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§ 1602. Definitions
and rules of construction |
(a)
The definitions and rules of
construction set forth in this section are
applicable for the purposes of this subchapter.
(b)
The term “Board” refers to the
Board of Governors of the Federal Reserve System.
(c)
The term “organization” means
a corporation, government or governmental
subdivision or agency, trust, estate, partnership,
cooperative, or association.
(d)
The term “person” means a
natural person or an organization.
(e)
The term “credit” means the
right granted by a creditor to a debtor to defer
payment of debt or to incur debt and defer its
payment.
(f)
The term “creditor” refers
only to a person who both
(1)
regularly extends, whether
in connection with loans, sales of property or
services, or otherwise, consumer credit which is
payable by agreement in more than four
installments or for which the payment of a
finance charge is or may be required, and
(2)
is the person to whom the
debt arising from the consumer credit
transaction is initially payable on the face of
the evidence of indebtedness or, if there is no
such evidence of indebtedness, by agreement.
Notwithstanding the preceding sentence, in the
case of an open-end credit plan involving a
credit card, the card issuer and any person who
honors the credit card and offers a discount
which is a finance charge are creditors. For the
purpose of the requirements imposed under part D
of this subchapter and sections
§ 1602. Definitions and
rules of construction
a) The definitions and rules of construction set
forth in this section are applicable for the
purposes of this subchapter.
(b) The term “Board” refers to the Board of
Governors of the Federal Reserve System.
(c) The term “organization” means a corporation,
government or governmental subdivision or
agency, trust, estate, partnership, cooperative,
or association.
(d) The term “person” means a natural person or
an organization.
(e) The term “credit” means the right granted by
a creditor to a debtor to defer payment of debt
or to incur debt and defer its payment.
(f) The term “creditor” refers only to a person
who both
(1) regularly extends, whether in connection
with loans, sales of property or services, or
otherwise, consumer credit which is payable by
agreement in more than four installments or for
which the payment of a finance charge is or may
be required, and
(2) is the person to whom the debt arising from
the consumer credit transaction is initially
payable on the face of the evidence of
indebtedness or, if there is no such evidence of
indebtedness, by agreement. Notwithstanding the
preceding sentence, in the case of an open-end
credit plan involving a credit card, the card
issuer and any person who honors the credit card
and offers a discount which is a finance charge
are creditors. For the purpose of the
requirements imposed under part D of this
subchapter and sections 1637 (a)(5), 1637
(a)(6), 1637 (a)(7), 1637 (b)(1), 1637 (b)(2),
1637 (b)(3), 1637 (b)(8), and 1637 (b)(10) of
this title, the term “creditor” shall also
include card issuers whether or not the amount
due is payable by agreement in more than four
installments or the payment of a finance charge
is or may be required, and the Board shall, by
regulation, apply these requirements to such
card issuers, to the extent appropriate, even
though the requirements are by their terms
applicable only to creditors offering open-end
credit plans. Any person who originates 2 or
more mortgages referred to in subsection (aa) of
this section in any 12-month period or any
person who originates 1 or more such mortgages
through a mortgage broker shall be considered to
be a creditor for purposes of this subchapter.
(g) The term “credit sale” refers to any sale in
which the seller is a creditor. The term
includes any contract in the form of a bailment
or lease if the bailee or lessee contracts to
pay as compensation for use a sum substantially
equivalent to or in excess of the aggregate
value of the property and services involved and
it is agreed that the bailee or lessee will
become, or for no other or a nominal
consideration has the option to become, the
owner of the property upon full compliance with
his obligations under the contract.
(h) The adjective “consumer”, used with
reference to a credit transaction, characterizes
the transaction as one in which the party to
whom credit is offered or extended is a natural
person, and the money, property, or services
which are the subject of the transaction are
primarily for personal, family, or household
purposes.
(i) The term “open end credit plan” means a plan
under which the creditor reasonably contemplates
repeated transactions, which prescribes the
terms of such transactions, and which provides
for a finance charge which may be computed from
time to time on the outstanding unpaid balance.
A credit plan which is an open end credit plan
within the meaning of the preceding sentence is
an open end credit plan even if credit
information is verified from time to time.
(j) The term “adequate notice,” as used in
section 1643 of this title, means a printed
notice to a cardholder which sets forth the
pertinent facts clearly and conspicuously so
that a person against whom it is to operate
could reasonably be expected to have noticed it
and understood its meaning. Such notice may be
given to a cardholder by printing the notice on
any credit card, or on each periodic statement
of account, issued to the cardholder, or by any
other means reasonably assuring the receipt
thereof by the cardholder.
