A specific transaction of $100 occurs at the midpoint of the billing 
cycle. The average daily balance is $50. The specific transaction charge 
is 3% of the transaction amount or $3.00. The periodic rate is 1\1/2\% 
per month applied to the average daily balance. The numerator is the 
amount of the finance charge, which is $3.75, including the $3.00 
transaction charge and $.75 resulting from application of the periodic 
rate. The denominator is the full amount of the specific transaction 
($100) plus the amount by which the balance subject to the periodic rate 
exceeds the amount of the transaction ($0). Where the specific 
transaction amount exceeds the balance subject to the periodic rate, the 
resulting number is considered to be zero rather than a negative number 
($50 - $100 = -$50). The denominator, in this case, is $100. As 
explained in example 1, the annual percentage rate is 3\3/4\% x 12 = 
45%.



     Sec. Appendix G to Part 1026--Open-End Model Forms and Clauses

G-1 Balance Computation Methods Model Clauses (Home-equity Plans) 
          (Sec. Sec. 1026.6 and 1026.7)
G-1(A) Balance Computation Methods Model Clauses (Plans other than Home-
          equity Plans) (Sec. Sec. 1026.6 and 1026.7)
G-2 Liability for Unauthorized Use Model Clause (Home-equity Plans) 
          (Sec. 1026.12)
G-2(A) Liability for Unauthorized Use Model Clause (Plans Other Than 
          Home-equity Plans) (Sec. 1026.12)
G-3 Long-Form Billing-Error Rights Model Form (Home-equity Plans) 
          (Sec. Sec. 1026.6 and 1026.9)
G-3(A) Long-Form Billing-Error Rights Model Form (Plans Other Than Home-
          equity Plans) (Sec. Sec. 1026.6 and 1026.9)
G-4 Alternative Billing-Error Rights Model Form (Home-equity Plans) 
          (Sec. 1026.9)
G-4(A) Alternative Billing-Error Rights Model Form (Plans Other Than 
          Home-equity Plans) (Sec. 1026.9)
G-5 Rescission Model Form (When Opening an Account) (Sec. 1026.15)
G-6 Rescission Model Form (For Each Transaction) (Sec. 1026.15)
G-7 Rescission Model Form (When Increasing the Credit Limit) (Sec. 
          1026.15)
G-8 Rescission Model Form (When Adding a Security Interest) (Sec. 
          1026.15)
G-9 Rescission Model Form (When Increasing the Security) (Sec. 1026.15)
G-10(A) Applications and Solicitations Model Form (Credit Cards) (Sec. 
          1026.60(b))
G-10(B) Applications and Solicitations Sample (Credit Cards) (Sec. 
          1026.60(b))
G-10(C) Applications and Solicitations Sample (Credit Cards) (Sec. 
          1026.60(b))
G-10(D) Applications and Solicitations Model Form (Charge Cards) (Sec. 
          1026.60(b))
G-10(E) Applications and Solicitations Sample (Charge Cards) (Sec. 
          1026.60(b))
G-11 Applications and Solicitations Made Available to General Public 
          Model Clauses (Sec. 1026.60(e))
G-12 Reserved
G-13(A) Change in Insurance Provider Model Form (Combined Notice) (Sec. 
          1026.9(f))
G-13(B) Change in Insurance Provider Model Form (Sec. 1026.9(f)(2))
G-14A Home-equity Sample
G-14B Home-equity Sample
G-15 Home-equity Model Clauses
G-16(A) Debt Suspension Model Clause (Sec. 1026.4(d)(3))
G-16(B) Debt Suspension Sample (Sec. 1026.4(d)(3))
G-17(A) Account-opening Model Form (Sec. 1026.6(b)(2))
G-17(B) Account-opening Sample (Sec. 1026.6(b)(2))
G-17(C) Account-opening Sample (Sec. 1026.6(b)(2))
G-17(D) Account-opening Sample (Sec. 1026.6(b)(2))
G-18(A) Transactions; Interest Charges; Fees Sample (Sec. 1026.7(b))
G-18(B) Late Payment Fee Sample (Sec. 1026.7(b))
G-18(C)(1) Minimum Payment Warning (When Amortization Occurs and the 36-
          Month Disclosures Are Required) (Sec. 1026.7(b))
G-18(C)(2) Minimum Payment Warning (When Amortization Occurs and the 36-
          Month Disclosures Are Not Required) (Sec. 1026.7(b))
G-18(C)(3) Minimum Payment Warning (When Negative or No Amortization 
          Occurs) (Sec. 1026.7(b))
G-18(D) Periodic Statement New Balance, Due Date, Late Payment and 
          Minimum Payment Sample (Credit cards) (Sec. 1026.7(b))
G-18(E) [Reserved]
G-18(F) Periodic Statement Form
G-18(G) Periodic Statement Form
G-18(H) Deferred Interest Periodic Statement Clause
G-19 Checks Accessing a Credit Card Account Sample (Sec. 1026.9(b)(3))
G-20 Change-in-Terms Sample (Increase in Annual Percentage Rate) (Sec. 
          1026.9(c)(2))
G-21 Change-in-Terms Sample (Increase in Fees) (Sec. 1026.9(c)(2))

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G-22 Penalty Rate Increase Sample (Payment 60 or Fewer Days Late) (Sec. 
          1026.9(g)(3))
G-23 Penalty Rate Increase Sample (Payment More Than 60 Days Late) 
          (Sec. 1026.9(g)(3))
G-24 Deferred Interest Offer Clauses (Sec. 1026.16(h))
G-25(A) Consent Form for Over-the-Limit Transactions (Sec. 1026.56)
G-25(B) Revocation Notice for Periodic Statement Regarding Over-the-
          Limit Transactions (Sec. 1026.56)

   G-1--Balance Computation Methods Model Clauses (Home-Equity Plans)

(a) Adjusted Balance Method
    We figure [a portion of] the finance charge on your account by 
applying the periodic rate to the ``adjusted balance'' of your account. 
We get the ``adjusted balance'' by taking the balance you owed at the 
end of the previous billing cycle and subtracting [any unpaid finance 
charges and] any payments and credits received during the present 
billing cycle.
(b) Previous Balance Method
    We figure [a portion of] the finance charge on your account by 
applying the periodic rate to the amount you owe at the beginning of 
each billing cycle [minus any unpaid finance charges]. We do not 
subtract any payments or credits received during the billing cycle. [The 
amount of payments and credits to your account this billing cycle was $ 
--------.]
(c) Average Daily Balance Method (Excluding Current Transactions)
    We figure [a portion of] the finance charge on your account by 
applying the periodic rate to the ``average daily balance'' of your 
account (excluding current transactions). To get the ``average daily 
balance'' we take the beginning balance of your account each day and 
subtract any payments or credits [and any unpaid finance charges]. We do 
not add in any new [purchases/advances/loans]. This gives us the daily 
balance. Then, we add all the daily balances for the billing cycle 
together and divide the total by the number of days in the billing 
cycle. This gives us the ``average daily balance.''
(d) Average Daily Balance Method (Including Current Transactions)
    We figure [a portion of] the finance charge on your account by 
applying the periodic rate to the ``average daily balance'' of your 
account (including current transactions). To get the ``average daily 
balance'' we take the beginning balance of your account each day, add 
any new [purchases/advances/loans], and subtract any payments or 
credits, [and unpaid finance charges]. This gives us the daily balance. 
Then, we add up all the daily balances for the billing cycle and divide 
the total by the number of days in the billing cycle. This gives us the 
``average daily balance.''
(e) Ending Balance Method
    We figure [a portion of] the finance charge on your account by 
applying the periodic rate to the amount you owe at the end of each 
billing cycle (including new purchases and deducting payments and 
credits made during the billing cycle).
(f) Daily Balance Method (Including Current Transactions)
    We figure [a portion of] the finance charge on your account by 
applying the periodic rate to the ``daily balance'' of your account for 
each day in the billing cycle. To get the ``daily balance'' we take the 
beginning balance of your account each day, add any new [purchases/
advances/fees], and subtract [any unpaid finance charges and] any 
payments or credits. This gives us the daily balance.
G-1(A)--Balance Computation Methods Model Clauses (Plans Other Than 
Home-Equity Plans)
(a) Adjusted Balance Method
    We figure the interest charge on your account by applying the 
periodic rate to the ``adjusted balance'' of your account. We get the 
``adjusted balance'' by taking the balance you owed at the end of the 
previous billing cycle and subtracting [any unpaid interest or other 
finance charges and] any payments and credits received during the 
present billing cycle.
(b) Previous Balance Method
    We figure the interest charge on your account by applying the 
periodic rate to the amount you owe at the beginning of each billing 
cycle. We do not subtract any payments or credits received during the 
billing cycle.
(c) Average Daily Balance Method (Excluding Current Transactions)
    We figure the interest charge on your account by applying the 
periodic rate to the ``average daily balance'' of your account. To get 
the ``average daily balance'' we take the beginning balance of your 
account each day and subtract [any unpaid interest or other finance 
charges and] any payments or credits. We do not add in any new 
[purchases/advances/fees]. This gives us the daily balance. Then, we add 
all the daily balances for the billing cycle together and divide the 
total by the number of days in the billing cycle. This gives us the 
``average daily balance.''
(d) Average Daily Balance Method (Including Current Transactions)
    We figure the interest charge on your account by applying the 
periodic rate to the ``average daily balance'' of your account. To get 
the ``average daily balance'' we take the beginning balance of your 
account each day, add any new [purchases/advances/fees], and subtract 
[any unpaid interest or other finance charges and] any payments or 
credits. This gives us the daily balance. Then, we add up all the daily 
balances for the billing cycle

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and divide the total by the number of days in the billing cycle. This 
gives us the ``average daily balance.''
(e) Ending Balance Method
    We figure the interest charge on your account by applying the 
periodic rate to the amount you owe at the end of each billing cycle 
(including new [purchases/advances/fees] and deducting payments and 
credits made during the billing cycle).
(f) Daily Balance Method (Including Current Transactions)
    We figure the interest charge on your account by applying the 
periodic rate to the ``daily balance'' of your account for each day in 
the billing cycle. To get the ``daily balance'' we take the beginning 
balance of your account each day, add any new [purchases/advances/fees], 
and subtract [any unpaid interest or other finance charges and] any 
payments or credits. This gives us the daily balance.
G-2--Liability for Unauthorized Use Model Clause (Home-Equity Plans)
    You may be liable for the unauthorized use of your credit card [or 
other term that describes the credit card]. You will not be liable for 
unauthorized use that occurs after you notify [name of card issuer or 
its designee] at [address], orally or in writing, of the loss, theft, or 
possible unauthorized use. [You may also contact us on the Web: 
[Creditor Web or email address]] In any case, your liability will not 
exceed [insert $50 or any lesser amount under agreement with the 
cardholder].
G-2(A)--Liability for Unauthorized Use Model Clause (Plans Other Than 
Home-Equity Plans)
    If you notice the loss or theft of your credit card or a possible 
unauthorized use of your card, you should write to us immediately at: 
[address] [address listed on your bill],
    or call us at [telephone number].
    [You may also contact us on the Web: [Creditor Web or email 
address]]
    You will not be liable for any unauthorized use that occurs after 
you notify us. You may, however, be liable for unauthorized use that 
occurs before your notice to us. In any case, your liability will not 
exceed [insert $50 or any lesser amount under agreement with the 
cardholder].

   G-3--Long-Form Billing-Error Rights Model Form (Home-Equity Plans)

                           YOUR BILLING RIGHTS

                     KEEP THIS NOTICE FOR FUTURE USE

    This notice contains important information about your rights and our 
responsibilities under the Fair Credit Billing Act.

        Notify Us in Case of Errors or Questions About Your Bill

    If you think your bill is wrong, or if you need more information 
about a transaction on your bill, write us [on a separate sheet] at 
[address] [the address listed on your bill]. Write to us as soon as 
possible. We must hear from you no later than 60 days after we sent you 
the first bill on which the error or problem appeared. [You may also 
contact us on the Web: [Creditor Web or email address]] You can 
telephone us, but doing so will not preserve your rights.
    In your letter, give us the following information:
     Your name and account number.
     The dollar amount of the suspected error.
     Describe the error and explain, if you can, why 
you believe there is an error. If you need more information, describe 
the item you are not sure about.
    If you have authorized us to pay your credit card bill automatically 
from your savings or checking account, you can stop the payment on any 
amount you think is wrong. To stop the payment your letter must reach us 
three business days before the automatic payment is scheduled to occur.

   Your Rights and Our Responsibilities After We Receive Your Written 
                                 Notice

    We must acknowledge your letter within 30 days, unless we have 
corrected the error by then. Within 90 days, we must either correct the 
error or explain why we believe the bill was correct.
    After we receive your letter, we cannot try to collect any amount 
you question, or report you as delinquent. We can continue to bill you 
for the amount you question, including finance charges, and we can apply 
any unpaid amount against your credit limit. You do not have to pay any 
questioned amount while we are investigating, but you are still 
obligated to pay the parts of your bill that are not in question.
    If we find that we made a mistake on your bill, you will not have to 
pay any finance charges related to any questioned amount. If we didn't 
make a mistake, you may have to pay finance charges, and you will have 
to make up any missed payments on the questioned amount. In either case, 
we will send you a statement of the amount you owe and the date that it 
is due.
    If you fail to pay the amount that we think you owe, we may report 
you as delinquent. However, if our explanation does not satisfy you and 
you write to us within ten days telling us that you still refuse to pay, 
we must tell anyone we report you to that you have a question about your 
bill. And, we must tell you the name of anyone we reported you to. We 
must tell anyone we report you to that the matter has been settled 
between us when it finally is.

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    If we don't follow these rules, we can't collect the first $50 of 
the questioned amount, even if your bill was correct.

                 Special Rule for Credit Card Purchases

    If you have a problem with the quality of property or services that 
you purchased with a credit card, and you have tried in good faith to 
correct the problem with the merchant, you may have the right not to pay 
the remaining amount due on the property or services.
    There are two limitations on this right:
    (a) You must have made the purchase in your home state or, if not 
within your home state within 100 miles of your current mailing address; 
and
    (b) The purchase price must have been more than $50.
    These limitations do not apply if we own or operate the merchant, or 
if we mailed you the advertisement for the property or services.
    G-3(A)--Long-Form Billing-Error Rights Model Form (Plans Other Than 
Home-Equity Plans)

         Your Billing Rights: Keep This Document For Future Use

    This notice tells you about your rights and our responsibilities 
under the Fair Credit Billing Act.

           What To Do If You Find A Mistake On Your Statement

    If you think there is an error on your statement, write to us at:
    [Creditor Name]
    [Creditor Address]
    [You may also contact us on the Web: [Creditor Web or email 
address]]
    In your letter, give us the following information:
     Account information: Your name and account 
number.
     Dollar amount: The dollar amount of the suspected 
error.
     Description of problem: If you think there is an 
error on your bill, describe what you believe is wrong and why you 
believe it is a mistake.
    You must contact us:
     Within 60 days after the error appeared on your 
statement.
     At least 3 business days before an automated 
payment is scheduled, if you want to stop payment on the amount you 
think is wrong.
    You must notify us of any potential errors in writing [or 
electronically]. You may call us, but if you do we are not required to 
investigate any potential errors and you may have to pay the amount in 
question.

              What Will Happen After We Receive Your Letter

    When we receive your letter, we must do two things:
    1. Within 30 days of receiving your letter, we must tell you that we 
received your letter. We will also tell you if we have already corrected 
the error.
    2. Within 90 days of receiving your letter, we must either correct 
the error or explain to you why we believe the bill is correct.
    While we investigate whether or not there has been an error:
     We cannot try to collect the amount in question, 
or report you as delinquent on that amount.
     The charge in question may remain on your 
statement, and we may continue to charge you interest on that amount.
     While you do not have to pay the amount in 
question, you are responsible for the remainder of your balance.
     We can apply any unpaid amount against your 
credit limit.
    After we finish our investigation, one of two things will happen:
     If we made a mistake: You will not have to pay 
the amount in question or any interest or other fees related to that 
amount.
     If we do not believe there was a mistake: You 
will have to pay the amount in question, along with applicable interest 
and fees. We will send you a statement of the amount you owe and the 
date payment is due. We may then report you as delinquent if you do not 
pay the amount we think you owe.
    If you receive our explanation but still believe your bill is wrong, 
you must write to us within 10 days telling us that you still refuse to 
pay. If you do so, we cannot report you as delinquent without also 
reporting that you are questioning your bill. We must tell you the name 
of anyone to whom we reported you as delinquent, and we must let those 
organizations know when the matter has been settled between us.
    If we do not follow all of the rules above, you do not have to pay 
the first $50 of the amount you question even if your bill is correct.

   Your Rights If You Are Dissatisfied With Your Credit Card Purchases

    If you are dissatisfied with the goods or services that you have 
purchased with your credit card, and you have tried in good faith to 
correct the problem with the merchant, you may have the right not to pay 
the remaining amount due on the purchase.
    To use this right, all of the following must be true:
    1. The purchase must have been made in your home state or within 100 
miles of your current mailing address, and the purchase price must have 
been more than $50. (Note: Neither of these are necessary if your 
purchase was based on an advertisement we

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mailed to you, or if we own the company that sold you the goods or 
services.)
    2. You must have used your credit card for the purchase. Purchases 
made with cash advances from an ATM or with a check that accesses your 
credit card account do not qualify.
    3. You must not yet have fully paid for the purchase.
    If all of the criteria above are met and you are still dissatisfied 
with the purchase, contact us in writing [or electronically] at:
    [Creditor Name]
    [Creditor Address]
    [[Creditor Web or email address]]
    While we investigate, the same rules apply to the disputed amount as 
discussed above. After we finish our investigation, we will tell you our 
decision. At that point, if we think you owe an amount and you do not 
pay, we may report you as delinquent.

  G-4--Alternative Billing-Error Rights Model Form (Home-Equity Plans)

                         BILLING RIGHTS SUMMARY

             In Case of Errors or Questions About Your Bill

    If you think your bill is wrong, or if you need more information 
about a transaction on your bill, write us [on a separate sheet] at 
[address] [the address shown on your bill] as soon as possible. [You may 
also contact us on the Web: [Creditor Web or email address].] We must 
hear from you no later than 60 days after we sent you the first bill on 
which the error or problem appeared. You can telephone us, but doing so 
will not preserve your rights.
    In your letter, give us the following information:
     Your name and account number.
     The dollar amount of the suspected error.
     Describe the error and explain, if you can, why 
you believe there is an error. If you need more information, describe 
the item you are unsure about.
    You do not have to pay any amount in question while we are 
investigating, but you are still obligated to pay the parts of your bill 
that are not in question. While we investigate your question, we cannot 
report you as delinquent or take any action to collect the amount you 
question.

                 Special Rule for Credit Card Purchases

    If you have a problem with the quality of goods or services that you 
purchased with a credit card, and you have tried in good faith to 
correct the problem with the merchant, you may not have to pay the 
remaining amount due on the goods or services. You have this protection 
only when the purchase price was more than $50 and the purchase was made 
in your home state or within 100 miles of your mailing address. (If we 
own or operate the merchant, or if we mailed you the advertisement for 
the property or services, all purchases are covered regardless of amount 
or location of purchase.)

 G-4(A)--Alternative Billing-Error Rights Model Form (Plans Other Than 
                           Home-Equity Plans)

      What To Do If You Think You Find A Mistake On Your Statement

    If you think there is an error on your statement, write to us at:
    [Creditor Name]
    [Creditor Address]
    [You may also contact us on the Web: [Creditor Web or email 
address]]
    In your letter, give us the following information:
     Account information: Your name and account 
number.
     Dollar amount: The dollar amount of the suspected 
error.
     Description of Problem: If you think there is an 
error on your bill, describe what you believe is wrong and why you 
believe it is a mistake.
    You must contact us within 60 days after the error appeared on your 
statement.
    You must notify us of any potential errors in writing [or 
electronically]. You may call us, but if you do we are not required to 
investigate any potential errors and you may have to pay the amount in 
question.
    While we investigate whether or not there has been an error, the 
following are true:
     We cannot try to collect the amount in question, 
or report you as delinquent on that amount.
     The charge in question may remain on your 
statement, and we may continue to charge you interest on that amount. 
But, if we determine that we made a mistake, you will not have to pay 
the amount in question or any interest or other fees related to that 
amount.
     While you do not have to pay the amount in 
question, you are responsible for the remainder of your balance.
     We can apply any unpaid amount against your 
credit limit.