(k) The term “credit card” means any card,
plate, coupon book or other credit device
existing for the purpose of obtaining money,
property, labor, or services on credit.
(l) The term “accepted credit card” means any
credit card which the cardholder has requested
and received or has signed or has used, or
authorized another to use, for the purpose of
obtaining money, property, labor, or services on
credit.
(m) The term “cardholder” means any person to
whom a credit card is issued or any person who
has agreed with the card issuer to pay
obligations arising from the issuance of a
credit card to another person.
(n) The term “card issuer” means any person who
issues a credit card, or the agent of such
person with respect to such card.
(o) The term “unauthorized use,” as used in
section 1643 of this title, means a use of a
credit card by a person other than the
cardholder who does not have actual, implied, or
apparent authority for such use and from which
the cardholder receives no benefit.
(p) The term “discount” as used in section 1666f
of this title means a reduction made from the
regular price. The term “discount” as used in
section 1666f of this title shall not mean a
surcharge.
(q) The term “surcharge” as used in this section
and section 1666f of this title means any means
of increasing the regular price to a cardholder
which is not imposed upon customers paying by
cash, check, or similar means.”
(r) The term “State” refers to any State, the
Commonwealth of Puerto Rico, the District of
Columbia, and any territory or possession of the
United States.
(s) The term “agricultural purposes” includes
the production, harvest, exhibition, marketing,
transportation, processing, or manufacture of
agricultural products by a natural person who
cultivates, plants, propagates, or nurtures
those agricultural products, including but not
limited to the acquisition of farmland, real
property with a farm residence, and personal
property and services used primarily in farming.
(t) The term “agricultural products” includes
agricultural, horticultural, viticultural, and
dairy products, livestock, wildlife, poultry,
bees, forest products, fish and shellfish, and
any products thereof, including processed and
manufactured products, and any and all products
raised or produced on farms and any processed or
manufactured products thereof.
(u) The term “material disclosures” means the
disclosure, as required by this subchapter, of
the annual percentage rate, the method of
determining the finance charge and the balance
upon which a finance charge will be imposed, the
amount of the finance charge, the amount to be
financed, the total of payments, the number and
amount of payments, the due dates or periods of
payments scheduled to repay the indebtedness,
and the disclosures required by section 1639 (a)
of this title.
(v) The term “dwelling” means a residential
structure or mobile home which contains one to
four family housing units, or individual units
of condominiums or cooperatives.
(w) The term “residential mortgage transaction”
means a transaction in which a mortgage, deed of
trust, purchase money security interest arising
under an installment sales contract, or
equivalent consensual security interest is
created or retained against the consumer’s
dwelling to finance the acquisition or initial
construction of such dwelling.
(x) As used in this section and section 1666f of
this title, the term “regular price” means the
tag or posted price charged for the property or
service if a single price is tagged or posted,
or the price charged for the property or service
when payment is made by use of an open-end
credit plan or a credit card if either (1) no
price is tagged or posted, or (2) two prices are
tagged or posted, one of which is charged when
payment is made by use of an open-end credit
plan or a credit card and the other when payment
is made by use of cash, check, or similar means.
For purposes of this definition, payment by
check, draft, or other negotiable instrument
which may result in the debiting of an open-end
credit plan or a credit cardholder’s open-end
account shall not be considered payment made by
use of the plan or the account.
(y) Any reference to any requirement imposed
under this subchapter or any provision thereof
includes reference to the regulations of the
Board under this subchapter or the provision
thereof in question.
(z) The disclosure of an amount or percentage
which is greater than the amount or percentage
required to be disclosed under this subchapter
does not in itself constitute a violation of
this subchapter.
(aa)
(1) A mortgage referred to in this subsection
means a consumer credit transaction that is
secured by the consumer’s principal dwelling,
other than a residential mortgage transaction, a
reverse mortgage transaction, or a transaction
under an open end credit plan, if—
(A) the annual percentage rate at consummation
of the transaction will exceed by more than 10
percentage points the yield on Treasury
securities having comparable periods of maturity
on the fifteenth day of the month immediately
preceding the month in which the application for
the extension of credit is received by the
creditor; or
(B) the total points and fees payable by the
consumer at or before closing will exceed the
greater of—
(i) 8 percent of the total loan amount; or
(ii) $400.
(2)
(A) After the 2-year period beginning on the
effective date of the regulations promulgated
under section 155 of the Riegle Community
Development and Regulatory Improvement Act of
1994, and no more frequently than biennially
after the first increase or decrease under this
subparagraph, the Board may by regulation
increase or decrease the number of percentage
points specified in paragraph (1)(A), if the
Board determines that the increase or decrease
is—
(i) consistent with the consumer protections
against abusive lending provided by the
amendments made by subtitle B of title I of the
Riegle Community Development and Regulatory
Improvement Act of 1994; and
(ii) warranted by the need for credit.
(B) An increase or decrease under subparagraph
(A) may not result in the number of percentage
points referred to in subparagraph (A) being—
(i) less that 8 percentage points; or
(ii) greater than 12 percentage points.
(C) In determining whether to increase or
decrease the number of percentage points
referred to in subparagraph (A), the Board shall
consult with representatives of consumers,
including low-income consumers, and lenders.
(3) The amount specified in paragraph (1)(B)(ii)
shall be adjusted annually on January 1 by the
annual percentage change in the Consumer Price
Index, as reported on June 1 of the year
preceding such adjustment.
(4) For purposes of paragraph (1)(B), points and
fees shall include—
(A) all items included in the finance charge,
except interest or the time-price differential;
(B) all compensation paid to mortgage brokers;
(C) each of the charges listed in section 1605
(e) of this title (except an escrow for future
payment of taxes), unless—
(i) the charge is reasonable;
(ii) the creditor receives no direct or indirect
compensation; and
(iii) the charge is paid to a third party
unaffiliated with the creditor; and
(D) such other charges as the Board determines
to be appropriate.
(5) This subsection shall not be construed to
limit the rate of interest or the finance charge
that a person may charge a consumer for any
extension of credit.
(bb) The term “reverse mortgage transaction”
means a nonrecourse transaction in which a
mortgage, deed of trust, or equivalent
consensual security interest is created against
the consumer’s principal dwelling—
(1) securing one or more advances; and
(2) with respect to which the payment of any
principal, interest, and shared appreciation or
equity is due and payable (other than in the
case of default) only after—
(A) the transfer of the dwelling;
(B) the consumer ceases to occupy the dwelling
as a principal dwelling; or
(C) the death of the consumer.
of this title, the term “creditor” shall also
include card issuers whether or not the amount
due is payable by agreement in more than four
installments or the payment of a finance charge
is or may be required, and the Board shall, by
regulation, apply these requirements to such
card issuers, to the extent appropriate, even
though the requirements are by their terms
applicable only to creditors offering open-end
credit plans. Any person who originates 2 or
more mortgages referred to in subsection (aa) of
this section in any 12-month period or any
person who originates 1 or more such mortgages
through a mortgage broker shall be considered to
be a creditor for purposes of this subchapter.
(g)
The term “credit sale” refers
to any sale in which the seller is a creditor. The
term includes any contract in the form of a bailment
or lease if the bailee or lessee contracts to pay as
compensation for use a sum substantially equivalent
to or in excess of the aggregate value of the
property and services involved and it is agreed that
the bailee or lessee will become, or for no other or
a nominal consideration has the option to become,
the owner of the property upon full compliance with
his obligations under the contract.
(h)
The adjective “consumer”, used
with reference to a credit transaction,
characterizes the transaction as one in which the
party to whom credit is offered or extended is a
natural person, and the money, property, or services
which are the subject of the transaction are
primarily for personal, family, or household
purposes.
(i)
The term “open end credit
plan” means a plan under which the creditor
reasonably contemplates repeated transactions, which
prescribes the terms of such transactions, and which
provides for a finance charge which may be computed
from time to time on the outstanding unpaid balance.
A credit plan which is an open end credit plan
within the meaning of the preceding sentence is an
open end credit plan even if credit information is
verified from time to time.
(j)
The term “adequate notice,” as
used in section 1643 of this title, means a printed
notice to a cardholder which sets forth the
pertinent facts clearly and conspicuously so that a
person against whom it is to operate could
reasonably be expected to have noticed it and
understood its meaning. Such notice may be given to
a cardholder by printing the notice on any credit
card, or on each periodic statement of account,
issued to the cardholder, or by any other means
reasonably assuring the receipt thereof by the
cardholder.
(k)
The term “credit card” means
any card, plate, coupon book or other credit device
existing for the purpose of obtaining money,
property, labor, or services on credit.
(l)
The term “accepted credit
card” means any credit card which the cardholder has
requested and received or has signed or has used, or
authorized another to use, for the purpose of
obtaining money, property, labor, or services on
credit.
(m)
The term “cardholder” means
any person to whom a credit card is issued or any
person who has agreed with the card issuer to pay
obligations arising from the issuance of a credit
card to another person.