   Your Rights If You Are Dissatisfied With Your Credit Card Purchases

    If you are dissatisfied with the goods or services that you have 
purchased with your credit card, and you have tried in good faith to 
correct the problem with the merchant, you may have the right not to pay 
the remaining amount due on the purchase.
    To use this right, all of the following must be true:
    1. The purchase must have been made in your home state or within 100 
miles of your current mailing address, and the purchase price must have 
been more than $50. (Note: Neither of these is necessary if your 
purchase was based on an advertisement we

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mailed to you, or if we own the company that sold you the goods or 
services.)
    2. You must have used your credit card for the purchase. Purchases 
made with cash advances from an ATM or with a check that accesses your 
credit card account do not qualify.
    3. You must not yet have fully paid for the purchase.
    If all of the criteria above are met and you are still dissatisfied 
with the purchase, contact us in writing [or electronically] at:
    [Creditor Name]
    [Creditor Address]
    [[Creditor Web address]]
    While we investigate, the same rules apply to the disputed amount as 
discussed above. After we finish our investigation, we will tell you our 
decision. At that point, if we think you owe an amount and you do not 
pay we may report you as delinquent.
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   G-11--Applications and Solicitations Made Available to the General 
                          Public Model Clauses

              (a) Disclosure of Required Credit Information

    The information about the costs of the card described in this 
[application]/[solicitation] is accurate as of (month/year). This 
information may have changed after that date. To find out what may have 
changed, [call us at (telephone number)][write to us at (address)].

                 (b) No Disclosure of Credit Information

    There are costs associated with the use of this card. To obtain 
information about these costs, call us at (telephone number) or write to 
us at (address).

                             G-12 [Reserved]

   G-13(A)--Change in Insurance Provider Model Form (Combined Notice)

    The credit card account you have with us is insured. This is to 
notify you that we plan to replace your current coverage with insurance 
coverage from a different insurer.
    If we obtain insurance for your account from a different insurer, 
you may cancel the insurance.
    [Your premium rate will increase to $ ---- per ----.]
    [Your coverage will be affected by the following:
    [ ] The elimination of a type of coverage previously provided to 
you. [(explanation)] [See ---- of the attached policy for details.]
    [ ] A lowering of the age at which your coverage will terminate or 
will become more restrictive. [(explanation)] [See ---- of the attached 
policy or certificate for details.]
    [ ] A decrease in your maximum insurable loan balance, maximum 
periodic benefit payment, maximum number of payments, or any other 
decrease in the dollar amount of your coverage or benefits. 
[(explanation)] [See ---- of the attached policy or certificate for 
details.]
    [ ] A restriction on the eligibility for benefits for you or others. 
[(explanation)] [See ---- of the attached policy or certificate for 
details.]
    [ ] A restriction in the definition of ``disability'' or other key 
term of coverage. [(explanation)] [See ---- of the attached policy or 
certificate for details.]
    [ ] The addition of exclusions or limitations that are broader or 
other than those under the current coverage. [(explanation)] [See ---- 
of the attached policy or certificate for details.]
    [ ] An increase in the elimination (waiting) period or a change to 
nonretroactive coverage. [(explanation)] [See ---- of the attached 
policy or certificate for details).]
    [The name and mailing address of the new insurer providing the 
coverage for your account is (name and address).]

            G-13(B)--Change in Insurance Provider Model Form

    We have changed the insurer providing the coverage for your account. 
The new insurer's name and address are (name and address). A copy of the 
new policy or certificate is attached.
    You may cancel the insurance for your account.

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                  G-16(A) Debt Suspension Model Clause

    Please enroll me in the optional [insert name of program], and bill 
my account the fee of [how cost is determined]. I understand that 
enrollment is not required to obtain credit. I also understand that 
depending on the event, the protection may only temporarily suspend my 
duty to make minimum payments, not reduce the balance I owe. I 
understand that my balance will actually grow during the suspension 
period as interest continues to accumulate.
    [To Enroll, Sign Here]/[To Enroll, Initial Here]. X----------------
----

                     G-16(B) Debt Suspension Sample

    Please enroll me in the optional [name of program], and bill my 
account the fee of $.83 per $100 of my month-end account balance. I 
understand that enrollment is not required to obtain credit. I also 
understand that depending on the event, the protection may only 
temporarily suspend my duty to make minimum payments, not reduce the 
balance I owe. I understand that my balance will actually grow during 
the suspension period as interest continues to accumulate.
    To Enroll, Initial Here. X--------------------

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                    G-18(B)--Late Payment Fee Sample

    Late Payment Warning: If we do not receive your minimum payment by 
the date listed above, you may have to pay a $35 late fee and your APRs 
may be increased up to the Penalty APR of 28.99%.

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                           G-18(E) [Reserved]

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          G-18(H)--Deferred Interest Periodic Statement Clause

    [You must pay your promotional balance in full by [date] to avoid 
paying accrued interest charges.]

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                  G-24--Deferred Interest Offer Clauses

   (a) For Credit Card Accounts Under an Open-End (Not Home-Secured) 
                          Consumer Credit Plan

    [Interest will be charged to your account from the purchase date if 
the purchase balance is not paid in full within the/by [deferred 
interest period/date] or if you make a late payment.]

                      (b) For Other Open-End Plans

    [Interest will be charged to your account from the purchase date if 
the purchase balance is not paid in full within the/by [deferred 
interest period/date] or if your account is otherwise in default.]

      G-25(A)--Consent Form for Over-the-Credit Limit Transactions

          Your Choice Regarding Over-the-Credit Limit Coverage

    Unless you tell us otherwise, we will decline any transaction that 
causes you to go over your credit limit. If you want us to authorize 
these transactions, you can request over-the-credit limit coverage.
    If you have over-the-credit limit coverage and you go over your 
credit limit, we will charge you a fee of up to $35. We may also 
increase your APRs to the Penalty APR of XX.XX%. You will only pay one 
fee per billing cycle, even if you go over your limit multiple times in 
the same cycle.
    Even if you request over-the-credit limit coverage, in some cases we 
may still decline a transaction that would cause you to go over your 
limit, such as if you are past due or significantly over your credit 
limit.
    If you want over-the-limit coverage and to allow us to authorize 
transactions that go over your credit limit, please:

--Call us at [telephone number];
--Visit [Web site]; or
--Check or initial the box below, and return the form to us at 
[address].
--------------------
    -- I want over-the-limit coverage. I understand that if I go over my 
credit limit, my APRs may be increased and I will be charged a fee of up 
to $35. [I have the right to cancel this coverage at any time.]
    [-- I do not want over-the-limit coverage. I understand that 
transactions that exceed my credit limit will not be authorized.]
Printed Name:___________________________________________________________
Date:___________________________________________________________________
[Account Number]:_______________________________________________________

  G-25(B)--Revocation Notice for Periodic Statement Regarding Over-the-
                        Credit Limit Transactions

    You currently have over-the-credit limit coverage on your account, 
which means that we pay transactions that cause you go to over your 
credit limit. If you do go over your credit limit, we will charge you a 
fee of up to $35. We may also increase your APRs. To remove over-the-
credit-limit coverage from your account, call us at 1-800-xxxxxxx or 
visit [insert Web site].
    [You may also write us at: [insert address].]
    [You may also check or initial the box below and return this form to 
us at: [insert address].
    -- I want to cancel over-the-limit coverage for my account.

Printed Name:___________________________________________________________
Date:___________________________________________________________________
[Account Number]:_______________________________________________________



    Sec. Appendix H to Part 1026--Closed-End Model Forms and Clauses

H-1 Credit Sale Model Form (Sec. 1026.18)
H-2 Loan Model Form (Sec. 1026.18)
H-3 Amount Financed Itemization Model Form (Sec. 1026.18(c))
H-4(A) Variable-Rate Model Clauses (Sec. 1026.18(f)(1))
H-4(B) Variable-Rate Model Clauses (Sec. 1026.18(f)(2))
H-4(C) Variable-Rate Model Clauses (Sec. 1026.19(b))
H-4(D)(1) Adjustable-Rate Mortgage Model Form (Sec. 1026.20(c))
H-4(D)(2) Adjustable-Rate Mortgage Sample Form (Sec. 1026.20(c))
H-4(D)(3) Adjustable-Rate Mortgage Model Form (Sec. 1026.20(d))
H-4(D)(4) Adjustable-Rate Mortgage Sample Form (Sec. 1026.20(d))
H-4(E) Fixed-Rate Mortgage Interest Rate and Payment Summary Model 
Clause (Sec. 1026.18(s))
H-4(F) Adjustable-Rate Mortgage or Step-Rate Mortgage Interest Rate and 
Payment Summary Model Clause (Sec. 1026.18(s))
H-4(G) Mortgage with Negative Amortization Interest Rate and Payment 
Summary Model Clause (Sec. 1026.18(s))
H-4(H) Fixed-Rate Mortgage with Interest-Only Interest Rate and Payment 
Summary Model Clause (Sec. 1026.18(s))
H-4(I) Adjustable-Rate Mortgage Introductory Rate Disclosure Model 
Clause (Sec. 1026.18(s)(2)(iii))
H-4(J) Balloon Payment Disclosure Model Clause (Sec. 1026.18(s)(5))
H-4(K) No Guarantee to Refinance Statement Model Clause (Sec. 
1026.18(t))
H-5 Demand Feature Model Clauses (Sec. 1026.18(i))
H-6 Assumption Policy Model Clause (Sec. 1026.18(q))
H-7 Required Deposit Model Clause (Sec. 1026.18(r))
H-8 Rescission Model Form (General) (Sec. 1026.23)
H-9 Rescission Model Form (Refinancing (with Original Creditor)) (Sec. 
1026.23)
H-10 Credit Sale Sample

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H-11 Installment Loan Sample
H-12 Refinancing Sample
H-13 Closed-End Transaction With Demand Feature Sample
H-14 Variable-Rate Mortgage Sample (Sec. 1026.19(b))
H-15 Closed-End Graduated-Payment Transaction Sample
H-16 Mortgage Sample
H-17(A) Debt Suspension Model Clause
H-17(B) Debt Suspension Sample
H-18 Private Education Loan Application and Solicitation Model Form
H-19 Private Education Loan Approval Model Form
H-20 Private Education Loan Final Model Form
H-21 Private Education Loan Application and Solicitation Sample
H-22 Private Education Loan Approval Sample
H-23 Private Education Loan Final Sample
H-24(A) Mortgage Loan Transaction Loan Estimate--Model Form
H-24(B) Mortgage Loan Transaction Loan Estimate--Fixed Rate Loan Sample
H-24(C) Mortgage Loan Transaction Loan Estimate--Interest Only 
Adjustable Rate Loan Sample
H-24(D) Mortgage Loan Transaction Loan Estimate--Refinance Sample
H-24(E) Mortgage Loan Transaction Loan Estimate--Balloon Payment Sample
H-24(F) Mortgage Loan Transaction Loan Estimate--Negative Amortization 
Sample
H-24(G) Mortgage Loan Transaction Loan Estimate--Modification to Loan 
Estimate for Transaction Not Involving Seller--Model Form
H-25(A) Mortgage Loan Transaction Closing Disclosure--Model Form
H-25(B) Mortgage Loan Transaction Closing Disclosure--Fixed Rate Loan 
Sample
H-25(C) Mortgage Loan Transaction Closing Disclosure--Borrower Funds 
From Second-Lien Loan in Summaries of Transactions Sample
H-25(D) Mortgage Loan Transaction Closing Disclosure--Borrower 
Satisfaction of Seller's Second-Lien Loan Outside of Closing in 
Summaries of Transactions Sample
H-25(E) Mortgage Loan Transaction Closing Disclosure--Refinance 
Transaction Sample
H-25(F) Mortgage Loan Transaction Closing Disclosure--Refinance 
Transaction Sample (amount in excess of Sec. 1026.19(e)(3))
H-25(G) Mortgage Loan Transaction Closing Disclosure--Refinance 
Transaction With Cash From Consumer at Consummation Sample
H-25(H) Mortgage Loan Transaction Closing Disclosure--Modification to 
Closing Cost Details--Model Form
H-25(I) Mortgage Loan Transaction Closing Disclosure--Modification to 
Closing Disclosure for Disclosure Provided to Seller--Model Form
H-25(J) Mortgage Loan Transaction Closing Disclosure--Modification to 
Closing Disclosure for Transaction Not Involving Seller--Model Form
H-26 Mortgage Loan Transaction--Pre-Loan Estimate Statement--Model Form
H-27(A) Mortgage Loan Transaction --Written List of Providers--Model 
Form
H-27(B) Mortgage Loan Transaction--Sample of Written List of Providers
H-27(C) Mortgage Loan Transaction--Sample of Written List of Providers 
with Services You Cannot Shop For
H-28(A) Mortgage Loan Transaction Loan Estimate--Spanish Language Model 
Form
H-28(B) Mortgage Loan Transaction Loan Estimate--Spanish Language 
Purchase Sample
H-28(C) Mortgage Loan Transaction Loan Estimate--Spanish Language 
Refinance Sample
H-28(D) Mortgage Loan Transaction Loan Estimate--Spanish Language 
Balloon Payment Sample
H-28(E) Mortgage Loan Transaction Loan Estimate--Spanish Language 
Negative Amortization Sample
H-28(F) Mortgage Loan Transaction Closing Disclosure--Spanish Language 
Model Form
H-28(G) Mortgage Loan Transaction Closing Disclosure--Spanish Language 
Purchase Sample
H-28(H) Mortgage Loan Transaction Closing Disclosure--Spanish Language 
Refinance Sample
H-28(I) Mortgage Loan Transaction Loan Estimate--Modification to Loan 
Estimate for Transaction Not Involving Seller--Spanish Language Model 
Form
H-28(J) Mortgage Loan Transaction Closing Disclosure--Modification to 
Closing Disclosure for Transaction Not Involving Seller--Spanish 
Language Model Form
H-29 Escrow Cancellation Notice Model Form (Sec. 1026.20(e))
H-30(A) Sample Form of Periodic Statement (Sec. 1026.41)
H-30(B) Sample Form of Periodic Statement with Delinquency Box (Sec. 
1026.41)
H-30(C) Sample Form of Periodic Statement for a Payment-Option Loan
H-30(D) Sample Clause for Homeownership Counselor Contact Information 
(Sec. 1026.41)

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                   H-4(C)--Variable-Rate Model Clauses

    This disclosure describes the features of the adjustable-rate 
mortgage (ARM) program you are considering. Information on other ARM 
programs is available upon request.
    How Your Interest Rate and Payment Are Determined

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     Your interest rate will be based on [an index 
plus a margin] [a formula].
     Your payment will be based on the interest rate, 
loan balance, and loan term.

    --[The interest rate will be based on (identification of index) plus 
our margin. Ask for our current interest rate and margin.]
    --[The interest rate will be based on (identification of formula). 
Ask us for our current interest rate.]
    --Information about the index [formula for rate adjustments] is 
published [can be found] ------------.
--[The initial interest rate is not based on the (index) (formula) used 
to make later adjustments. Ask us for the amount of current interest 
rate discounts.]

                    How Your Interest Rate Can Change

     Your interest rate can change (frequency).
     [Your interest rate cannot increase or decrease 
more than ---- percentage points at each adjustment.]
     Your interest rate cannot increase [or decrease] 
more than ---- percentage points over the term of the loan.

                       How Your Payment Can Change

     Your payment can change (frequency) based on 
changes in the interest rate.
     [Your payment cannot increase more than (amount 
or percentage) at each adjustment.]
     You will be notified in writing -------- days 
before the due date of a payment at a new level. This notice will 
contain information about your interest rates, payment amount, and loan 
balance.
     [You will be notified once each year during which 
interest rate adjustments, but no payment adjustments, have been made to 
your loan. This notice will contain information about your interest 
rates, payment amount, and loan balance.]
     [For example, on a $10,000 [term] loan with an 
initial interest rate of -------- [(the rate shown in the interest rate 
column below for the year 19 --------)] [(in effect (month) (year)], the 
maximum amount that the interest rate can rise under this program is --
------ percentage points, to --------%, and the monthly payment can rise 
from a first-year payment of $-------- to a maximum of $-------- in the 
---------- year. To see what your payments would be, divide your 
mortgage amount by $10,000; then multiply the monthly payment by that 
amount. (For example, the monthly payment for a mortgage amount of 
$60,000 would be: $60,000 / $10,000 = 6; 6 x -------- = $-------- per 
month.)]
    [Example
    The example below shows how your payments would have changed under 
this ARM program based on actual changes in the index from 1982 to 1996. 
This does not necessarily indicate how your index will change in the 
future.
    The example is based on the following assumptions:

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                 H-4(I)--Introductory Rate Model Clause

    [Introductory Rate Notice
    You have a discounted introductory rate of -------- % that ends 
after (period).
    In the (period in sequence), even if market rates do not change, 
this rate will increase to ---- %.]

                  H-4(J)--Balloon Payment Model Clause

    [Final Balloon Payment due (date): $------------]

      H-4(K)--``No-Guarantee-to-Refinance'' Statement Model Clause

    There is no guarantee that you will be able to refinance to lower 
your rate and payments.

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     H-9--Rescission Model Form (Refinancing With Original Creditor)

                        NOTICE OF RIGHT TO CANCEL

                          Your Right To Cancel

    You are entering into a new transaction to increase the amount of 
credit previously provided to you. Your home is the security for this 
new transaction. You have a legal right under Federal law to cancel this 
new transaction, without cost, within three business days from whichever 
of the following events occurs last:
    (1) the date of this new transaction, which is ------------; or
    (2) the date you received your new Truth in Lending disclosures; or
    (3) the date you received this notice of your right to cancel.
    If you cancel this new transaction, it will not affect any amount 
that you presently owe. Your home is the security for that amount. 
Within 20 calendar days after we receive your notice of cancellation of 
this new transaction, we must take the steps necessary to reflect the 
fact that your home does not secure the increase of credit. We must also 
return any money you have given to us or anyone else in connection with 
this new transaction.
    You may keep any money we have given you in this new transaction 
until we have done the things mentioned above, but you must then offer 
to return the money at the address below.
    If we do not take possession of the money within 20 calendar days of 
your offer, you may keep it without further obligation.

                              How To Cancel

    If you decide to cancel this new transaction, you may do so by 
notifying us in writing, at

________________________________________________________________________

(Creditor's name and business address).

    You may use any written statement that is signed and dated by you 
and states your intention to cancel, or you may use this notice by 
dating and signing below. Keep one copy of this notice because it 
contains important information about your rights.
    If you cancel by mail or telegram, you must send the notice no later 
than midnight of
________________________________________________________________________

(Date)__________________________________________________________________
(or midnight of the third business day following the latest of the three 
events listed above).

    If you send or deliver your written notice to cancel some other way, 
it must be delivered to the above address no later than that time.

                            I WISH TO CANCEL

Consumer's Signature____________________________________________________
Date____________________________________________________________________

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         H-13--Closed-End Transaction With Demand Feature Sample
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                   H-14--Variable-Rate Mortgage Sample

    This disclosure describes the features of the adjustable-rate 
mortgage (ARM) program you are considering. Information on other ARM 
programs is available upon request.

            How Your Interest Rate and Payment Are Determined

     Your interest rate will be based on an index rate 
plus a margin.
     Your payment will be based on the interest rate, 
loan balance, and loan term.

--The interest rate will be based on the weekly average yield on United 
States Treasury securities adjusted to a constant maturity of 1 year 
(your index), plus our margin. Ask us for our current interest rate and 
margin.
--Information about the index rate is published weekly in the Wall 
Street Journal.
     Your interest rate will equal the index rate plus 
our margin unless your interest rate ``caps'' limit the amount of change 
in the interest rate.

                    How Your Interest Rate Can Change

     Your interest rate can change yearly.
     Your interest rate cannot increase or decrease 
more than 2 percentage points per year.
     Your interest rate cannot increase or decrease 
more than 5 percentage points over the term of the loan.

                   How Your Monthly Payment Can Change

     Your monthly payment can increase or decrease 
substantially based on annual changes in the interest rate.
     [For example, on a $10,000, 30-year loan with an 
initial interest rate of 12.41 percent in effect in July 1996, the 
maximum amount that the interest rate can rise under this program is 5 
percentage points, to 17.41 percent, and the monthly payment can rise 
from a first-year payment of $106.03 to a maximum of $145.34 in the 
fourth year. To see what your payment is, divide your mortgage amount by 
$10,000; then multiply the monthly payment by that amount. (For example, 
the monthly payment for a mortgage amount of $60,000 would be: $60,000 / 
$10,000 = 6; 6 x 106.03 = $636.18 per month.)
     You will be notified in writing 25 days before 
the annual payment adjustment may be made. This notice will contain 
information

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about your interest rates, payment amount and loan balance.]
    Example
    The example below shows how your payments would have changed under 
this ARM program based on actual changes in the index from 1982 to 1996. 
This does not necessarily indicate how your index will change in the 
future. The example is based on the following assumptions:

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    Note: To see what your payments would have been during that period, 
divide your mortgage amount by $10,000; then multiply the monthly 
payment by that amount. (For example, in 1996 the monthly payment for a 
mortgage amount of $60,000 taken out in 1982 would be: $60,000 / $10,000 
= 6; 6 x $106.73 = $640.38.)
     You will be notified in writing 25 days before 
the annual payment adjustment may be made. This notice will contain 
information about your interest rates, payment amount and loan balance.]

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          H-15 Closed-End Graduated Payment Transaction Sample
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                  H-17(A) Debt Suspension Model Clause

    Please enroll me in the optional [insert name of program], and bill 
my account the fee of [insert charge for the initial term of coverage]. 
I understand that enrollment is not required to obtain credit. I also 
understand that depending on the event, the protection may only 
temporarily suspend my duty to make minimum payments, not reduce the 
balance I owe. I understand that my balance will actually grow during 
the suspension period as interest continues to accumulate.
    [To Enroll, Sign Here]/[To Enroll, Initial Here].
X_______________________________________________________________________

                     H-17(B) Debt Suspension Sample

    Please enroll me in the optional [name of program], and bill my 
account the fee of $200.00. I understand that enrollment is not required 
to obtain credit. I also understand that depending on the event, the 
protection may only temporarily suspend my duty to make minimum 
payments, not reduce the balance I owe. I understand that my balance 
will actually grow during the suspension period as interest continues to 
accumulate.
    To Enroll, Initial Here.
X_______________________________________________________________________

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       H-24(A) Mortgage Loan Transaction Loan Estimate--Model Form

    Description: This is a blank model Loan Estimate that illustrates 
the application of the content requirements in Sec. 1026.37. This form 
provides two variations of page one, four variations of page two, and 
four variations of page three, reflecting the variable content 
requirements in Sec. 1026.37.

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 H-24(B) Mortgage Loan Transaction Loan Estimate--Fixed Rate Loan Sample

    Description: This is a sample of a completed Loan Estimate for a 
fixed rate loan. This loan is for the purchase of property at a sale 
price of $180,000 and has a loan amount of $162,000, a 30-year loan 
term, a fixed interest rate of 3.875 percent, and a prepayment penalty 
equal to 2.00 percent of the outstanding principal balance of the loan 
for the first two years after consummation of the transaction. The 
consumer has elected to lock the interest rate. The creditor requires an 
escrow account and that the consumer pay for private mortgage insurance.

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     H-24(C) Mortgage Loan Transaction Loan Estimate--Interest Only 
                       Adjustable Rate Loan Sample

    Description: This is a sample of a completed Loan Estimate for an 
adjustable rate loan with interest only payments. This loan is for the 
purchase of property at a sale price of $240,000 and has a loan amount 
of $211,000 and a 30-year loan term. For the first five years of the 
loan term, the scheduled payments cover only interest and the loan has 
an introductory interest rate that is fixed at 4.00 percent. After five 
years, the payments include principal and the interest rate adjusts 
every three years based on the value of the Monthly Treasury Average 
index plus a margin of 4.00 percent. The consumer has elected to lock 
the interest rate. The creditor does not require an escrow account with 
the loan.

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The creditor requires that the consumer pay for private mortgage 
insurance.
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    H-24(D) Mortgage Loan Transaction Loan Estimate--Refinance Sample

    Description: This is a sample of a completed Loan Estimate for a 
transaction that is for a refinance of an existing mortgage loan that 
secures the property, for which the consumer is estimated to receive 
funds from the transaction. The estimated property value is $180,000, 
the loan amount is $150,000, the estimated outstanding balance of the 
existing mortgage loan is $120,000, and the interest rate is 4.25 
percent. The consumer has elected to lock the interest rate. The 
creditor requires an escrow account and that the consumer pay for 
private mortgage insurance.

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 H-24(E) Mortgage Loan Transaction Loan Estimate--Balloon Payment Sample

    Description: This is a sample of the information required by Sec. 
1026.37(a) through (c) for a transaction with a loan term of seven years 
that includes a final balloon payment.

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 H-24(F) Mortgage Loan Transaction Loan Estimate--Negative Amortization 
                                 Sample

    Description: This is a sample of the information required by Sec. 
1026.37(a) and (b) for a transaction with negative amortization.

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 H-24(G) Mortgage Loan Transaction Loan Estimate--Modification to Loan 
        Estimate for Transaction Not Involving Seller--Model Form

    Description: This is a blank model Loan Estimate that illustrates 
the application of the content requirements in Sec. 1026.37, with the 
optional alternative tables permitted by Sec. 1026.37(d)(2) and (h)(2) 
for transactions without a seller. This form provides one variation of 
page one, four variations of page two, and four variations of page 
three, reflecting the variable content requirements in Sec. 1026.37.

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    H-25(A) Mortgage Loan Transaction Closing Disclosure--Model Form

    Description: This is a blank model Closing Disclosure that 
illustrates the content requirements in Sec. 1026.38. This form 
provides three variations of page one, one page two, one page three, 
four variations of page four, and four variations of page five, 
reflecting the variable content requirements in Sec. 1026.38. This form 
does not reflect modifications permitted under Sec. 1026.38(t).

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 H-25(B) Mortgage Loan Transaction Closing Disclosure--Fixed Rate Loan 
                                 Sample

    Description: This is a sample of a completed Closing Disclosure for 
the fixed rate loan illustrated by form H-24(B). The purpose, product, 
sale price, loan amount, loan term, and interest rate have not changed 
from the estimates provided on the Loan Estimate. The creditor requires 
an escrow account and that the consumer pay for private mortgage 
insurance for the transaction.

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  H-25(C) Mortgage Loan Transaction Closing Disclosure--Borrower Funds 
        From Second-Lien Loan in Summaries of Transactions Sample

    Description: This is a sample of the information required on the 
Closing Disclosure by Sec. 1026.38(j) for disclosure of consumer funds 
from a simultaneous second-lien credit transaction not otherwise 
disclosed pursuant to Sec. 1026.38(j)(2)(iii) or (iv) that is used to 
finance part of the purchase price of the property subject to the 
transaction.

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     H-25(D) Mortgage Loan Transaction Closing Disclosure--Borrower 
    Satisfaction of Seller's Second-Lien Loan Outside of Closing in 
                    Summaries of Transactions Sample

    Description: This is a sample of the information required on the 
Closing Disclosure by Sec. 1026.38(j) and (k) for the satisfaction of a 
junior-lien transaction by the consumer, which was not paid from closing 
funds.

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    H-25(E) Mortgage Loan Transaction Closing Disclosure--Refinance 
                           Transaction Sample

    Description: This is a sample of a completed Closing Disclosure for 
the refinance transaction illustrated by form H-24(D). The purpose, loan 
amount, loan term, and interest rate have not changed from the estimates 
provided on the Loan Estimate. The outstanding balance of the existing 
mortgage loan securing the property was less than estimated on the Loan 
Estimate. The creditor requires an escrow account and that the consumer 
pay for private mortgage insurance for the transaction.

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    H-25(F) Mortgage Loan Transaction Closing Disclosure--Refinance 
      Transaction Sample (Amount in Excess of Sec. 1026.19(e)(3))

    Description: This is a sample of the completed disclosures required 
by Sec. 1026.38(e) and (h) for a completed Closing Disclosure for the 
refinance transaction illustrated by form H-24(D). The Closing Costs 
have increased in excess of the good faith requirements of Sec. 
1026.19(e)(3) by $200, for which the creditor has provided a refund 
under Sec. 1026.19(f)(2)(v).

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    H-25(G) Mortgage Loan Transaction Closing Disclosure--Refinance 
           Transaction With Cash From Consumer at Consummation

    Description: This is a sample of a completed Closing Disclosure for 
a refinance transaction in which the consumer must pay additional funds 
to satisfy the existing mortgage loan securing the property and other 
existing debt to consummate the transaction.

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 H-25(H) Mortgage Loan Transaction Closing Disclosure--Modification to 
                    Closing Cost Details--Model Form

    Description: This is a blank model form of the modification to 
Closing Cost Details permitted by Sec. 1026.38(t)(5)(iv)(B).

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 H-25(I) Mortgage Loan Transaction Closing Disclosure--Modification to 
    Closing Disclosure for Disclosure Provided to Seller--Model Form

    Description: This is a blank model form of the modification 
permitted by Sec. 1026.38(t)(5)(vi).

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 H-25(J) Mortgage Loan Transaction Closing Disclosure--Modification to 
   Closing Disclosure for Transaction Not Involving Seller--Model Form

    Description: This is a blank model form of the alternative 
disclosures and modifications permitted by Sec. 1026.38(d)(2), (e), and 
(t)(5)(vii) for transactions without a seller.

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 H-26 Mortgage Loan Transaction--Pre-Loan Estimate Statement--Model Form

    Description: This is a model of the statement required by Sec. 
1026.19(e)(2)(ii) to be stated at the top of the front of the first page 
of a written estimate of terms or costs specific to a consumer that is 
provided to a consumer before the consumer receives the disclosures 
required under Sec. 1026.19(e)(1)(i).

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H-27(A) Mortgage Loan Transaction--Written List of Providers--Model Form

    Description: This is a blank model form for the written list of 
settlement service providers required by Sec. 1026.19(e)(1)(vi) and the 
statement required by Sec. 1026.19(e)(1)(vi)(C) that the consumer may 
select a settlement service provider that is not on the list.

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 H-27(B) Mortgage Loan Transaction--Sample of Written List of Providers

    Description: This is a sample of the Written List of Providers for 
the transaction in the sample Loan Estimate illustrated by form H-24(B).

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 H-27(C) Mortgage Loan Transaction--Sample of Written List of Providers 
                    With Services You Cannot Shop for

    Description: This is a sample of the Written List of Providers with 
information about the providers selected by the creditor for the charges 
disclosed pursuant to Sec. 1026.37(f)(2).

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H-28(A) Mortgage Loan Transaction Loan Estimate--Spanish Language Model 
                                  Form

    Description: This is a blank model Loan Estimate that illustrates 
the application of the content requirements in Sec. 1026.37, and is 
translated into the Spanish language as permitted by Sec. 
1026.37(o)(5)(ii). This form provides two variations of page one, four 
variations of page two, and four variations of page three, reflecting 
the variable content requirements in Sec. 1026.37.

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   H-28(B) Mortgage Loan Transaction Loan Estimate--Spanish Language 
                             Purchase Sample

    Description: This is a sample of the Loan Estimate illustrated by 
form H-24(C) for a 5 Year Interest Only, 5/3 Adjustable Rate loan, 
translated into the Spanish language as permitted by Sec. 
1026.37(o)(5)(ii).

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   H-28(C) Mortgage Loan Transaction Loan Estimate--Spanish Language 
                            Refinance Sample

    Description: This is a sample of the Loan Estimate illustrated by 
form H-24(D) for a refinance transaction in which the consumer is 
estimated to receive funds from the transaction, translated into the 
Spanish language as permitted by Sec. 1026.37(o)(5)(ii).

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   H-28(D) Mortgage Loan Transaction Loan Estimate--Spanish Language 
                         Balloon Payment Sample

    Description: This is a sample of the information required by Sec. 
1026.37(a) through (c) for a transaction with a loan term of seven years 
that includes a final balloon payment illustrated by form H-24(E), 
translated into the Spanish language as permitted by Sec. 
1026.37(o)(5)(ii).

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   H-28(E) Mortgage Loan Transaction Loan Estimate--Spanish Language 
                      Negative Amortization Sample

    Description: This is a sample of the information required by Sec. 
1026.37(a) and (b) for a transaction with negative amortization 
illustrated by form H-24(F), translated into the Spanish language as 
permitted by Sec. 1026.37(o)(5)(ii).

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 H-28(F) Mortgage Loan Transaction Closing Disclosure--Spanish Language 
                               Model Form

    Description: This is a blank model Closing Disclosure that 
illustrates the content requirements in Sec. 1026.38, and is translated 
into the Spanish language as permitted by Sec. 1026.38(t)(5)(viii). 
This form provides three variations of page one, one page two, one page 
three, four variations of page four, four variations of page five, and 
two variations of page six reflecting the variable content requirements 
in Sec. 1026.38. This form does not reflect any other modifications 
permitted under Sec. 1026.38(t).

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 H-28(G) Mortgage Loan Transaction Closing Disclosure--Spanish Language 
                             Purchase Sample

    Description: This is a sample of the Closing Disclosure illustrated 
by form H-25(B) translated into the Spanish language as permitted by 
Sec. 1026.38(t)(5)(viii).

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 H-28(H) Mortgage Loan Transaction Closing Disclosure--Spanish Language 
                            Refinance Sample

    Description: This is a sample of the Closing Disclosure illustrated 
by form H-25(E) translated into the Spanish language as permitted by 
Sec. 1026.38(t)(5)(viii).

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 H-28(I) Mortgage Loan Transaction Loan Estimate--Modification to Loan 
 Estimate for Transaction Not Involving Seller--Spanish Language Model 
                                  Form

    Description: This is a blank model Loan Estimate that illustrates 
form H-24(G), with the optional alternative disclosures permitted by 
Sec. 1026.37(d)(2) and (h)(2) for transactions without a seller, 
translated into the Spanish language as permitted by Sec. 
1026.37(o)(5)(ii).

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 H-28(J) Mortgage Loan Transaction Closing Disclosure--Modification to 
    Closing Disclosure for Transaction Not Involving Seller--Spanish 
                           Language Model Form

    Description: This is a blank model Closing Disclosure that 
illustrates form H-25(J), with the alternative disclosures under Sec. 
1026.38(d)(2), (e), and (t)(5)(vii) for transactions without a seller, 
translated into the Spanish language as permitted by Sec. 
1026.38(t)(5)(viii).

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      H-29 Escrow Cancellation Notice Model Form (Sec. 1026.20(e))

    Description: This is a blank model form of the disclosures required 
by Sec. 1026.20(e).

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H-30(D) Sample Clause for Homeownership Counselor Contact Information

    Housing Counselor Information: If you would like counseling or 
assistance, you can contact the following:

[[Page 424]]

     U.S. Department of Housing and Urban Development 
(HUD): For a list of homeownership counselors or counseling 
organizations in your area, go to http://www.hud.gov/offices/hsg/sfh/
hcc/hcs.cfm or call 800-569-4287.

[76 FR 79772, Dec. 22, 2011, as amended at 78 FR 11008, Feb. 14, 2013; 
78 FR 80130, Dec. 31, 2013; 80 FR 8776, Feb. 19, 2015]

    Effective Date Note: At 81 FR 72390, Oct. 19, 2016, appendix H to 
part 1026 was amended by:
    a. Revising the entry for H-30(C) in the table of contents at the 
beginning of the appendix;
    b. Adding entries for H-30(E) and H-30(F) in the table of contents 
at the beginning of the appendix;
    c. Revising H-4(C), H-14, and H-30(C); and
    d. Adding H-30(E) and H-30(F), effective Oct. 19, 2017. For the 
convenience of the user, the added and revised text is set forth as 
follows:



    Sec. Appendix H to Part 1026--Closed-End Model Forms and Clauses

                                * * * * *

H-30(C) Sample Form of Periodic Statement for a Payment-Option Loan 
(Sec. 1026.41)

                                * * * * *

H-30(E) Sample Form of Periodic Statement for Consumer in Chapter 7 or 
Chapter 11 Bankruptcy
H-30(F) Sample Form of Periodic Statement for Consumer in Chapter 12 or 
Chapter 13 Bankruptcy

                                * * * * *

                   H-4(C)--Variable Rate Model Clauses

    This disclosure describes the features of the adjustable-rate 
mortgage (ARM) program you are considering. Information on other ARM 
programs is available upon request.

            How Your Interest Rate and Payment Are Determined

     Your interest rate will be based on [an index 
plus a margin] [a formula].
     Your payment will be based on the interest rate, 
loan balance, and loan term.

--[The interest rate will be based on (identification of index) plus our 
margin. Ask for our current interest rate and margin.]
--[The interest rate will be based on (identification of formula). Ask 
us for our current interest rate.]
--Information about the index [formula for rate adjustments] is 
published [can be found] ------.
--[The initial interest rate is not based on the (index) (formula) used 
to make later adjustments. Ask us for the amount of current interest 
rate discounts.]

                    How Your Interest Rate Can Change

     Your interest rate can change (frequency).
     [Your interest rate cannot increase or decrease 
more than ---- percentage points at each adjustment.]
     Your interest rate cannot increase [or decrease] 
more than ---- percentage points over the term of the loan.

                       How Your Payment Can Change

     Your payment can change (frequency) based on 
changes in the interest rate.
     [Your payment cannot increase more than (amount 
or percentage) at each adjustment.]
     [You will be notified at least 210, but no more 
than 240, days before first payment at the adjusted level is due after 
the initial interest rate adjustment of the loan. This notice will 
contain information about the adjustment, including the interest rate, 
payment amount, and loan balance.]
     [You will be notified at least 60, but no more 
than 120, days before first payment at the adjusted level is due after 
any interest rate adjustment resulting in a corresponding payment 
change. This notice will contain information about the adjustment, 
including the interest rate, payment amount, and loan balance.]
     [For example, on a $10,000 [term] loan with an 
initial interest rate of ---- [(the rate shown in the interest rate 
column below for the year 19 ----)] [(in effect (month) (year)], the 
maximum amount that the interest rate can rise under this program is --
-- percentage points, to ----%, and the monthly payment can rise from a 
first-year payment of $---- to a maximum of $---- in the ---- year. To 
see what your payments would be, divide your mortgage amount by $10,000; 
then multiply the monthly payment by that amount. (For example, the 
monthly payment for a mortgage amount of $60,000 would be: $60,000 / 
$10,000 = 6; 6 x ---- = $---- per month.)]

                                [Example

    The example below shows how your payments would have changed under 
this ARM program based on actual changes in the index from 1982 to 1996. 
This does not necessarily indicate how your index will change in the 
future.
    The example is based on the following assumptions:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Amount...................................  $10,000.
Term.....................................  ----.
Change date..............................  ----.

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Payment adjustment.......................  (frequency).
Interest adjustment......................  (frequency).
[Margin] *...............................  ----.
------------------------------------------------------------------------
Caps ---- [periodic interest rate cap]..................................
---- [lifetime interest rate cap........................................
---- [payment cap]......................................................
[Interest rate carryover]...............................................
[Negative amortization].................................................
[Interest rate discount].**.............................................
Index(identification of index or formula)...............................
------------------------------------------------------------------------
* This is a margin we have used recently, your margin may be different.
** This is the amount of a discount we have provided recently; your loan
  may be discounted by a different amount.]


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Margin
                           Year                                Index (%)         (percentage     Interest rate (%)   Monthly payment   Remaining balance
                                                                                   points)                                 ($)                ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1982.....................................................  .................  .................  .................
1983.....................................................  .................  .................  .................
1984.....................................................  .................  .................  .................
1985.....................................................  .................  .................  .................
1986.....................................................  .................  .................  .................
1987.....................................................  .................  .................  .................
1988.....................................................  .................  .................  .................
1989.....................................................  .................  .................  .................
1990.....................................................  .................  .................  .................
1991.....................................................  .................  .................  .................
1992.....................................................  .................  .................  .................
1993.....................................................  .................  .................  .................
1994.....................................................  .................  .................  .................
1995.....................................................  .................  .................  .................
1996.....................................................  .................  .................  .................  .................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then multiply the monthly payment by that
  amount. (For example, in 1996 the monthly payment for a mortgage amount of $60,000 taken out in 1982 would be: $60,000 / $10,000 = 6; 6 x ---- = $----
  per month.)