(n)
The term “card issuer” means
any person who issues a credit card, or the agent of
such person with respect to such card.
(o)
The term “unauthorized use,”
as used in section 1643 of this title, means a use
of a credit card by a person other than the
cardholder who does not have actual, implied, or
apparent authority for such use and from which the
cardholder receives no benefit.
(p)
The term “discount” as used in
section 1666f of this title means a reduction made
from the regular price. The term “discount” as used
in section 1666f of this title shall not mean a
surcharge.
(q)
The term “surcharge” as used
in this section and section 1666f of this title
means any means of increasing the regular price to a
cardholder which is not imposed upon customers
paying by cash, check, or similar means.”
(r)
The term “State” refers to any
State, the Commonwealth of Puerto Rico, the District
of Columbia, and any territory or possession of the
United States.
(s)
The term “agricultural
purposes” includes the production, harvest,
exhibition, marketing, transportation, processing,
or manufacture of agricultural products by a natural
person who cultivates, plants, propagates, or
nurtures those agricultural products, including but
not limited to the acquisition of farmland, real
property with a farm residence, and personal
property and services used primarily in farming.
(t)
The term “agricultural
products” includes agricultural, horticultural,
viticultural, and dairy products, livestock,
wildlife, poultry, bees, forest products, fish and
shellfish, and any products thereof, including
processed and manufactured products, and any and all
products raised or produced on farms and any
processed or manufactured products thereof.
(u)
The term “material
disclosures” means the disclosure, as required by
this subchapter, of the annual percentage rate, the
method of determining the finance charge and the
balance upon which a finance charge will be imposed,
the amount of the finance charge, the amount to be
financed, the total of payments, the number and
amount of payments, the due dates or periods of
payments scheduled to repay the indebtedness, and
the disclosures required by section 1639 (a)of this
title.
(v)
The term “dwelling” means a
residential structure or mobile home which contains
one to four family housing units, or individual
units of condominiums or cooperatives.
(w)
The term “residential mortgage
transaction” means a transaction in which a
mortgage, deed of trust, purchase money security
interest arising under an installment sales
contract, or equivalent consensual security interest
is created or retained against the consumer’s
dwelling to finance the acquisition or initial
construction of such dwelling.
(x)
As used in this section and
section 1666f of this title, the term “regular
price” means the tag or posted price charged for the
property or service if a single price is tagged or
posted, or the price charged for the property or
service when payment is made by use of an open-end
credit plan or a credit card if either (1) no price
is tagged or posted, or (2) two prices are tagged or
posted, one of which is charged when payment is made
by use of an open-end credit plan or a credit card
and the other when payment is made by use of cash,
check, or similar means. For purposes of this
definition, payment by check, draft, or other
negotiable instrument which may result in the
debiting of an open-end credit plan or a credit
cardholder’s open-end account shall not be
considered payment made by use of the plan or the
account.
(y)
Any reference to any
requirement imposed under this subchapter or any
provision thereof includes reference to the
regulations of the Board under this subchapter or
the provision thereof in question.
(z)
The disclosure of an amount or
percentage which is greater than the amount or
percentage required to be disclosed under this
subchapter does not in itself constitute a violation
of this subchapter.
(aa)
(1)
A mortgage referred to
in this subsection means a consumer credit
transaction that is secured by the
consumer’s principal dwelling, other than a
residential mortgage transaction, a reverse
mortgage transaction, or a transaction under
an open end credit plan, if—
(A)
the annual
percentage rate at consummation of the
transaction will exceed by more than 10
percentage points the yield on Treasury
securities having comparable periods of
maturity on the fifteenth day of the
month immediately preceding the month in
which the application for the extension
of credit is received by the creditor;
or
(B)
the total points
and fees payable by the consumer at or
before closing will exceed the greater
of—
(i)
8 percent of
the total loan amount; or
(2)
(A)
After the 2-year
period beginning on the effective date
of the regulations promulgated under
section 155 of the Riegle Community
Development and Regulatory Improvement
Act of 1994, and no more frequently than
biennially after the first increase or
decrease under this subparagraph, the
Board may by regulation increase or
decrease the number of percentage points
specified in paragraph (1)(A), if the
Board determines that the increase or
decrease is—
(i)
consistent
with the consumer protections
against abusive lending provided by
the amendments made by subtitle B of
title I of the Riegle Community
Development and Regulatory
Improvement Act of 1994; and
(ii)
warranted by
the need for credit. (including Boat
Loans)
(B)
An increase or
decrease under subparagraph (A) may not
result in the number of percentage
points referred to in subparagraph (A)
being—
(i)
less that 8
percentage points; or
(ii)
greater than
12 percentage points.