                                * * * * *

                   H-14--Variable Rate Mortgage Sample

    This disclosure describes the features of the adjustable-rate 
mortgage (ARM) program you are considering. Information on other ARM 
programs is available upon request.

            How Your Interest Rate and Payment Are Determined

     Your interest rate will be based on an index rate 
plus a margin.
     Your payment will be based on the interest rate, 
loan balance, and loan term.
    --The interest rate will be based on the weekly average yield on 
United States Treasury securities adjusted to a constant maturity of 1 
year (your index), plus our margin. Ask us for our current interest rate 
and margin.
    --Information about the index rate is published weekly in the Wall 
Street Journal.
     Your interest rate will equal the index rate plus 
our margin unless your interest rate ``caps'' limit the amount of change 
in the interest rate.

                    How Your Interest Rate Can Change

     Your interest rate can change yearly.
     Your interest rate cannot increase or decrease 
more than 2 percentage points per year.
     Your interest rate cannot increase or decrease 
more than 5 percentage points over the term of the loan.

                   How Your Monthly Payment Can Change

     Your monthly payment can increase or decrease 
substantially based on annual changes in the interest rate.
     [For example, on a $10,000, 30-year loan with an 
initial interest rate of 12.41 percent in effect in July 1996, the 
maximum amount that the interest rate can rise under this program is 5 
percentage points, to 17.41 percent, and the monthly payment can rise 
from a first-year payment of $106.03 to a maximum of $145.34 in the 
fourth year. To see what your payment is, divide your mortgage amount by 
$10,000; then multiply the monthly payment by that amount. (For example, 
the monthly payment for a mortgage amount of $60,000 would be: $60,000 / 
$10,000 = 6; 6 x 106.03 = $636.18 per month.)]
     [You will be notified at least 210, but no more 
than 240, days before first payment at the adjusted level is due after 
the initial interest rate adjustment of the loan. This notice will 
contain information about the adjustment, including the interest rate, 
payment amount, and loan balance.]
     [You will be notified at least 60, but no more 
than 120, days before first payment at the adjusted level is due after 
any interest rate adjustment resulting in a corresponding payment 
change. This notice will contain information about the adjustment, 
including

[[Page 426]]

the interest rate, payment amount, and loan balance.]

                                [Example

    The example below shows how your payments would have changed under 
this ARM program based on actual changes in the index from 1982 to 1996. 
This does not necessarily indicate how your index will change in the 
future. The example is based on the following assumptions:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Amount...................................  $10,000.
Term.....................................  30 years.
Payment adjustment.......................  1 year.
Interest adjustment......................  1 year.
Margin...................................  3 percentage points.
------------------------------------------------------------------------
Caps ---- 2 percentage points annual interest rate......................
---- 5 percentage points lifetime interest rate.........................
Index ---- Weekly average yield on U.S. Treasury securities adjusted to
 a constant maturity of one year..
------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                     Margin *
 Year (as of 1st week ending in        Index        (percentage    Interest rate      Monthly        Remaining
              July)                                   points)           (%)         payment ($)     balance ($)
----------------------------------------------------------------------------------------------------------------
1982............................           14.41               3           17.41          145.90        9,989.37
1983............................            9.78               3       * * 15.41          129.81        9,969.66
1984............................           12.17               3           15.17          127.91        9,945.51
1985............................            7.66               3        ** 13.17          112.43        9,903.70
1986............................            6.36               3       *** 12.41          106.73        9,848.94
1987............................            6.71               3       *** 12.41          106.73        9,786.98
1988............................            7.52               3       *** 12.41          106.73        9,716.88
1989............................            7.97               3       *** 12.41          106.73        9,637.56
1990............................            8.06               3       *** 12.41          106.73        9,547.83
1991............................            6.40               3       *** 12.41          106.73        9,446.29
1992............................            3.96               3       *** 12.41          106.73        9,331.56
1993............................            3.42               3       *** 12.41          106.73        9,201.61
1994............................            5.47               3       *** 12.41          106.73        9,054.72
1995............................            5.53               3       *** 12.41          106.73        8,888.52
1996............................            5.82               3       *** 12.41          106.73        8,700.37
----------------------------------------------------------------------------------------------------------------
* This is a margin we have used recently; your margin may be different.
** This interest rate reflects a 2 percentage point annual interest rate cap.
*** This interest rate reflects a 5 percentage point lifetime interest rate cap.
Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then
  multiply the monthly payment by that amount. (For example, in 1996 the monthly payment for a mortgage amount
  of $60,000 taken out in 1982 would be: $60,000 / $10,000 = 6; 6 x $106.73 = $640.38.)]

     [You will be notified at least 210, but no more 
than 240, days before first payment at the adjusted level is due after 
the initial interest rate adjustment of the loan. This notice will 
contain information about the adjustment, including the interest rate, 
payment amount, and loan balance.]
     [You will be notified at least 60, but no more 
than 120, days before first payment at the adjusted level is due after 
any interest rate adjustment resulting in a corresponding payment 
change. This notice will contain information about the adjustment, 
including the interest rate, payment amount, and loan balance.]

                                * * * * *

   H-30(C) Sample Form of Periodic Statement for a Payment-Option Loan

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                                * * * * *

 H-30(E) Sample Form of Periodic Statement for Consumer in Chapter 7 or 
                          Chapter 11 Bankruptcy

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H-30(F) Sample Form of Periodic Statement for Consumer in Chapter 12 or 
                          Chapter 13 Bankruptcy

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                 Sec. Appendix I to Part 1026 [Reserved]



 Sec. Appendix J to Part 1026--Annual Percentage Rate Computations for 
                     Closed-End Credit Transactions

                            (a) Introduction

    (1) Section 1026.22(a) of Regulation Z provides that the annual 
percentage rate for other than open-end credit transactions shall be 
determined in accordance with either the actuarial method or the United 
States Rule method. This appendix contains an explanation of the 
actuarial method as well as equations, instructions and examples of how 
this method applies to single advance and multiple advance transactions.
    (2) Under the actuarial method, at the end of each unit-period (or 
fractional unit-period) the unpaid balance of the amount financed is 
increased by the finance charge earned during that period and is 
decreased by the total payment (if any) made at the end of that period. 
The determination of unit-periods and fractional unit-periods shall be 
consistent with the definitions and rules in paragraphs (b)(3), (4) and 
(5) of this section and the general equation in paragraph (b)(8) of this 
section.
    (3) In contrast, under the United States Rule method, at the end of 
each payment period, the unpaid balance of the amount financed is 
increased by the finance charge earned during that payment period and is 
decreased by the payment made at the end of that payment period. If the 
payment is less than the finance charge earned, the adjustment of the 
unpaid balance of the amount financed is postponed until the end of the 
next payment period. If at that time the sum of the two payments is 
still less than the total earned finance charge for the two payment 
periods, the adjustment of the unpaid balance of the amount financed is 
postponed still another payment period, and so forth.

         (b) Instructions and Equations for the Actuarial Method

                            (1) General Rule

    The annual percentage rate shall be the nominal annual percentage 
rate determined by multiplying the unit-period rate by the number of 
unit-periods in a year.

                       (2) Term of the Transaction

    The term of the transaction begins on the date of its consummation, 
except that if the finance charge or any portion of it is earned 
beginning on a later date, the term begins on the later date. The term 
ends on the date the last payment is due, except that if an advance is 
scheduled after that date, the term ends on the later date. For 
computation purposes, the length of the term shall be equal to the time 
interval between any point in time on the beginning date to the same 
point in time on the ending date.

                    (3) Definitions of Time Intervals

    (i) A period is the interval of time between advances or between 
payments and includes the interval of time between the date the finance 
charge begins to be earned and the date of the first advance thereafter 
or the date of the first payment thereafter, as applicable.
    (ii) A common period is any period that occurs more than once in a 
transaction.
    (iii) A standard interval of time is a day, week, semimonth, month, 
or a multiple of a week or a month up to, but not exceeding, 1 year.
    (iv) All months shall be considered equal. Full months shall be 
measured from any point in time on a given date of a given month to the 
same point in time on the same date of another month. If a series of 
payments (or advances) is scheduled for the last day of each month, 
months shall be measured from the last day of the given month to the 
last day of another month. If payments (or advances) are scheduled for 
the 29th or 30th of each month, the last day of February shall be used 
when applicable.

                             (4) Unit-Period

    (i) In all transactions other than a single advance, single payment 
transaction, the unit-period shall be that common period, not to exceed 
1 year, that occurs most frequently in the transaction, except that
    (A) If 2 or more common periods occur with equal frequency, the 
smaller of such common periods shall be the unit-period; or
    (B) If there is no common period in the transaction, the unit-period 
shall be that period which is the average of all periods rounded to the 
nearest whole standard interval of time. If the average is equally near 
2 standard intervals of time, the lower shall be the unit-period.
    (ii) In a single advance, single payment transaction, the unit-
period shall be the term of the transaction, but shall not exceed 1 
year.

            (5) Number of Unit-Periods Between 2 Given Dates

    (i) The number of days between 2 dates shall be the number of 24-
hour intervals between any point in time on the first date to the same 
point in time on the second date.
    (ii) If the unit-period is a month, the number of full unit-periods 
between 2 dates shall be the number of months measured back from the 
later date. The remaining fraction of a unit-period shall be the number 
of days measured forward from the earlier date to the beginning of the 
first full unit-period, divided by 30. If the unit-period is a month, 
there are 12 unit-periods per year.

[[Page 431]]

    (iii) If the unit-period is a semimonth or a multiple of a month not 
exceeding 11 months, the number of days between 2 dates shall be 30 
times the number of full months measured back from the later date, plus 
the number of remaining days. The number of full unit-periods and the 
remaining fraction of a unit-period shall be determined by dividing such 
number of days by 15 in the case of a semimonthly unit-period or by the 
appropriate multiple of 30 in the case of a multimonthly unit-period. If 
the unit-period is a semimonth, the number of unit-periods per year 
shall be 24. If the number of unit-periods is a multiple of a month, the 
number of unit-periods per year shall be 12 divided by the number of 
months per unit-period.
    (iv) If the unit-period is a day, a week, or a multiple of a week, 
the number of full unit-periods and the remaining fractions of a unit-
period shall be determined by dividing the number of days between the 2 
given dates by the number of days per unit-period. If the unit-period is 
a day, the number of unit-periods per year shall be 365. If the unit-
period is a week or a multiple of a week, the number of unit-periods per 
year shall be 52 divided by the number of weeks per unit-period.
    (v) If the unit-period is a year, the number of full unit-periods 
between 2 dates shall be the number of full years (each equal to 12 
months) measured back from the later date. The remaining fraction of a 
unit-period shall be
    (A) The remaining number of months divided by 12 if the remaining 
interval is equal to a whole number of months, or
    (B) The remaining number of days divided by 365 if the remaining 
interval is not equal to a whole number of months.
    (vi) In a single advance, single payment transaction in which the 
term is less than a year and is equal to a whole number of months, the 
number of unit-periods in the term shall be 1, and the number of unit-
periods per year shall be 12 divided by the number of months in the term 
or 365 divided by the number of days in the term.
    (vii) In a single advance, single payment transaction in which the 
term is less than a year and is not equal to a whole number of months, 
the number of unit-periods in the term shall be 1, and the number of 
unit-periods per year shall be 365 divided by the number of days in the 
term.

           (6) Percentage Rate for a Fraction of a Unit-Period

    The percentage rate of finance charge for a fraction (less than 1) 
of a unit-period shall be equal to such fraction multiplied by the 
percentage rate of finance charge per unit-period.

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 Sec. Appendix K to Part 1026--Total Annual Loan Cost Rate Computations 
                    for Reverse Mortgage Transactions

    (a) Introduction. Creditors are required to disclose a series of 
total annual loan cost rates for each reverse mortgage transaction. This 
appendix contains the equations creditors must use in computing the 
total annual loan cost rate for various transactions, as well as 
instructions, explanations, and examples for various transactions. This 
appendix is modeled after appendix J of this part (Annual Percentage 
Rates Computations for Closed-end Credit Transactions); creditors should 
consult appendix J of this part for additional guidance in using the 
formulas for reverse mortgages.
    (b) Instructions and equations for the total annual loan cost rate--
(1) General rule. The total annual loan cost rate shall be the nominal 
total annual loan cost rate determined by multiplying the unit-period 
rate by the number of unit-periods in a year.
    (2) Term of the transaction. For purposes of total annual loan cost 
disclosures, the term of a reverse mortgage transaction is assumed to 
begin on the first of the month in which consummation is expected to 
occur. If a loan cost or any portion of a loan cost is initially 
incurred beginning on a date later than consummation, the term of the 
transaction is assumed to begin on the first of the month in which that 
loan cost is incurred. For purposes of total annual loan cost 
disclosures, the term ends on each of the assumed loan periods specified 
in Sec. 1026.33(c)(6).
    (3) Definitions of time intervals. (i) A period is the interval of 
time between advances.
    (ii) A common period is any period that occurs more than once in a 
transaction.
    (iii) A standard interval of time is a day, week, semimonth, month, 
or a multiple of a week or a month up to, but not exceeding, 1 year.
    (iv) All months shall be considered to have an equal number of days.
    (4) Unit-period. (i) In all transactions other than single-advance, 
single-payment transactions, the unit-period shall be that common 
period, not to exceed one year, that occurs most frequently in the 
transaction, except that:
    (A) If two or more common periods occur with equal frequency, the 
smaller of such common periods shall be the unit-period; or
    (B) If there is no common period in the transaction, the unit-period 
shall be that period which is the average of all periods rounded to the 
nearest whole standard interval of time. If the average is equally near 
two standard intervals of time, the lower shall be the unit-period.
    (ii) In a single-advance, single-payment transaction, the unit-
period shall be the term of the transaction, but shall not exceed one 
year.
    (5) Number of unit-periods between two given dates. (i) The number 
of days between two dates shall be the number of 24-hour intervals 
between any point in time on the first date to the same point in time on 
the second date.
    (ii) If the unit-period is a month, the number of full unit-periods 
between two dates shall be the number of months. If the unit-period is a 
month, the number of unit-periods per year shall be 12.
    (iii) If the unit-period is a semimonth or a multiple of a month not 
exceeding 11 months, the number of days between two dates shall be 30 
times the number of full months. The number of full unit-periods shall 
be determined by dividing the number of days by 15 in the case of a 
semimonthly unit-period or by the appropriate multiple of 30 in the case 
of a multimonthly unit-period. If the unit-period is a semimonth, the 
number of unit-periods per year shall be 24. If the number of unit-
periods is a multiple of a month, the number of unit-periods per year 
shall be 12 divided by the number of months per unit-period.
    (iv) If the unit-period is a day, a week, or a multiple of a week, 
the number of full unit-periods shall be determined by dividing the 
number of days between the two given dates by the number of days per 
unit-period. If the unit-period is a day, the number of unit-periods per 
year shall be 365. If the unit-period is a week or a multiple of a week, 
the number of unit-periods per year shall be 52 divided by the number of 
weeks per unit-period.
    (v) If the unit-period is a year, the number of full unit-periods 
between two dates shall be the number of full years (each equal to 12 
months).
    (6) Symbols. The symbols used to express the terms of a transaction 
in the equation set forth in paragraph (b)(8) of this appendix are 
defined as follows:

Aj = The amount of each periodic or lump-sum advance to the 
          consumer under the reverse mortgage transaction.
i = Percentage rate of the total annual loan cost per unit-period, 
          expressed as a decimal equivalent.
j = The number of unit-periods until the jth advance.
n = The number of unit-periods between consummation and repayment of the 
          debt.
Pn = Min (Baln, Valn). This is the 
          maximum amount that the creditor can be repaid at the 
          specified loan term.
Baln = Loan balance at time of repayment, including all costs 
          and fees incurred by the consumer (including any shared 
          appreciation or shared equity amount) compounded to time n at 
          the creditor's contract rate of interest.

[[Page 443]]

Valn = Val0(1 + [sigma])\y\, where Val0 
          is the property value at consummation, [sigma] is the assumed 
          annual rate of appreciation for the dwelling, and y is the 
          number of years in the assumed term. Valn must be 
          reduced by the amount of any equity reserved for the consumer 
          by agreement between the parties, or by 7 percent (or the 
          amount or percentage specified in the credit agreement), if 
          the amount required to be repaid is limited to the net 
          proceeds of sale.
[sigma] = The summation operator.

    Symbols used in the examples shown in this appendix are defined as 
follows:
[GRAPHIC] [TIFF OMITTED] TR22DE11.072

w = The number of unit-periods per year.
I = wi x 100 = the nominal total annual loan cost rate.

    (7) General equation. The total annual loan cost rate for a reverse 
mortgage transaction must be determined by first solving the following 
formula, which sets forth the relationship between the advances to the 
consumer and the amount owed to the creditor under the terms of the 
reverse mortgage agreement for the loan cost rate per unit-period (the 
loan cost rate per unit-period is then multiplied by the number of unit-
periods per year to obtain the total annual loan cost rate I; that is, I 
= wi):
[GRAPHIC] [TIFF OMITTED] TR22DE11.073

    (8) Solution of general equation by iteration process. (i) The 
general equation in paragraph (b)(7) of this appendix, when applied to a 
simple transaction for a reverse mortgage loan of equal monthly advances 
of $350 each, and with a total amount owed of $14,313.08 at an assumed 
repayment period of two years, takes the special form:
[GRAPHIC] [TIFF OMITTED] TR22DE11.074

Using the iteration procedures found in steps 1 through 4 of (b)(9)(i) 
of appendix J of this part, the total annual loan cost rate, correct to 
two decimals, is 48.53%.

[[Page 444]]

    (ii) In using these iteration procedures, it is expected that 
calculators or computers will be programmed to carry all available 
decimals throughout the calculation and that enough iterations will be 
performed to make virtually certain that the total annual loan cost rate 
obtained, when rounded to two decimals, is correct. Total annual loan 
cost rates in the examples below were obtained by using a 10-digit 
programmable calculator and the iteration procedure described in 
appendix J of this part.
    (9) Assumption for discretionary cash advances. If the consumer 
controls the timing of advances made after consummation (such as in a 
credit line arrangement), the creditor must use the general formula in 
paragraph (b)(7) of this appendix. The total annual loan cost rate shall 
be based on the assumption that 50 percent of the principal loan amount 
is advanced at closing, or in the case of an open-end transaction, at 
the time the consumer becomes obligated under the plan. Creditors shall 
assume the advances are made at the interest rate then in effect and 
that no further advances are made to, or repayments made by, the 
consumer during the term of the transaction or plan.
    (10) Assumption for variable-rate reverse mortgage transactions. If 
the interest rate for a reverse mortgage transaction may increase during 
the loan term and the amount or timing is not known at consummation, 
creditors shall base the disclosures on the initial interest rate in 
effect at the time the disclosures are provided.
    (11) Assumption for closing costs. In calculating the total annual 
loan cost rate, creditors shall assume all closing and other consumer 
costs are financed by the creditor.
    (c) Examples of total annual loan cost rate computations--(1) Lump-
sum advance at consummation.
Lump-sum advance to consumer at consummation: $30,000
Total of consumer's loan costs financed at consummation: $4,500
Contract interest rate: 11.60%
Estimated time of repayment (based on life expectancy of a consumer at 
age 78): 10 years
Appraised value of dwelling at consummation: $100,000
Assumed annual dwelling appreciation rate: 4%

P10 = Min (103,385.84, 137,662.72)
[GRAPHIC] [TIFF OMITTED] TR22DE11.075

i = .1317069438
Total annual loan cost rate (100(.1317069438 x 1)) = 13.17%
    (2) Monthly advance beginning at consummation.
Monthly advance to consumer, beginning at consummation: $492.51
Total of consumer's loan costs financed at consummation: $4,500
Contract interest rate: 9.00%
Estimated time of repayment (based on life expectancy of a consumer at 
age 78): 10 years
Appraised value of dwelling at consummation: $100,000
Assumed annual dwelling appreciation rate: 8%
[GRAPHIC] [TIFF OMITTED] TR22DE11.076

Total annual loan cost rate (100(.009061140 x 12)) = 10.87%
    (3) Lump sum advance at consummation and monthly advances 
thereafter.
Lump sum advance to consumer at consummation: $10,000
Monthly advance to consumer, beginning at consummation: $725
Total of consumer's loan costs financed at consummation: $4,500
Contract rate of interest: 8.5%

[[Page 445]]

Estimated time of repayment (based on life expectancy of a consumer at 
age 75): 12 years
Appraised value of dwelling at consummation: $100,000
Assumed annual dwelling appreciation rate: 8%
[GRAPHIC] [TIFF OMITTED] TR22DE11.077

Total annual loan cost rate (100(.007708844 x 12)) = 9.25%
    (d) Reverse mortgage model form and sample form--(1) Model form.

                       Total Annual Loan Cost Rate

                               Loan Terms

    Age of youngest borrower:
    Appraised property value:
    Interest rate:
    Monthly advance:
    Initial draw:
    Line of credit:

                          Initial Loan Charges

    Closing costs:
    Mortgage insurance premium:
    Annuity cost:

                          Monthly Loan Charges

    Servicing fee:

                             Other Charges:

    Mortgage insurance:
    Shared Appreciation:

                            Repayment Limits

----------------------------------------------------------------------------------------------------------------
                                                              Total annual loan cost rate
     Assumed annual appreciation     ---------------------------------------------------------------------------
              (percent)                                    [ ]-year loan      [ ]-year loan      [ ]-year loan
                                       2-year loan term        term]               term               term
----------------------------------------------------------------------------------------------------------------
0...................................  .................                [ ]  .................
4...................................  .................                [ ]  .................
8...................................  .................                [ ]  .................  .................
----------------------------------------------------------------------------------------------------------------

    The cost of any reverse mortgage loan depends on how long you keep 
the loan and how much your house appreciates in value. Generally, the 
longer you keep a reverse mortgage, the lower the total annual loan cost 
rate will be.
    This table shows the estimated cost of your reverse mortgage loan, 
expressed as an annual rate. It illustrates the cost for three [four] 
loan terms: 2 years, [half of life expectancy for someone your age,] 
that life expectancy, and 1.4 times that life expectancy. The table also 
shows the cost of the loan, assuming the value of your home appreciates 
at three different rates: 0%, 4% and 8%.
    The total annual loan cost rates in this table are based on the 
total charges associated with this loan. These charges typically include 
principal, interest, closing costs, mortgage insurance premiums, annuity 
costs, and servicing costs (but not costs when you sell the home).
    The rates in this table are estimates. Your actual cost may differ 
if, for example, the amount of your loan advances varies or the interest 
rate on your mortgage changes.
    Signing an Application or Receiving These Disclosures Does Not 
Require You To Complete This Loan
    (2) Sample Form.

                       Total Annual Loan Cost Rate

                               Loan Terms

    Age of youngest borrower: 75
    Appraised property value: $100,000
    Interest rate: 9%
    Monthly advance: $301.80
    Initial draw: $1,000
    Line of credit: $4,000

                          Initial Loan Charges

    Closing costs: $5,000
    Mortgage insurance premium: None
    Annuity cost: None

                          Monthly Loan Charges

    Servicing fee: None

                              Other Charges

    Mortgage insurance: None

[[Page 446]]

    Shared Appreciation: None

                            Repayment Limits

    Net proceeds estimated at 93% of projected home sale

----------------------------------------------------------------------------------------------------------------
                                                              Total annual loan cost rate
     Assumed annual appreciation     ---------------------------------------------------------------------------
              (percent)                2-year loan term   6-year loan term  12-year loan term  17-year loan term
                                          (percent)          (percent)          (percent)          (percent)
----------------------------------------------------------------------------------------------------------------
0...................................              39.00            [14.94]               9.86               3.87
4...................................              39.00            [14.94]              11.03              10.14
8...................................              39.00            [14.94]              11.03              10.20
----------------------------------------------------------------------------------------------------------------

    The cost of any reverse mortgage loan depends on how long you keep 
the loan and how much your house appreciates in value. Generally, the 
longer you keep a reverse mortgage, the lower the total annual loan cost 
rate will be.
    This table shows the estimated cost of your reverse mortgage loan, 
expressed as an annual rate. It illustrates the cost for three [four] 
loan terms: 2 years, [half of life expectancy for someone your age,] 
that life expectancy, and 1.4 times that life expectancy. The table also 
shows the cost of the loan, assuming the value of your home appreciates 
at three different rates: 0%, 4% and 8%.
    The total annual loan cost rates in this table are based on the 
total charges associated with this loan. These charges typically include 
principal, interest, closing costs, mortgage insurance premiums, annuity 
costs, and servicing costs (but not disposition costs--costs when you 
sell the home).
    The rates in this table are estimates. Your actual cost may differ 
if, for example, the amount of your loan advances varies or the interest 
rate on your mortgage changes.
    Signing an Application or Receiving These Disclosures Does Not 
Require You To Complete This Loan



 Sec. Appendix L to Part 1026--Assumed Loan Periods for Computations of 
                      Total Annual Loan Cost Rates

    (a) Required tables. In calculating the total annual loan cost rates 
in accordance with appendix K of this part, creditors shall assume three 
loan periods, as determined by the following table.
    (b) Loan periods. (1) Loan Period 1 is a two-year loan period.
    (2) Loan Period 2 is the life expectancy in years of the youngest 
borrower to become obligated on the reverse mortgage loan, as shown in 
the U.S. Decennial Life Tables for 1979-1981 for females, rounded to the 
nearest whole year.
    (3) Loan Period 3 is the life expectancy figure in Loan Period 3, 
multiplied by 1.4 and rounded to the nearest full year (life expectancy 
figures at .5 have been rounded up to 1).
    (4) At the creditor's option, an additional period may be included, 
which is the life expectancy figure in Loan Period 2, multiplied by .5 
and rounded to the nearest full year (life expectancy figures at .5 have 
been rounded up to 1).

----------------------------------------------------------------------------------------------------------------
                                                           [Optional loan     Loan period 2
      Age of youngest borrower        Loan period 1 (in      period (in     (life expectancy)  Loan period 3 (in
                                            years)            years)]           (in years)           years)
----------------------------------------------------------------------------------------------------------------
62..................................                  2               [11]                 21                 29
63..................................                  2               [10]                 20                 28
64..................................                  2               [10]                 19                 27
65..................................                  2                [9]                 18                 25
66..................................                  2                [9]                 18                 25
67..................................                  2                [9]                 17                 24
68..................................                  2                [8]                 16                 22
69..................................                  2                [8]                 16                 22
70..................................                  2                [8]                 15                 21
71..................................                  2                [7]                 14                 20
72..................................                  2                [7]                 13                 18
73..................................                  2                [7]                 13                 18
74..................................                  2                [6]                 12                 17
75..................................                  2                [6]                 12                 17
76..................................                  2                [6]                 11                 15
77..................................                  2                [5]                 10                 14
78..................................                  2                [5]                 10                 14
79..................................                  2                [5]                  9                 13
80..................................                  2                [5]                  9                 13
81..................................                  2                [4]                  8                 11
82..................................                  2                [4]                  8                 11
83..................................                  2                [4]                  7                 10
84..................................                  2                [4]                  7                 10

[[Page 447]]

 
85..................................                  2                [3]                  6                  8
86..................................                  2                [3]                  6                  8
87..................................                  2                [3]                  6                  8
88..................................                  2                [3]                  5                  7
89..................................                  2                [3]                  5                  7
90..................................                  2                [3]                  5                  7
91..................................                  2                [2]                  4                  6
92..................................                  2                [2]                  4                  6
93..................................                  2                [2]                  4                  6
94..................................                  2                [2]                  4                  6
95 and over.........................                  2                [2]                  3                  4
----------------------------------------------------------------------------------------------------------------



          Sec. Appendix M1 to Part 1026--Repayment Disclosures

    (a) Definitions. (1) ``Promotional terms'' means terms of a 
cardholder's account that will expire in a fixed period of time, as set 
forth by the card issuer.
    (2) ``Deferred interest or similar plan'' means a plan where a 
consumer will not be obligated to pay interest that accrues on balances 
or transactions if those balances or transactions are paid in full prior 
to the expiration of a specified period of time.
    (b) Calculating minimum payment repayment estimates--(1) Minimum 
payment formulas. When calculating the minimum payment repayment 
estimate, card issuers must use the minimum payment formula(s) that 
apply to a cardholder's account. If more than one minimum payment 
formula applies to an account, the issuer must apply each minimum 
payment formula to the portion of the balance to which the formula 
applies. In this case, the issuer must disclose the longest repayment 
period calculated. For example, assume that an issuer uses one minimum 
payment formula to calculate the minimum payment amount for a general 
revolving feature, and another minimum payment formula to calculate the 
minimum payment amount for special purchases, such as a ``club plan 
purchase.'' Also, assume that based on a consumer's balances in these 
features and the annual percentage rates that apply to such features, 
the repayment period calculated pursuant to this appendix for the 
general revolving feature is 5 years, while the repayment period 
calculated for the special purchase feature is 3 years. This issuer must 
disclose 5 years as the repayment period for the entire balance to the 
consumer. If any promotional terms related to payments apply to a 
cardholder's account, such as a deferred billing plan where minimum 
payments are not required for 12 months, card issuers may assume no 
promotional terms apply to the account. For example, assume that a 
promotional minimum payment of $10 applies to an account for six months, 
and then after the promotional period expires, the minimum payment is 
calculated as 2 percent of the outstanding balance on the account or $20 
whichever is greater. An issuer may assume during the promotional period 
that the $10 promotional minimum payment does not apply, and instead 
calculate the minimum payment disclosures based on the minimum payment 
formula of 2 percent of the outstanding balance or $20, whichever is 
greater. Alternatively, during the promotional period, an issuer in 
calculating the minimum payment repayment estimate may apply the 
promotional minimum payment until it expires and then apply the minimum 
payment formula that applies after the promotional minimum payment 
expires. In the above example, an issuer could calculate the minimum 
payment repayment estimate during the promotional period by applying the 
$10 promotional minimum payment for the first six months and then 
applying the 2 percent or $20 (whichever is greater) minimum payment 
formula after the promotional minimum payment expires. In calculating 
the minimum payment repayment estimate during a promotional period, an 
issuer may not assume that the promotional minimum payment will apply 
until the outstanding balance is paid off by making only minimum 
payments (assuming the repayment estimate is longer than the promotional 
period). In the above example, the issuer may not calculate the minimum 
payment repayment estimate during the promotional period by assuming 
that the $10 promotional minimum payment will apply beyond the six 
months until the outstanding balance is repaid.
    (2) Annual percentage rate. When calculating the minimum payment 
repayment estimate, a card issuer must use the annual percentage rates 
that apply to a cardholder's account, based on the portion of the 
balance to which the rate applies. If any promotional terms related to 
annual percentage rates apply to a cardholder's account, other than 
deferred interest or similar plans, a card issuer in calculating the 
minimum payment repayment estimate during the promotional period must 
apply the promotional annual percentage rate(s) until it expires and 
then must apply the rate that applies after the

[[Page 448]]

promotional rate(s) expires. If the rate that applies after the 
promotional rate(s) expires is a variable rate, a card issuer must 
calculate that rate based on the applicable index or formula. This 
variable rate is accurate if it was in effect within the last 30 days 
before the minimum payment repayment estimate is provided. For deferred 
interest plans or similar plans, if minimum payments under the deferred 
interest or similar plan will repay the balances or transactions in full 
prior to the expiration of the specified period of time, a card issuer 
must assume that the consumer will not be obligated to pay the accrued 
interest. This means, in calculating the minimum payment repayment 
estimate, the card issuer must apply a zero percent annual percentage 
rate to the balance subject to the deferred interest or similar plan. 
If, however, minimum payments under the deferred interest plan or 
similar plan may not repay the balances or transactions in full prior to 
the expiration of the specified period of time, a card issuer must 
assume that a consumer will not repay the balances or transactions in 
full prior to the expiration of the specified period of time and thus 
the consumer will be obligated to pay the accrued interest. This means, 
in calculating the minimum payment repayment estimate, the card issuer 
must apply the annual percentage rate at which interest is accruing to 
the balance subject to the deferred interest or similar plan.
    (3) Beginning balance. When calculating the minimum payment 
repayment estimate, a card issuer must use as the beginning balance the 
outstanding balance on a consumer's account as of the closing date of 
the last billing cycle. When calculating the minimum payment repayment 
estimate, a card issuer may round the beginning balance as described 
above to the nearest whole dollar.
    (4) Assumptions. When calculating the minimum payment repayment 
estimate, a card issuer for each of the terms below, may either make the 
following assumption about that term, or use the account term that 
applies to a consumer's account.
    (i) Only minimum monthly payments are made each month. In addition, 
minimum monthly payments are made each month--for example, a debt 
cancellation or suspension agreement, or skip payment feature does not 
apply to the account.
    (ii) No additional extensions of credit are obtained, such as new 
purchases, transactions, fees, charges or other activity. No refunds or 
rebates are given.
    (iii) The annual percentage rate or rates that apply to a 
cardholder's account will not change, through either the operation of a 
variable rate or the change to a rate, except as provided in paragraph 
(b)(2) of this Appendix. For example, if a penalty annual percentage 
rate currently applies to a consumer's account, a card issuer may assume 
that the penalty annual percentage rate will apply to the consumer's 
account indefinitely, even if the consumer may potentially return to a 
non-penalty annual percentage rate in the future under the account 
agreement.
    (iv) There is no grace period.
    (v) The final payment pays the account in full (i.e., there is no 
residual finance charge after the final month in a series of payments).
    (vi) The average daily balance method is used to calculate the 
balance.
    (vii) All months are the same length and leap year is ignored. A 
monthly or daily periodic rate may be assumed. If a daily periodic rate 
is assumed, the issuer may either assume (1) a year is 365 days long, 
and all months are 30.41667 days long, or (2) a year is 360 days long, 
and all months are 30 days long.
    (viii) Payments are credited either on the last day of the month or 
the last day of the billing cycle.
    (ix) Payments are allocated to lower annual percentage rate balances 
before higher annual percentage rate balances.
    (x) The account is not past due and the account balance does not 
exceed the credit limit.
    (xi) When calculating the minimum payment repayment estimate, the 
assumed payments, current balance and interest charges for each month 
may be rounded to the nearest cent, as shown in appendix M2 to this 
part.
    (5) Tolerance. A minimum payment repayment estimate shall be 
considered accurate if it is not more than 2 months above or below the 
minimum payment repayment estimate determined in accordance with the 
guidance in this appendix (prior to rounding described in Sec. 
1026.7(b)(12)(i)(B) and without use of the assumptions listed in 
paragraph (b)(4) of this appendix to the extent a card issuer chooses 
instead to use the account terms that apply to a consumer's account). 
For example, assume the minimum payment repayment estimate calculated 
using the guidance in this appendix is 28 months (2 years, 4 months), 
and the minimum payment repayment estimate calculated by the issuer is 
30 months (2 years, 6 months). The minimum payment repayment estimate 
should be disclosed as 2 years, due to the rounding rule set forth in 
Sec. 1026.7(b)(12)(i)(B). Nonetheless, based on the 30-month estimate, 
the issuer disclosed 3 years, based on that rounding rule. The issuer 
would be in compliance with this guidance by disclosing 3 years, instead 
of 2 years, because the issuer's estimate is within the 2 months' 
tolerance, prior to rounding. In addition, even if an issuer's estimate 
is more than 2 months above or below the minimum payment repayment 
estimate calculated using the guidance in this Appendix, so long as the 
issuer discloses the

[[Page 449]]

correct number of years to the consumer based on the rounding rule set 
forth in Sec. 1026.7(b)(12)(i)(B), the issuer would be in compliance 
with this guidance. For example, assume the minimum payment repayment 
estimate calculated using the guidance in this appendix is 32 months (2 
years, 8 months), and the minimum payment repayment estimate calculated 
by the issuer is 38 months (3 years, 2 months). Under the rounding rule 
set forth in Sec. 1026.7(b)(12)(i)(B), both of these estimates would be 
rounded and disclosed to the consumer as 3 years. Thus, if the issuer 
disclosed 3 years to the consumer, the issuer would be in compliance 
with this guidance even though the minimum payment repayment estimate 
calculated by the issuer is outside the 2 months' tolerance amount.
    (c) Calculating the minimum payment total cost estimate. When 
calculating the minimum payment total cost estimate, a card issuer must 
total the dollar amount of the interest and principal that the consumer 
would pay if he or she made minimum payments for the length of time 
calculated as the minimum payment repayment estimate under paragraph (b) 
of this Appendix. The minimum payment total cost estimate is deemed to 
be accurate if it is based on a minimum payment repayment estimate that 
is within the tolerance guidance set forth in paragraph (b)(5) of this 
Appendix. For example, assume the minimum payment repayment estimate 
calculated using the guidance in this appendix is 28 months (2 years, 4 
months), and the minimum payment repayment estimate calculated by the 
issuer is 30 months (2 years, 6 months). The minimum payment total cost 
estimate will be deemed accurate even if it is based on the 30 month 
estimate for length of repayment, because the issuer's minimum payment 
repayment estimate is within the 2 months' tolerance, prior to rounding. 
In addition, assume the minimum payment repayment estimate calculated 
under this appendix is 32 months (2 years, 8 months), and the minimum 
payment repayment estimate calculated by the issuer is 38 months (3 
years, 2 months). Under the rounding rule set forth in Sec. 
1026.7(b)(12)(i)(B), both of these estimates would be rounded and 
disclosed to the consumer as 3 years. If the issuer based the minimum 
payment total cost estimate on 38 months (or any other minimum payment 
repayment estimate that would be rounded to 3 years), the minimum 
payment total cost estimate would be deemed to be accurate.
    (d) Calculating the estimated monthly payment for repayment in 36 
months--(1) In general. When calculating the estimated monthly payment 
for repayment in 36 months, a card issuer must calculate the estimated 
monthly payment amount that would be required to pay off the outstanding 
balance shown on the statement within 36 months, assuming the consumer 
paid the same amount each month for 36 months.
    (2) Weighted annual percentage rate. In calculating the estimated 
monthly payment for repayment in 36 months, an issuer may use a weighted 
annual percentage rate that is based on the annual percentage rates that 
apply to a cardholder's account and the portion of the balance to which 
the rate applies, as shown in appendix M2 to this part. If a card issuer 
uses a weighted annual percentage rate and any promotional terms related 
to annual percentage rates apply to a cardholder's account, other than 
deferred interest plans or similar plans, in calculating the weighted 
annual percentage rate, the issuer must calculate a weighted average of 
the promotional rate and the rate that will apply after the promotional 
rate expires based on the percentage of 36 months each rate will apply, 
as shown in appendix M2 to this part. For deferred interest plans or 
similar plans, if minimum payments under the deferred interest or 
similar plan will repay the balances or transactions in full prior to 
the expiration of the specified period of time, if a card issuer uses a 
weighted annual percentage rate, the card issuer must assume that the 
consumer will not be obligated to pay the accrued interest. This means, 
in calculating the weighted annual percentage rate, the card issuer must 
apply a zero percent annual percentage rate to the balance subject to 
the deferred interest or similar plan. If, however, minimum payments 
under the deferred interest plan or similar plan may not repay the 
balances or transactions in full prior to the expiration of the 
specified period of time, a card issuer in calculating the weighted 
annual percentage rate must assume that a consumer will not repay the 
balances or transactions in full prior to the expiration of the 
specified period of time and thus the consumer will be obligated to pay 
the accrued interest. This means, in calculating the weighted annual 
percentage rate, the card issuer must apply the annual percentage rate 
at which interest is accruing to the balance subject to the deferred 
interest or similar plan. A card issuer may use a method of calculating 
the estimated monthly payment for repayment in 36 months other than a 
weighted annual percentage rate, so long as the calculation results in 
the same payment amount each month and so long as the total of the 
payments would pay off the outstanding balance shown on the periodic 
statement within 36 months.
    (3) Assumptions. In calculating the estimated monthly payment for 
repayment in 36 months, a card issuer must use the same terms described 
in paragraph (b) of this Appendix, as appropriate.
    (4) Tolerance. An estimated monthly payment for repayment in 36 
months shall be considered accurate if it is not more than 10 percent 
above or below the estimated monthly payment for repayment in 36 months 
determined in accordance with the guidance in

[[Page 450]]

this appendix (after rounding described in Sec. 
1026.7(b)(12)(i)(F)(1)(i)).
    (e) Calculating the total cost estimate for repayment in 36 months. 
When calculating the total cost estimate for repayment in 36 months, a 
card issuer must total the dollar amount of the interest and principal 
that the consumer would pay if he or she made the estimated monthly 
payment calculated under paragraph (d) of this appendix each month for 
36 months. The total cost estimate for repayment in 36 months shall be 
considered accurate if it is based on the estimated monthly payment for 
repayment in 36 months that is calculated in accordance with paragraph 
(d) of this appendix.
    (f) Calculating the savings estimate for repayment in 36 months. 
When calculating the savings estimate for repayment in 36 months, if a 
card issuer chooses under Sec. 1026.7(b)(12)(i) to round the 
disclosures to the nearest whole dollar when disclosing them on the 
periodic statement, the card issuer must calculate the savings estimate 
for repayment in 36 months by subtracting the total cost estimate for 
repayment in 36 months calculated under paragraph (e) of this appendix 
(rounded to the nearest whole dollar) from the minimum payment total 
cost estimate calculated under paragraph (c) of this appendix (rounded 
to the nearest whole dollar). If a card issuer chooses under Sec. 
1026.7(b)(12)(i), however, to round the disclosures to the nearest cent 
when disclosing them on the periodic statement, the card issuer must 
calculate the savings estimate for repayment in 36 months by subtracting 
the total cost estimate for repayment in 36 months calculated under 
paragraph (e) of this appendix (rounded to the nearest cent) from the 
minimum payment total cost estimate calculated under paragraph (c) of 
this appendix (rounded to the nearest cent). The savings estimate for 
repayment in 36 months shall be considered accurate if it is based on 
the total cost estimate for repayment in 36 months that is calculated in 
accordance with paragraph (e) of this appendix and the minimum payment 
total cost estimate calculated under paragraph (c) of this appendix.



    Sec. Appendix M2 to Part 1026--Sample Calculations of Repayment 
                               Disclosures

    The following is an example of how to calculate the minimum payment 
repayment estimate, the minimum payment total cost estimate, the 
estimated monthly payment for repayment in 36 months, the total cost 
estimate for repayment in 36 months, and the savings estimate for 
repayment in 36 months using the guidance in appendix M1 to this part 
where three annual percentage rates apply (where one of the rates is a 
promotional APR), the total outstanding balance is $1000, and the 
minimum payment formula is 2 percent of the outstanding balance or $20, 
whichever is greater. The following calculation is written in SAS code.
    data one;
/*
Note:
pmt01 = estimated monthly payment to repay balance in 36 months 
          sumpmts36 = sum of payments for repayment in 36 months
month = number of months to repay total balance if making only minimum 
          payments
pmt = minimum monthly payment
fc = monthly finance charge
sumpmts = sum of payments for minimum payments
*/
* inputs;
* annual percentage rates; apr1 = 0.0; apr2 = 0.17; apr3 = 0.21; * 
          insert in ascending order;
* outstanding balances; cbal1 = 500; cbal2 = 250; cbal3 = 250;
* dollar minimum payment; dmin = 20;
* percent minimum payment; pmin = 0.02; * (0.02 + perrate);
* promotional rate information;
* last month for promotional rate; expm = 6; * = 0 if no promotional 
          rate;
* regular rate; rrate = .17; * = 0 if no promotional rate;
array apr(3); array perrate(3);
days = 365/12; * calculate days in month;
* calculate estimated monthly payment to pay off balances in 36 months, 
          and total cost of repaying balance in 36 months;
array xperrate(3);
do I = 1 to 3;
xperrate(I) = (apr(I)/365) * days; * calculate periodic rate;
end;
if expmgt 0 then xperrate1a = (expm/36) * xperrate1 + (1-(expm/36)) * 
          (rrate/365) * days; else xperrate1a = xperrate1;
tbal = cbal1 + cbal2 + cbal3;
perrate36 = (cbal1 * xperrate1a + cbal2 * xperrate2 + cbal3 * 
          xperrate3)/(cbal1 + cbal2 + cbal3);
* months to repay; dmonths = 36;
* initialize counters for sum of payments for repayment in 36 months; 
          Sumpmts36 = 0;
    pvaf = (1-(1 + perrate36) ** -dmonths)/perrate36; * calculate 
present value of annuity factor;
pmt01 = round(tbal/pvaf,0.01); * calculate monthly payment for 
          designated number of months;
sumpmts36 = pmt01 * 36;
* calculate time to repay and total cost of making minimum payments each 
          month;
* initialize counter for months, and sum of payments;
month = 0;
sumpmts = 0;
do I = 1 to 3;

[[Page 451]]

perrate(I) = (apr(I)/365) * days; * calculate periodic rate;
end;
put perrate1 = perrate2 = perrate3 =;
eins:
month = month + 1; * increment month counter;
pmt = round(pmin * tbal,0.01); * calculate payment as percentage of 
          balance;
if month geexpm and expm ne 0 then perrate1 = (rrate/365) * days;
if pmtltdmin then pmt = dmin; * set dollar minimum payment;
array xxxbal(3); array cbal(3);
do I = 1 to 3;
xxxbal(I) = round(cbal(I) * (1 + perrate(I)),0.01);
end;
fc = xxxbal1 + xxxbal2 + xxxbal3 - tbal;
if pmtgt (tbal + fc) then do;
do I = 1 to 3;
if cbal(I) gt 0 then pmt = round(cbal(I) * (1 + perrate(I)),0.01); * set 
          final payment amount;
end;
end;
if pmt le xxxbal1 then do;
cbal1 = xxxbal1 - pmt;
cbal2 = xxxbal2;
cbal3 = xxxbal3;
end;
if pmtgt xxxbal1 and xxxbal2 gt 0 and pmt le (xxxbal1 + xxxbal2) then 
          do;
cbal2 = xxxbal2 - (pmt - xxxbal1);
cbal1 = 0;
cbal3 = xxxbal3;
end;
if pmtgt xxxbal2 and xxxbal3 gt 0 then do;
cbal3 = xxxbal3 - (pmt - xxxbal1 - xxxbal2);
cbal2 = 0;
end;
sumpmts = sumpmts + pmt; * increment sum of payments;
tbal = cbal1 + cbal2 + cbal3; * calculate new total balance;
* print month, balance, payment amount, and finance charge;
put month = tbal = cbal1 = cbal2 = cbal3 = pmt = fc =;
if tbalgt 0 then go to eins; * go to next month if balance is greater 
          than zero;
* initialize total cost savings;
savtot = 0;
savtot = round(sumpmts,1)--round (sumpmts36,1);
* print number of months to repay debt if minimum payments made, final 
          balance (zero), total cost if minimum payments made, estimated 
          monthly payment for repayment in 36 months, total cost for 
          repayment in 36 months, and total savings if repaid in 36 
          months;
put title = ` ';
put title = `number of months to repay debt if minimum payment made, 
          final balance, total cost if minimum payments made, estimated 
          monthly payment for repayment in 36 months, total cost for 
          repayment in 36 months, and total savings if repaid in 36 
          months';
put month = tbal = sumpmts = pmt01 = sumpmts36 = savtot =;
put title = ` ';
run;



Sec. Appendix N to Part 1026--Higher-Priced Mortgage Loan Appraisal Safe 
                              Harbor Review

    To qualify for the safe harbor provided in Sec. 1026.35(c)(3)(ii), 
a creditor must confirm that the written appraisal:
    1. Identifies the creditor who ordered the appraisal and the 
property and the interest being appraised.
    2. Indicates whether the contract price was analyzed.
    3. Addresses conditions in the property's neighborhood.
    4. Addresses the condition of the property and any improvements to 
the property.
    5. Indicates which valuation approaches were used, and includes a 
reconciliation if more than one valuation approach was used.
    6. Provides an opinion of the property's market value and an 
effective date for the opinion.
    7. Indicates that a physical property visit of the interior of the 
property was performed, as applicable.
    8. Includes a certification signed by the appraiser that the 
appraisal was prepared in accordance with the requirements of the 
Uniform Standards of Professional Appraisal Practice.
    9. Includes a certification signed by the appraiser that the 
appraisal was prepared in accordance with the requirements of title XI 
of the Financial Institutions Reform, Recovery and Enforcement Act of 
1989, as amended (12 U.S.C. 3331 et seq.), and any implementing 
regulations.

[78 FR 10444, Feb. 13, 2013, as amended at 78 FR 78586, Dec. 26, 2013]



Sec. Appendix O to Part 1026--Illustrative Written Source Documents for 
               Higher-Priced Mortgage Loan Appraisal Rules

    A creditor acts with reasonable diligence under Sec. 
1026.35(c)(4)(vi)(A) if the creditor bases its determination on 
information contained in written source documents, such as:
    1. A copy of the recorded deed from the seller.
    2. A copy of a property tax bill.
    3. A copy of any owner's title insurance policy obtained by the 
seller.
    4. A copy of the RESPA settlement statement from the seller's 
acquisition (i.e., the HUD-1 or any successor form).

[[Page 452]]

    5. A property sales history report or title report from a third-
party reporting service.
    6. Sales price data recorded in multiple listing services.
    7. Tax assessment records or transfer tax records obtained from 
local governments.
    8. A written appraisal performed in compliance with Sec. 
1026.35(c)(3)(i) for the same transaction.
    9. A copy of a title commitment report detailing the seller's 
ownership of the property, the date it was acquired, or the price at 
which the seller acquired the property.
    10. A property abstract.

[78 FR 10444, Feb. 13, 2013]



                 Sec. Appendix P to Part 1026 [Reserved]



Sec. Appendix Q to Part 1026--Standards for Determining Monthly Debt and 
                                 Income

    Section 1026.43(e)(2)(vi) provides that, to satisfy the requirements 
for a qualified mortgage under Sec. 1026.43(e)(2), the ratio of the 
consumer's total monthly debt payments to total monthly income at the 
time of consummation cannot exceed 43 percent. Section 
1026.43(e)(2)(vi)(A) requires the creditor to calculate the ratio of the 
consumer's total monthly debt payments to total monthly income using the 
following standards, with additional requirements for calculating debt 
and income appearing in Sec. 1026.43(e)(2)(vi)(B). Where guidance 
issued by the U.S. Department of Housing and Urban Development, the U.S. 
Department of Veterans Affairs, the U.S. Department of Agriculture, or 
the Rural Housing Service, or issued by the Federal National Mortgage 
Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation 
(Freddie Mac) while operating under the conservatorship or receivership 
of the Federal Housing Finance Agency, or issued by a limited-life 
regulatory entity succeeding the charter of either Fannie Mae or Freddie 
Mac (collectively, Agency or GSE guidance) is in accordance with 
appendix Q, creditors may look to that guidance as a helpful resource in 
applying appendix Q. Moreover, when the following standards do not 
resolve how a specific kind of debt or income should be treated, the 
creditor may either (1) exclude the income or include the debt, or (2) 
rely on Agency or GSE guidance to resolve the issue. The following 
standards resolve the appropriate treatment of a specific kind of debt 
or income where the standards provide a discernible answer to the 
question of how to treat the debt or income. However, a creditor may not 
rely on Agency or GSE guidance to reach a resolution contrary to that 
provided by the following standards, even if such Agency or GSE guidance 
specifically addresses the particular type of debt or income but the 
following standards provide more generalized guidance.

                  I. Consumer Employment Related Income

                         A. Stability of Income

    1. Effective Income. Income may not be used in calculating the 
consumer's debt-to-income ratio if it comes from any source that cannot 
be verified, is not stable, or will not continue.
    2. Verifying Employment History.
    a. The creditor must verify the consumer's employment for the most 
recent two full years, and the creditor must require the consumer to:
    i. Explain any gaps in employment that span one or more months, and
    ii. Indicate if he/she was in school or the military for the recent 
two full years, providing evidence supporting this claim, such as 
college transcripts, or discharge papers.
    b. Allowances can be made for seasonal employment, typical for the 
building trades and agriculture, if documented by the creditor.

    Note: A consumer with a 25 percent or greater ownership interest in 
a business is considered self-employed and will be evaluated as a self-
employed consumer.

    3. Analyzing a Consumer's Employment Record.
    a. When analyzing a consumer's employment, creditors must examine:
    i. The consumer's past employment record; and
    ii. The employer's confirmation of current, ongoing employment 
status.

    Note: Creditors may assume that employment is ongoing if a 
consumer's employer verifies current employment and does not indicate 
that employment has been, or is set to be terminated. Creditors should 
not rely upon a verification of current employment that includes an 
affirmative statement that the employment is likely to cease, such as a 
statement that indicates the employee has given (or been given) notice 
of employment suspension or termination.

    b. Creditors may favorably consider the stability of a consumer's 
income if he/she changes jobs frequently within the same line of work, 
but continues to advance in income or benefits. In this analysis, income 
stability takes precedence over job stability.
    4. Consumers Returning to Work After an Extended Absence. A 
consumer's income may be considered effective and stable when recently 
returning to work after an extended absence if he/she:
    a. Is employed in the current job for six months or longer; and
    b. Can document a two year work history prior to an absence from 
employment using:
    i. Traditional employment verifications; and/or
    ii. Copies of IRS Form W-2s or pay stubs.


[[Page 453]]


    Note: An acceptable employment situation includes individuals who 
took several years off from employment to raise children, then returned 
to the workforce.
    c. Important: Situations not meeting the criteria listed above may 
not be used in qualifying. Extended absence is defined as six months.

                B. Salary, Wage and Other Forms of Income

    1. General Policy on Consumer Income Analysis.
    a. The income of each consumer who will be obligated for the 
mortgage debt and whose income is being relied upon in determining 
ability to repay must be analyzed to determine whether his/her income 
level can be reasonably expected to continue.
    b. In most cases, a consumer's income is limited to salaries or 
wages. Income from other sources can be considered as effective, when 
properly verified and documented by the creditor.

    Notes: i. Effective income for consumers planning to retire during 
the first three-year period must include the amount of:
    a. Documented retirement benefits;

    b. Social Security payments; or
    c. Other payments expected to be received in retirement.
    ii. Creditors must not ask the consumer about possible, future 
maternity leave.
    iii. Creditors may assume that salary or wage income from employment 
verified in accordance with section I.A.3 above can be reasonably 
expected to continue if a consumer's employer verifies current 
employment and income and does not indicate that employment has been, or 
is set to be terminated. Creditors should not assume that income can be 
reasonably expected to continue if a verification of current employment 
includes an affirmative statement that the employment is likely to 
cease, such as a statement that indicates the employee has given (or 
been given) notice of employment suspension or termination.
    2. Overtime and Bonus Income.
    a. Overtime and bonus income can be used to qualify the consumer if 
he/she has received this income for the past two years, and 
documentation submitted for the loan does not indicate this income will 
likely cease. If, for example, the employment verification states that 
the overtime and bonus income is unlikely to continue, it may not be 
used in qualifying.
    b. The creditor must develop an average of bonus or overtime income 
for the past two years. Periods of overtime and bonus income less than 
two years may be acceptable, provided the creditor can justify and 
document in writing the reason for using the income for qualifying 
purposes.
    3. Establishing an Overtime and Bonus Income Earning Trend.
    a. The creditor must establish and document an earnings trend for 
overtime and bonus income. If either type of income shows a continual 
decline, the creditor must document in writing a sound rationalization 
for including the income when qualifying the consumer.
    b. A period of more than two years must be used in calculating the 
average overtime and bonus income if the income varies significantly 
from year to year.
    4. Qualifying Part-Time Income.
    a. Part-time and seasonal income can be used to qualify the consumer 
if the creditor documents that the consumer has worked the part-time job 
uninterrupted for the past two years, and plans to continue. Many low 
and moderate income families rely on part-time and seasonal income for 
day to day needs, and creditors should not restrict consideration of 
such income when qualifying the income of these consumers.
    b. Part-time income received for less than two years may be included 
as effective income, provided that the creditor justifies and documents 
that the income is likely to continue.
    c. Part-time income not meeting the qualifying requirements may not 
be used in qualifying.

    Note: For qualifying purposes, ``part-time'' income refers to 
employment taken to supplement the consumer's income from regular 
employment; part-time employment is not a primary job and it is worked 
less than 40 hours.

    5. Income from Seasonal Employment.
    a. Seasonal income is considered uninterrupted, and may be used to 
qualify the consumer, if the creditor documents that the consumer:
    i. Has worked the same job for the past two years, and
    ii. Expects to be rehired the next season.
    b. Seasonal employment includes, but is not limited to:
    i. Umpiring baseball games in the summer; or
    ii. Working at a department store during the holiday shopping 
season.
    6. Primary Employment Less Than 40 Hour Work Week.
    a. When a consumer's primary employment is less than a typical 40-
hour work week, the creditor should evaluate the stability of that 
income as regular, on-going primary employment.
    b. Example: A registered nurse may have worked 24 hours per week for 
the last year. Although this job is less than the 40-hour work week, it 
is the consumer's primary employment, and should be considered effective 
income.
    7. Commission Income.

[[Page 454]]

    a. Commission income must be averaged over the previous two years. 
To qualify commission income, the consumer must provide:
    i. Copies of signed tax returns for the last two years; and
    ii. The most recent pay stub.
    b. Consumers whose commission income was received for more than one 
year, but less than two years may be considered favorably if the 
underwriter can:
    i. Document the likelihood that the income will continue, and
    ii. Soundly rationalize accepting the commission income.

    Notes: i. Unreimbursed business expenses must be subtracted from 
gross income.
    ii. A commissioned consumer is one who receives more than 25 percent 
of his/her annual income from commissions.
    iii. A tax transcript obtained directly from the IRS may be used in 
lieu of signed tax returns.

    8. Qualifying Commission Income Earned for Less Than One Year.
    a. Commission income earned for less than one year is not considered 
effective income. Exceptions may be made for situations in which the 
consumer's compensation was changed from salary to commission within a 
similar position with the same employer.
    b. A consumer's income may also qualify when the portion of earnings 
not attributed to commissions would be sufficient to qualify the 
consumer for the mortgage.
    9. Employer Differential Payments.
    If the employer subsidizes a consumer's mortgage payment through 
direct payments, the amount of the payments:
    a. Is considered gross income, and
    b. Cannot be used to offset the mortgage payment directly, even if 
the employer pays the servicing creditor directly.
    10. Retirement Income.
    Retirement income must be verified from the former employer, or from 
Federal tax returns. If any retirement income, such as employer pensions 
or 401(k)'s, will cease within the first full three years of the 
mortgage loan, such income may not be used in qualifying.
    11. Social Security Income.
    Social Security income must be verified by a Social Security 
Administration benefit verification letter (sometimes called a ``proof 
of income letter,'' ``budget letter,'' ``benefits letter,'' or ``proof 
of award letter''). If any benefits expire within the first full three 
years of the loan, the income source may not be used in qualifying.

    Notes: i. If the Social Security Administration benefit verification 
letter does not indicate a defined expiration date within three years of 
loan origination, the creditor shall consider the income effective and 
likely to continue. Pending or current re-evaluation of medical 
eligibility for benefit payments is not considered an indication that 
the benefit payments are not likely to continue.
    ii. Some portion of Social Security income may be ``grossed up'' if 
deemed nontaxable by the IRS.

    12. Automobile Allowances and Expense Account Payments.
    a. Only the amount by which the consumer's automobile allowance or 
expense account payments exceed actual expenditures may be considered 
income.
    b. To establish the amount to add to gross income, the consumer must 
provide the following:
    i. IRS Form 2106, Employee Business Expenses, for the previous two 
years; and
    ii. Employer verification that the payments will continue.
    c. If the consumer uses the standard per-mile rate in calculating 
automobile expenses, as opposed to the actual cost method, the portion 
that the IRS considers depreciation may be added back to income.
    d. Expenses that must be treated as recurring debt include:
    i. The consumer's monthly car payment; and
    ii. Any loss resulting from the calculation of the difference 
between the actual expenditures and the expense account allowance.

            C. Consumers Employed by a Family Owned Business.

    1. Income Documentation Requirement.
    In addition to normal employment verification, a consumer employed 
by a family owned business is required to provide evidence that he/she 
is not an owner of the business, which may include:
    a. Copies of signed personal tax returns, or
    b. A signed copy of the corporate tax return showing ownership 
percentage.

    Note: A tax transcript obtained directly from the IRS may be used in 
lieu of signed tax returns.

 D. General Information on Self-Employed Consumers and Income Analysis.

    1. Definition: Self-Employed Consumer.
    A consumer with a 25 percent or greater ownership interest in a 
business is considered self-employed.
    2. Types of Business Structures.
    There are four basic types of business structures. They include:
    a. Sole proprietorships;
    b. Corporations;
    c. Limited liability or ``S'' corporations; and
    d. Partnerships.
    3. Minimum Length of Self Employment.
    a. Income from self-employment is considered stable, and effective, 
if the consumer has been self-employed for two or more years.

[[Page 455]]

    b. Due to the high probability of failure during the first few years 
of a business, the requirements described in the table below are 
necessary for consumers who have been self-employed for less than two 
years.
[GRAPHIC] [TIFF OMITTED] TR24JY13.000

    4. General Documentation Requirements for Self-Employed Consumers.
    Self-employed consumers must provide the following documentation:
    a. Signed, dated individual tax returns, with all applicable tax 
schedules for the most recent two years;
    b. For a corporation, ``S'' corporation, or partnership, signed 
copies of Federal business income tax returns for the last two years, 
with all applicable tax schedules; and
    c. Year to date profit and loss (P&L) statement and balance sheet.
    5. Establishing a Self-Employed Consumer's Earnings Trend.
    a. When qualifying income, the creditor must establish the 
consumer's earnings trend from the previous two years using the 
consumer's tax returns.
    b. If a consumer:
    i. Provides quarterly tax returns, the income analysis may include 
income through the period covered by the tax filings, or
    ii. Is not subject to quarterly tax returns, or does not file them, 
then the income shown on the P&L statement may be included in the 
analysis, provided the income stream based on the P&L is consistent with 
the previous years' earnings.
    c. If the P&L statements submitted for the current year show an 
income stream considerably greater than what is supported by the 
previous year's tax returns, the creditor must base the income analysis 
solely on the income verified through the tax returns.
    d. If the consumer's earnings trend for the previous two years is 
downward and the most recent tax return or P&L is less than the prior 
year's tax return, the consumer's most recent year's tax return or P&L 
must be used to calculate his/her income.
    6. Analyzing the Business's Financial Strength.
    The creditor must consider the business's financial strength by 
examining annual earnings. Annual earnings that are stable or increasing 
are acceptable, while businesses that show a significant decline in 
income over the analysis period are not acceptable.

       E. Income Analysis: Individual Tax Returns (IRS Form 1040).

    1. General Policy on Adjusting Income Based on a Review of IRS Form 
1040.
    The amount shown on a consumer's IRS Form 1040 as adjusted gross 
income must either be increased or decreased based on the creditor's 
analysis of the individual tax return and any related tax schedules.
    2. Guidelines for Analyzing IRS Form 1040.
    The table below contains guidelines for analyzing IRS Form 1040:

[[Page 456]]

[GRAPHIC] [TIFF OMITTED] TR24JY13.001

       F. Income Analysis: Corporate Tax Returns (IRS Form 1120).

    1. Description: Corporation.
    A corporation is a State-chartered business owned by its 
stockholders.
    2. Need To Obtain Consumer Percentage of Ownership Information.

[[Page 457]]

    a. Corporate compensation to the officers, generally in proportion 
to the percentage of ownership, is shown on the:
    i. Corporate tax return IRS Form 1120; and
    ii. Individual tax returns.
    b. When a consumer's percentage of ownership does not appear on the 
tax returns, the creditor must obtain the information from the 
corporation's accountant, along with evidence that the consumer has the 
right to any compensation.
    3. Analyzing Corporate Tax Returns.
    a. In order to determine a consumer's self-employed income from a 
corporation the adjusted business income must:
    i. Be determined; and
    ii. Multiplied by the consumer's percentage of ownership in the 
business.
    b. The table below describes the items found on IRS Form 1120 for 
which an adjustment must be made in order to determine adjusted business 
income.
[GRAPHIC] [TIFF OMITTED] TR24JY13.002

   G. Income Analysis: ``S'' Corporation Tax Returns (IRS Form 1120S).

    1. Description: ``S'' Corporation.
    a. An ``S'' corporation is generally a small, start-up business, 
with gains and losses passed to stockholders in proportion to each 
stockholder's percentage of business ownership.
    b. Income for owners of ``S'' corporations comes from IRS Form W-2 
wages, and is taxed at the individual rate. The IRS Form 1120S, 
Compensation of Officers line item is transferred to the consumer's 
individual IRS Form 1040.
    2. Analyzing ``S'' Corporation Tax Returns.
    a. ``S'' corporation depreciation and depletion may be added back to 
income in proportion to the consumer's share of the corporation's 
income.
    b. In addition, the income must also be reduced proportionately by 
the total obligations payable by the corporation in less than one year.
    c. Important: The consumer's withdrawal of cash from the corporation 
may have a severe negative impact on the corporation's ability to 
continue operating, and must be considered in the income analysis.

      H. Income Analysis: Partnership Tax Returns (IRS Form 1065).

    1. Description: Partnership.
    a. A partnership is formed when two or more individuals form a 
business, and share in profits, losses, and responsibility for running 
the company.
    b. Each partner pays taxes on his/her proportionate share of the 
partnership's net income.
    2. Analyzing Partnership Tax Returns.
    a. Both general and limited partnerships report income on IRS Form 
1065, and the partners' share of income is carried over to Schedule E of 
IRS Form 1040.
    b. The creditor must review IRS Form 1065 to assess the viability of 
the business. Both depreciation and depletion may be added back to the 
income in proportion to the consumer's share of income.
    c. Income must also be reduced proportionately by the total 
obligations payable by the partnership in less than one year.
    d. Important: Cash withdrawals from the partnership may have a 
severe negative impact on the partnership's ability to continue 
operating, and must be considered in the income analysis.

               II. Non-Employment Related Consumer Income

       A. Alimony, Child Support, and Maintenance Income Criteria.

    Alimony, child support, or maintenance income may be considered 
effective, if:
    1. Payments are likely to be received consistently for the first 
three years of the mortgage;
    2. The consumer provides the required documentation, which includes 
a copy of the:

[[Page 458]]

    i. Final divorce decree;
    ii. Legal separation agreement;
    iii. Court order; or
    iv. Voluntary payment agreement; and
    3. The consumer can provide acceptable evidence that payments have 
been received during the last 12 months, such as:
    i. Cancelled checks;
    ii. Deposit slips;
    iii. Tax returns; or
    iv. Court records.

    Notes: i. Periods less than 12 months may be acceptable, provided 
the creditor can adequately document the payer's ability and willingness 
to make timely payments.
    ii. Child support may be ``grossed up'' under the same provisions as 
non-taxable income sources.

                     B. Investment and Trust Income.

    1. Analyzing Interest and Dividends.
    a. Interest and dividend income may be used as long as tax returns 
or account statements support a two-year receipt history. This income 
must be averaged over the two years.
    b. Subtract any funds that are derived from these sources, and are 
required for the cash investment, before calculating the projected 
interest or dividend income.
    2. Trust Income.
    a. Income from trusts may be used if constant payments will continue 
for at least the first three years of the mortgage term as evidenced by 
trust income documentation.
    b. Required trust income documentation includes a copy of the Trust 
Agreement or other trustee statement, confirming the:
    i. Amount of the trust;
    ii. Frequency of distribution; and
    iii. Duration of payments.
    c. Trust account funds may be used for the required cash investment 
if the consumer provides adequate documentation that the withdrawal of 
funds will not negatively affect income. The consumer may use funds from 
the trust account for the required cash investment, but the trust income 
used to determine repayment ability cannot be affected negatively by its 
use.
    3. Notes Receivable Income.
    a. In order to include notes receivable income, the consumer must 
provide:
    i. A copy of the note to establish the amount and length of payment, 
and
    ii. Evidence that these payments have been consistently received for 
the last 12 months through deposit slips, deposit receipts, cancelled 
checks, bank or other account statements, or tax returns.
    b. If the consumer is not the original payee on the note, the 
creditor must establish that the consumer is able to enforce the note.
    4. Eligible Investment Properties.
    Follow the steps in the table below to calculate an investment 
property's income or loss if the property to be subject to a mortgage is 
an eligible investment property.
[GRAPHIC] [TIFF OMITTED] TR24JY13.003

     C. Military, Government Agency, and Assistance Program Income.

    1. Military Income.
    a. Military personnel not only receive base pay, but often times are 
entitled to additional forms of pay, such as:
    i. Income from variable housing allowances;
    ii. Clothing allowances;
    iii. Flight or hazard pay;
    iv. Rations; and
    v. Proficiency pay.
    b. These types of additional pay are acceptable when analyzing a 
consumer's income as long as the probability of such pay to continue is 
verified in writing.

    Note: The tax-exempt nature of some of the above payments should 
also be considered.

    2. VA Benefits.
    a. Direct compensation for service-related disabilities from the 
Department of Veterans Affairs (VA) is acceptable, provided the creditor 
receives documentation from the VA.

[[Page 459]]

    b. Education benefits used to offset education expenses are not 
acceptable.
    3. Government Assistance Programs.
    a. Income received from government assistance programs is acceptable 
as long as the paying agency provides documentation indicating that the 
income is expected to continue for at least three years.
    b. If the income from government assistance programs will not be 
received for at least three years, it may not be used in qualifying.
    c. Unemployment income must be documented for two years, and there 
must be reasonable assurance that this income will continue. This 
requirement may apply to seasonal employment.

    Note: Social Security income is acceptable as provided in section 
I.B.11.

    4. Mortgage Credit Certificates.
    a. If a government entity subsidizes the mortgage payments either 
through direct payments or tax rebates, these payments may be considered 
as acceptable income.
    b. Either type of subsidy may be added to gross income, or used 
directly to offset the mortgage payment, before calculating the 
qualifying ratios.
    5. Homeownership Subsidies.
    a. A monthly subsidy may be treated as income, if a consumer is 
receiving subsidies under the housing choice voucher home ownership 
option from a public housing agency (PHA). Although continuation of the 
homeownership voucher subsidy beyond the first year is subject to 
Congressional appropriation, for the purposes of underwriting, the 
subsidy will be assumed to continue for at least three years.
    b. If the consumer is receiving the subsidy directly, the amount 
received is treated as income. The amount received may also be treated 
as nontaxable income and be ``grossed up'' by 25 percent, which means 
that the amount of the subsidy, plus 25 percent of that subsidy may be 
added to the consumer's income from employment and/or other sources.
    c. Creditors may treat this subsidy as an ``offset'' to the monthly 
mortgage payment (that is, reduce the monthly mortgage payment by the 
amount of the home ownership assistance payment before dividing by the 
monthly income to determine the payment-to-income and debt-to-income 
ratios). The subsidy payment must not pass through the consumer's hands.
    d. The assistance payment must be:
    i. Paid directly to the servicing creditor; or
    ii. Placed in an account that only the servicing creditor may 
access.

    Note: Assistance payments made directly to the consumer must be 
treated as income.

                            D. Rental Income.

    1. Analyzing the Stability of Rental Income.
    a. Rent received for properties owned by the consumer is acceptable 
as long as the creditor can document the stability of the rental income 
through:
    i. A current lease;
    ii. An agreement to lease; or
    iii. A rental history over the previous 24 months that is free of 
unexplained gaps greater than three months (such gaps could be explained 
by student, seasonal, or military renters, or property rehabilitation).
    b. A separate schedule of real estate is not required for rental 
properties as long as all properties are documented on the Uniform 
Residential Loan Application.

    Note: The underwriting analysis may not consider rental income from 
any property being vacated by the consumer, except under the 
circumstances described below.

    2. Rental Income From Consumer Occupied Property.
    a. The rent for multiple unit property where the consumer resides in 
one or more units and charges rent to tenants of other units may be used 
for qualifying purposes.
    b. Projected rent for the tenant-occupied units only may:
    i. Be considered gross income, only after deducting vacancy and 
maintenance factors, and
    ii. Not be used as a direct offset to the mortgage payment.
    3. Income from Roommates or Boarders in a Single Family Property.
    a. Rental income from roommates or boarders in a single family 
property occupied as the consumer's primary residence is acceptable.
    b. The rental income may be considered effective if shown on the 
consumer's tax return. If not on the tax return, rental income paid by 
the roommate or boarder may not be used in qualifying.
    4. Documentation Required To Verify Rental Income.
    Analysis of the following required documentation is necessary to 
verify all consumer rental income:
    a. IRS Form 1040 Schedule E; and
    b. Current leases/rental agreements.
    5. Analyzing IRS Form 1040 Schedule E.
    a. The IRS Form 1040 Schedule E is required to verify all rental 
income. Depreciation shown on Schedule E may be added back to the net 
income or loss.
    b. Positive rental income is considered gross income for qualifying 
purposes, while negative income must be treated as a recurring 
liability.
    c. The creditor must confirm that the consumer still owns each 
property listed, by comparing Schedule E with the real estate owned 
section of the Uniform Residential Loan Application (URLA).
    6. Using Current Leases To Analyze Rental Income.

[[Page 460]]

    a. The consumer can provide a current signed lease or other rental 
agreement for a property that was acquired since the last income tax 
filing, and is not shown on Schedule E.
    b. In order to calculate the rental income:
    i. Reduce the gross rental amount by 25 percent for vacancies and 
maintenance;
    ii. Subtract PITI and any homeowners association dues; and
    iii. Apply the resulting amount to income, if positive, or recurring 
debts, if negative.
    7. Exclusion of Rental Income From Property Being Vacated by the 
Consumer. Underwriters may not consider any rental income from a 
consumer's principal residence that is being vacated in favor of another 
principal residence, except under the conditions described below:

    Notes: i. This policy assures that a consumer either has sufficient 
income to make both mortgage payments without any rental income, or has 
an equity position not likely to result in defaulting on the mortgage on 
the property being vacated.
    ii. This applies solely to a principal residence being vacated in 
favor of another principal residence. It does not apply to existing 
rental properties disclosed on the loan application and confirmed by tax 
returns (Schedule E of form IRS 1040).

    8. Policy Exceptions Regarding the Exclusion of Rental Income From a 
Principal Residence Being Vacated by a Consumer.
    When a consumer vacates a principal residence in favor of another 
principal residence, the rental income, reduced by the appropriate 
vacancy factor, may be considered in the underwriting analysis under the 
circumstances listed in the table below.
[GRAPHIC] [TIFF OMITTED] TR24JY13.004

                   E. Non-Taxable and Projected Income

    1. Types of Non-Taxable Income.
    Certain types of regular income may not be subject to Federal tax. 
Such types of non-taxable income include:
    a. Some portion of Social Security, some Federal government employee 
retirement income, Railroad Retirement Benefits, and some State 
government retirement income;
    b. Certain types of disability and public assistance payments;
    c. Child support;
    d. Military allowances; and
    e. Other income that is documented as being exempt from Federal 
income taxes.
    2. Adding Non-Taxable Income to a Consumer's Gross Income.
    a. The amount of continuing tax savings attributed to regular income 
not subject to Federal taxes may be added to the consumer's gross 
income.
    b. The percentage of non-taxable income that may be added cannot 
exceed the appropriate tax rate for the income amount. Additional 
allowances for dependents are not acceptable.
    c. The creditor:

[[Page 461]]

    i. Must document and support the amount of income grossed up for any 
non-taxable income source, and
    ii. Should use the tax rate used to calculate the consumer's last 
year's income tax.

    Note: If the consumer is not required to file a Federal tax return, 
the tax rate to use is 25 percent.

    3. Analyzing Projected Income.
    a. Projected or hypothetical income is not acceptable for qualifying 
purposes. However, exceptions are permitted for income from the 
following sources:
    i. Cost-of-living adjustments;
    ii. Performance raises; and
    iii. Bonuses.
    b. For the above exceptions to apply, the income must be:
    i. Verified in writing by the employer; and
    ii. Scheduled to begin within 60 days of loan closing.
    4. Projected Income for New Job.
    a. Projected income is acceptable for qualifying purposes for a 
consumer scheduled to start a new job within 60 days of loan closing if 
there is a guaranteed, non-revocable contract for employment.
    b. The creditor must verify that the consumer will have sufficient 
income or cash reserves to support the mortgage payment and any other 
obligations between loan closing and the start of employment. Examples 
of this type of scenario are teachers whose contracts begin with the new 
school year, or physicians beginning a residency after the loan closes.
    c. The income does not qualify if the loan closes more than 60 days 
before the consumer starts the new job.

            III. Consumer Liabilities: Recurring Obligations

    1. Types of Recurring Obligation. Recurring obligations include:
    a. All installment loans;
    b. Revolving charge accounts;
    c. Real estate loans;
    d. Alimony;
    e. Child support; and
    f. Other continuing obligations.
    2. Debt to Income Ratio Computation for Recurring Obligations.
    a. The creditor must include the following when computing the debt 
to income ratios for recurring obligations:
    i. Monthly housing expense; and
    ii. Additional recurring charges extending ten months or more, such 
as
    a. Payments on installment accounts;
    b. Child support or separate maintenance payments;
    c. Revolving accounts; and
    d. Alimony.
    b. Debts lasting less than ten months must be included if the amount 
of the debt affects the consumer's ability to pay the mortgage during 
the months immediately after loan closing, especially if the consumer 
will have limited or no cash assets after loan closing.

    Note: Monthly payments on revolving or open-ended accounts, 
regardless of the balance, are counted as a liability for qualifying 
purposes even if the account appears likely to be paid off within 10 
months or less.

    3. Revolving Account Monthly Payment Calculation. If the credit 
report shows any revolving accounts with an outstanding balance but no 
specific minimum monthly payment, the payment must be calculated as the 
greater of:
    a. 5 percent of the balance; or
    b. $10.

    Note: If the actual monthly payment is documented from the creditor 
or the creditor obtains a copy of the current statement reflecting the 
monthly payment, that amount may be used for qualifying purposes.

    4. Reduction of Alimony Payment for Qualifying Ratio Calculation. 
Since there are tax consequences of alimony payments, the creditor may 
choose to treat the monthly alimony obligation as a reduction from the 
consumer's gross income when calculating the ratio, rather than treating 
it as a monthly obligation.

             IV. Consumer Liabilities: Contingent Liability

    1. Definition: Contingent Liability. A contingent liability exists 
when an individual is held responsible for payment of a debt if another 
party, jointly or severally obligated, defaults on the payment.
    2. Application of Contingent Liability Policies. The contingent 
liability policies described in this topic apply unless the consumer can 
provide conclusive evidence from the debt holder that there is no 
possibility that the debt holder will pursue debt collection against 
him/her should the other party default.
    3. Contingent Liability on Mortgage Assumptions. Contingent 
liability must be considered when the consumer remains obligated on an 
outstanding FHA-insured, VA-guaranteed, or conventional mortgage secured 
by property that:
    a. Has been sold or traded within the last 12 months without a 
release of liability, or
    b. Is to be sold on assumption without a release of liability being 
obtained.
    4. Exemption From Contingent Liability Policy on Mortgage 
Assumptions. When a mortgage is assumed, contingent liabilities need not 
be considered if the:
    a. Originating creditor of the mortgage being underwritten obtains, 
from the servicer of the assumed loan, a payment history showing that 
the mortgage has been current during the previous 12 months, or
    b. Value of the property, as established by an appraisal or the 
sales price on the HUD-

[[Page 462]]

1 Settlement Statement from the sale of the property, results in a loan-
to-value (LTV) ratio of 75 percent or less.
    5. Contingent Liability on Cosigned Obligations.
    a. Contingent liability applies, and the debt must be included in 
the underwriting analysis, if an individual applying for a mortgage is a 
cosigner/co-obligor on:
    i. A car loan;
    ii. A student loan;
    iii. A mortgage; or
    iv. Any other obligation.
    b. If the creditor obtains documented proof that the primary obligor 
has been making regular payments during the previous 12 months, and does 
not have a history of delinquent payments on the loan during that time, 
the payment does not have to be included in the consumer's monthly 
obligations.

   V. Consumer Liabilities: Projected Obligations and Obligations Not 
                             Considered Debt

                        1. Projected Obligations

    a. Debt payments, such as a student loan or balloon-payment note 
scheduled to begin or come due within 12 months of the mortgage loan 
closing, must be included by the creditor as anticipated monthly 
obligations during the underwriting analysis.
    b. Debt payments do not have to be classified as projected 
obligations if the consumer provides written evidence that the debt will 
be deferred to a period outside the 12-month timeframe.
    c. Balloon-payment notes that come due within one year of loan 
closing must be considered in the underwriting analysis.

                   2. Obligations Not Considered Debt

    Obligations not considered debt, and therefore not subtracted from 
gross income, include:
    a. Federal, State, and local taxes;
    b. Federal Insurance Contributions Act (FICA) or other retirement 
contributions, such as 401(k) accounts (including repayment of debt 
secured by these funds):
    c. Commuting costs;
    d. Union dues;
    e. Open accounts with zero balances;
    f. Automatic deductions to savings accounts;
    g. Child care; and
    h. Voluntary deductions.

[78 FR 44718, July 24, 2013]



        Sec. Supplement I to Part 1026--Official Interpretations

                              Introduction

    1. Official status. This commentary is the vehicle by which the 
Bureau of Consumer Financial Protection issues official interpretations 
of Regulation Z. Good faith compliance with this commentary affords 
protection from liability under section 130(f) of the Truth in Lending 
Act. Section 130(f) (15 U.S.C. 1640) protects creditors from civil 
liability for any act done or omitted in good faith in conformity with 
any interpretation issued by a duly authorized official or employee of 
the Bureau of Consumer Financial Protection.
    2. Procedure for requesting interpretations. Under appendix C of the 
regulation, anyone may request an official interpretation. 
Interpretations that are adopted will be incorporated in this commentary 
following publication in the Federal Register. No official 
interpretations are expected to be issued other than by means of this 
commentary.
    3. Rules of construction. (a) Lists that appear in the commentary 
may be exhaustive or illustrative; the appropriate construction should 
be clear from the context. In most cases, illustrative lists are 
introduced by phrases such as ``including, but not limited to,'' ``among 
other things,'' ``for example,'' or ``such as.''
    (b) Throughout the commentary, reference to ``this section'' or 
``this paragraph'' means the section or paragraph in the regulation that 
is the subject of the comment.
    4. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph which it 
interprets. The comments are designated with as much specificity as 
possible according to the particular regulatory provision addressed. For 
example, some of the comments to Sec. 1026.18(b) are further divided by 
subparagraph, such as comment 18(b)(1)-1 and comment 18(b)(2)-1. In 
other cases, comments have more general application and are designated, 
for example, as comment 18-1 or comment 18(b)-1. This introduction may 
be cited as comments I-1 through I-4. Comments to the appendices may be 
cited, for example, as comment app. A-1.

                           Subpart A--General

Section 1026.1--Authority, Purpose, Coverage, Organization, Enforcement 
                              and Liability

                              1(c) Coverage

    1. Foreign applicability. Regulation Z applies to all persons 
(including branches of foreign banks and sellers located in the United 
States) that extend consumer credit to residents (including resident 
aliens) of any state as defined in Sec. 1026.2. If an account is 
located in the United States and credit is extended to a U.S. resident, 
the transaction is subject to the regulation. This will be the case 
whether or not a particular advance or purchase on the account takes 
place in the United States and whether or not the extender of credit is 
chartered or based in the

[[Page 463]]

United States or a foreign country. For example, if a U.S. resident has 
a credit card account located in the consumer's state issued by a bank 
(whether U.S. or foreign-based), the account is covered by the 
regulation, including extensions of credit under the account that occur 
outside the United States. In contrast, if a U.S. resident residing or 
visiting abroad, or a foreign national abroad, opens a credit card 
account issued by a foreign branch of a U.S. bank, the account is not 
covered by the regulation.
    Paragraph 1(c)(5).
    1. Exemption for certain mortgage transactions. Section 1026.1(c)(5) 
implements sections 128(a)(16) through (19), 128(b)(4), 129C(f)(1), 
129C(g)(2) and (3), 129C(h), 129D(h), 129D(j)(1)(A), and 129D(j)(1)(B) 
of the Truth in Lending Act and section 4(c) of the Real Estate 
Settlement Procedures Act, by exempting persons from the disclosure 
requirements of those sections, except in certain transactions. The 
exemptions do not apply to certain transactions for which the disclosure 
requirements are implemented in other parts of Regulation Z. Sections 
1026.37 and 1026.38 implement sections 128(a)(16) through (19), 
128(b)(4), 129C(f)(1), 129C(g)(2) and (3), 129D(h), and 129D(j)(1)(A) of 
the Truth in Lending Act and section 4(c) of the Real Estate Settlement 
Procedures Act for transactions subject to Sec. 1026.19(e) and (f). 
Section 1026.38(l)(5) implements the disclosure requirements of section 
129C(h) of the Truth in Lending Act for transactions subject to Sec. 
1026.19(f). Section 1026.39(d)(5) implements the disclosure requirements 
of section 129C(h) of the Truth in Lending Act for transactions subject 
to Sec. 1026.39(d)(5). Section 1026.20(e) implements the disclosure 
requirements of section 129D(j)(1)(B) of the Truth in Lending Act for 
transactions subject to Sec. 1026.20(e). Section 1026.1(c)(5) does not 
exempt any person from any other requirement of this part, Regulation X 
(12 CFR part 1024), the Truth in Lending Act, or the Real Estate 
Settlement Procedures Act.
    1(d) Organization.
    Paragraph 1(d)(5).
    1. Effective date. The Bureau's revisions to Regulation X and 
Regulation Z published on December 31, 2013 (the TILA-RESPA Final Rule), 
apply to covered loans (closed-end credit transactions secured by real 
property) for which the creditor or mortgage broker receives an 
application on or after October 3, 2015 (the ``effective date''), except 
that new Sec. 1026.19(e)(2), the amendments to Sec. 1026.28(a)(1), and 
the amendments to the commentary to Sec. 1026.29, become effective on 
October 3, 2015, without respect to whether an application has been 
received. The provisions of Sec. 1026.19(e)(2) apply prior to a 
consumer's receipt of the disclosures required by Sec. 
1026.19(e)(1)(i), and therefore, restrict activity that may occur prior 
to receipt of an application by a creditor or mortgage broker under 
Sec. 1026.19(e). These provisions include Sec. 1026.19(e)(2)(i), which 
restricts the fees that may be imposed on a consumer, Sec. 
1026.19(e)(2)(ii), which requires a statement to be included on written 
estimates of terms or costs specific to a consumer, and Sec. 
1026.19(e)(2)(iii), which prohibits creditors from requiring the 
submission of documents verifying information related to the consumer's 
application. Accordingly, the provisions under Sec. 1026.19(e)(2) are 
effective on October 3, 2015, without respect to whether an application 
has been received on that date. In addition, the amendments to Sec. 
1026.28 and the commentary to Sec. 1026.29 govern the preemption of 
State laws and thus, the amendments to those provisions and associated 
commentary made by the TILA-RESPA Final Rule are effective on October 3, 
2015, without respect to whether an application has been received on 
that date. The following examples illustrate the application of the 
effective date for the TILA-RESPA Final Rule.
    i. General. Assume a creditor receives an application, as defined 
under Sec. 1026.2(a)(3) of the TILA-RESPA Final Rule, for a transaction 
subject to Sec. 1026.19(e) and (f) on October 3, 2015, and that 
consummation of the transaction occurs on October 31, 2015. The 
amendments of the TILA-RESPA Final Rule, including the requirements to 
provide the Loan Estimate and Closing Disclosure under Sec. 1026.19(e) 
and (f), apply to the transaction. The creditor would also be required 
to provide the special information booklet under Sec. 1026.19(g) of the 
TILA-RESPA Final Rule, as applicable. Assume a creditor receives an 
application, as defined under Sec. 1026.2(a)(3) of the TILA-RESPA Final 
Rule, for a transaction subject to Sec. 1026.19(e) and (f) on September 
30, 2015, and that consummation of the transaction occurs on October 30, 
2015. The amendments of the TILA-RESPA Final Rule, including the 
requirements to provide the Loan Estimate and Closing Disclosure under 
Sec. 1026.19(e) and (f), do not apply to the transaction, except that 
the provisions of Sec. 1026.19(e)(2), specifically Sec. 
1026.19(e)(2)(i), (e)(2)(ii), and (e)(2)(iii), do apply to the 
transaction beginning on October 3, 2015, because they become effective 
on October 3, 2015, without respect to whether an application, as 
defined under Sec. 1026.2(a)(3) of the TILA-RESPA Final Rule, has been 
received by the creditor or mortgage broker on that date. The creditor 
does not provide the Closing Disclosure so that it is received by the 
consumer at least three business days before consummation; instead, the 
creditor and the settlement agent provide the disclosures under Sec. 
1026.19(a)(2)(ii) and Sec. 1024.8, as applicable, under the Truth in 
Lending Act and the Real Estate Settlement Procedures Act, respectively. 
The requirement to provide the special information booklet under Sec. 
1026.19(g) of the TILA-RESPA Final Rule would also

[[Page 464]]

not apply to the transaction. But the creditor would provide the special 
information booklet under Sec. 1024.6, as applicable.
    ii. Predisclosure written estimates. Assume a creditor receives a 
request from a consumer for a written estimate of terms or costs 
specific to the consumer on October 3, 2015, before the consumer submits 
an application to the creditor, and thus before the consumer has 
received the disclosures required under Sec. 1026.19(e)(1)(i). The 
creditor, if it provides such written estimate to the consumer, must 
comply with the requirements of Sec. 1026.19(e)(2)(ii) and provide the 
required statement on the written estimate, even though the creditor has 
not received an application for a transaction subject to Sec. 
1026.19(e) and (f) on that date.
    iii. Request for preemption determination. Assume a creditor submits 
a request to the Bureau under Sec. 1026.28(a)(1) for a determination of 
whether a State law is inconsistent with the disclosure requirements of 
the TILA-RESPA Final Rule on October 3, 2015. Because the amendments to 
Sec. 1026.28(a)(1) are effective on that date and do not depend on 
whether the creditor has received an application as defined under Sec. 
1026.2(a)(3) of the TILA-RESPA Final Rule, Sec. 1026.28(a)(1), as 
amended by the TILA-RESPA Final Rule, is applicable to the request on 
that date and the Bureau would make a determination based on the 
amendments of the TILA-RESPA Final Rule, including, for example, the 
requirements of Sec. 1026.37.

          Section 1026.2--Definitions and Rules of Construction

                          2(a)(2) Advertisement

    1. Coverage. Only commercial messages that promote consumer credit 
transactions requiring disclosures are advertisements. Messages 
inviting, offering, or otherwise announcing generally to prospective 
customers the availability of credit transactions, whether in visual, 
oral, or print media, are covered by Regulation Z (12 CFR part 1026).
    i. Examples include:
    A. Messages in a newspaper, magazine, leaflet, promotional flyer, or 
catalog.
    B. Announcements on radio, television, or public address system.
    C. Electronic advertisements, such as on the Internet.
    D. Direct mail literature or other printed material on any exterior 
or interior sign.
    E. Point of sale displays.
    F. Telephone solicitations.
    G. Price tags that contain credit information.
    H. Letters sent to customers or potential customers as part of an 
organized solicitation of business.
    I. Messages on checking account statements offering auto loans at a 
stated annual percentage rate.
    J. Communications promoting a new open-end plan or closed-end 
transaction.
    ii. The term does not include:
    A. Direct personal contacts, such as follow-up letters, cost 
estimates for individual consumers, or oral or written communication 
relating to the negotiation of a specific transaction.
    B. Informational material, for example, interest-rate and loan-term 
memos, distributed only to business entities.
    C. Notices required by Federal or state law, if the law mandates 
that specific information be displayed and only the information so 
mandated is included in the notice.
    D. News articles the use of which is controlled by the news medium.
    E. Market-research or educational materials that do not solicit 
business.
    F. Communications about an existing credit account (for example, a 
promotion encouraging additional or different uses of an existing credit 
card account).
    2. Persons covered. All persons must comply with the advertising 
provisions in Sec. Sec. 1026.16 and 1026.24, not just those that meet 
the definition of creditor in Sec. 1026.2(a)(17). Thus, home builders, 
merchants, and others who are not themselves creditors must comply with 
the advertising provisions of the regulation if they advertise consumer 
credit transactions. However, under section 145 of the Act, the owner 
and the personnel of the medium in which an advertisement appears, or 
through which it is disseminated, are not subject to civil liability for 
violations.

                          2(a)(3) Application.

    1. In general. An application means the submission of a consumer's 
financial information for purposes of obtaining an extension of credit. 
For transactions subject to Sec. 1026.19(e), (f), or (g) of this part, 
the term consists of the consumer's name, the consumer's income, the 
consumer's social security number to obtain a credit report, the 
property address, an estimate of the value of the property, and the 
mortgage loan amount sought. This definition does not prevent a creditor 
from collecting whatever additional information it deems necessary in 
connection with the request for the extension of credit. However, once a 
creditor has received these six pieces of information, it has an 
application for purposes of the requirements of Regulation Z. A 
submission may be in written or electronic format and includes a written 
record of an oral application. The following examples for a transaction 
subject to Sec. 1026.19(e), (f), or (g) are illustrative of this 
provision:
    i. Assume a creditor provides a consumer with an application form 
containing 20 questions about the consumer's credit history and the 
collateral value. The consumer submits answers to nine of the questions 
and informs the creditor that the consumer will

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contact the creditor the next day with answers to the other 11 
questions. Although the consumer provided nine pieces of information, 
the consumer did not provide a social security number. The creditor has 
not yet received an application for purposes of Sec. 1026.2(a)(3).
    ii. Assume a creditor requires all applicants to submit 20 pieces of 
information. The consumer submits only six pieces of information and 
informs the creditor that the consumer will contact the creditor the 
next day with answers to the other 14 questions. The six pieces of 
information provided by the consumer were the consumer's name, income, 
social security number, property address, estimate of the value of the 
property, and the mortgage loan amount sought. Even though the creditor 
requires 14 additional pieces of information to process the consumer's 
request for a mortgage loan, the creditor has received an application 
for the purposes of Sec. 1026.2(a)(3) and therefore must comply with 
the relevant requirements under Sec. 1026.19.
    2. Social security number to obtain a credit report. If a consumer 
does not have a social security number, the creditor may substitute 
whatever unique identifier the creditor uses to obtain a credit report 
on the consumer. For example, a creditor has obtained a social security 
number to obtain a credit report for purposes of Sec. 1026.2(a)(3)(ii) 
if the creditor collects a Tax Identification Number from a consumer who 
does not have a social security number, such as a foreign national.
    3. Receipt of credit report fees. Section 1026.19(a)(1)(iii) permits 
the imposition of a fee to obtain the consumer's credit history prior to 
the delivery of the disclosures required under Sec. 1026.19(a)(1)(i). 
Section 1026.19(e)(2)(i)(B) permits the imposition of a fee to obtain 
the consumer's credit report prior to the delivery of the disclosures 
required under Sec. 1026.19(e)(1)(i). Whether, or when, such fees are 
received does not affect whether an application has been received for 
the purposes of the definition in Sec. 1026.2(a)(3) and the timing 
requirements in Sec. 1026.19(a)(1)(i) and (e)(1)(iii). For example, if, 
in a transaction subject to Sec. 1026.19(e)(1)(i), a creditor receives 
the six pieces of information identified under Sec. 1026.2(a)(3)(ii) on 
Monday, June 1, but does not receive a credit report fee from the 
consumer until Tuesday, June 2, the creditor does not comply with Sec. 
1026.19(e)(1)(iii) if it provides the disclosures required under Sec. 
1026.19(e)(1)(i) after Thursday, June 4. The three-business-day period 
beings on Monday, June 1, the date the creditor received the six pieces 
of information. The waiting period does not begin on Tuesday, June 2, 
the date the creditor received the credit report fee.

                     2(a)(4) Billing Cycle or Cycle

    1. Intervals. In open-end credit plans, the billing cycle determines 
the intervals for which periodic disclosure statements are required; 
these intervals are also used as measuring points for other duties of 
the creditor. Typically, billing cycles are monthly, but they may be 
more frequent or less frequent (but not less frequent than quarterly).
    2. Creditors that do not bill. The term cycle is interchangeable 
with billing cycle for definitional purposes, since some creditors' 
cycles do not involve the sending of bills in the traditional sense but 
only statements of account activity. This is commonly the case with 
financial institutions when periodic payments are made through payroll 
deduction or through automatic debit of the consumer's asset account.
    3. Equal cycles. Although cycles must be equal, there is a 
permissible variance to account for weekends, holidays, and differences 
in the number of days in months. If the actual date of each statement 
does not vary by more than four days from a fixed ``day'' (for example, 
the third Thursday of each month) or ``date'' (for example, the 15th of 
each month) that the creditor regularly uses, the intervals between 
statements are considered equal. The requirement that cycles be equal 
applies even if the creditor applies a daily periodic rate to determine 
the finance charge. The requirement that intervals be equal does not 
apply to the first billing cycle on an open-end account (i.e., the time 
period between account opening and the generation of the first periodic 
statement) or to a transitional billing cycle that can occur if the 
creditor occasionally changes its billing cycles so as to establish a 
new statement day or date. (See comments 9(c)(1)-3 and 9(c)(2)-3.)
    4. Payment reminder. The sending of a regular payment reminder 
(rather than a late payment notice) establishes a cycle for which the 
creditor must send periodic statements.

                          2(a)(6) Business Day

    1. Business function test. Activities that indicate that the 
creditor is open for substantially all of its business functions include 
the availability of personnel to make loan disbursements, to open new 
accounts, and to handle credit transaction inquiries. Activities that 
indicate that the creditor is not open for substantially all of its 
business functions include a retailer's merely accepting credit cards 
for purchases or a bank's having its customer-service windows open only 
for limited purposes such as deposits and withdrawals, bill paying, and 
related services.
    2. Rule for rescission, disclosures for certain mortgage 
transactions, and private education

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loans. A more precise rule for what is a business day (all calendar days 
except Sundays and the Federal legal holidays specified in 5 U.S.C. 
6103(a)) applies when the right of rescission, the receipt of 
disclosures for certain dwelling- or real estate-secured mortgage 
transactions under Sec. Sec. 1026.19(a)(1)(ii), 1026.19(a)(2), 
1026.19(e)(1)(iii)(B), 1026.19(e)(1)(iv), 1026.19(e)(2)(i)(A), 
1026.19(e)(4)(ii), 1026.19(f)(1)(ii), 1026.19(f)(1)(iii), 1026.20(e)(5), 
1026.31(c), or the receipt of disclosures for private education loans 
under Sec. 1026.46(d)(4) is involved. 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). In cases where the 
more precise rule applies, the observed holiday (in the example, July 3) 
is a business day.

                           2(a)(7) Card Issuer

    1. Agent. An agent of a card issuer is considered a card issuer. 
Because agency relationships are traditionally defined by contract and 
by state or other applicable law, the regulation does not define agent. 
Merely providing services relating to the production of credit cards or 
data processing for others, however, does not make one the agent of the 
card issuer. In contrast, a financial institution may become the agent 
of the card issuer if an agreement between the institution and the card 
issuer provides that the cardholder may use a line of credit with the 
financial institution to pay obligations incurred by use of the credit 
card.

                           2(a)(8) Cardholder

    1. General rule. A cardholder is a natural person at whose request a 
card is issued for consumer credit purposes or who is a co-obligor or 
guarantor for such a card issued to another. The second category does 
not include an employee who is a co-obligor or guarantor on a card 
issued to the employer for business purposes, nor does it include a 
person who is merely the authorized user of a card issued to another.
    2. Limited application of regulation. For the limited purposes of 
the rules on issuance of credit cards and liability for unauthorized 
use, a cardholder includes any person, including an organization, to 
whom a card is issued for any purpose--including a business, 
agricultural, or commercial purpose.
    3. Issuance. See the commentary to Sec. 1026.12(a).
    4. Dual-purpose cards and dual-card systems. Some card issuers offer 
dual-purpose cards that are for business as well as consumer purposes. 
If a card is issued to an individual for consumer purposes, the fact 
that an organization has guaranteed to pay the debt does not make it 
business credit. On the other ha