(C)
In determining
whether to increase or decrease the
number of percentage points referred to
in subparagraph (A), the Board shall
consult with representatives of
consumers, including low-income
consumers, and lenders.
(3)
The amount specified
in paragraph (1)(B)(ii) shall be adjusted
annually on January 1 by the annual
percentage change in the Consumer Price
Index, as reported on June 1 of the year
preceding such adjustment.
(4)
For purposes of
paragraph (1)(B), points and fees shall
include—
(A)
all items included
in the finance charge, except interest
or the time-price differential;
(B)
all compensation
paid to mortgage brokers;
(C)
each of the
charges listed in section 1605 (e) of
this title (except an escrow for future
payment of taxes), unless—
(i)
the charge is
reasonable;
(ii)
the creditor
receives no direct or indirect
compensation; and
(iii)
the charge is
paid to a third party unaffiliated
with the creditor; and
(D)
such other charges
as the Board determines to be
appropriate.
(5)
This subsection shall
not be construed to limit the rate of
interest or the finance charge that a person
may charge a consumer for any extension of
credit.
(bb)
The term “reverse mortgage
transaction” means a nonrecourse transaction in
which a mortgage, deed of trust, or equivalent
consensual security interest is created against
the consumer’s principal dwelling—
(1)
securing one or more
advances; and
(2)
with respect to which
the payment of any principal, interest, and
shared appreciation or equity is due and
payable (other than in the case of default)
only after—
(A)
the transfer of
the dwelling;
(B)
the consumer
ceases to occupy the dwelling as a
principal dwelling; or
(C)
the death of the
consumer.
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§ 1604. Disclosure guidelines
(a) Promulgation, contents, etc., of regulations
The Board shall prescribe regulations to carry out the purposes of
this subchapter. Except in the case of a mortgage referred to in
section 1602 (aa) of this title, these regulations may contain such
classifications, differentiations, or other provisions, and may
provide for such adjustments and exceptions for any class of
transactions, as in the judgment of the Board are necessary or
proper to effectuate the purposes of this subchapter, to prevent
circumvention or evasion thereof, or to facilitate compliance
therewith.
(b) Model disclosure forms and clauses; publication, criteria,
compliance, etc.
The Board shall publish model disclosure forms and clauses for
common transactions to facilitate compliance with the disclosure
requirements of this subchapter and to aid the borrower or lessee in
understanding the transaction by utilizing readily understandable
language to simplify the technical nature of the disclosures. In
devising such forms, the Board shall consider the use by creditors
or lessors of data processing or similar automated equipment.
Nothing in this subchapter may be construed to require a creditor or
lessor to use any such model form or clause prescribed by the Board
under this section. A creditor or lessor shall be deemed to be in
compliance with the disclosure provisions of this subchapter with
respect to other than numerical disclosures if the creditor or
lessor
(1) uses any appropriate model form or clause as published by the
Board, or
(2) uses any such model form or clause and changes it by
(A) deleting any information which is not required by this
subchapter, or
(B) rearranging the format, if in making such deletion or
rearranging the format, the creditor or lessor does not affect the
substance, clarity, or meaningful sequence of the disclosure.
(c) Procedures applicable for adoption of model forms and clauses
Model disclosure forms and clauses shall be adopted by the Board
after notice duly given in the Federal Register and an opportunity
for public comment in accordance with section 553 of title 5.
(d) Effective dates of regulations containing new disclosure
requirements
Any regulation of the Board, or any amendment or interpretation
thereof, requiring any disclosure which differs from the disclosures
previously required by this part, part D, or part E of this
subchapter or by any regulation of the Board promulgated thereunder
shall have an effective date of that October 1 which follows by at
least six months the date of promulgation, except that the Board may
at its discretion take interim action by regulation, amendment, or
interpretation to lengthen the period of time permitted for
creditors or lessors to adjust their forms to accommodate new
requirements or shorten the length of time for creditors or lessors
to make such adjustments when it makes a specific finding that such
action is necessary to comply with the findings of a court or to
prevent unfair or deceptive disclosure practices. Notwithstanding
the previous sentence, any creditor or lessor may comply with any
such newly promulgated disclosure requirements prior to the
effective date of the requirements.
(f) 1 Exemption authority
(1) In general
The Board may exempt, by regulation, from all or part of this
subchapter any class of transactions, other than transactions
involving any mortgage described in section 1602 (aa) of this title,
for which, in the determination of the Board, coverage under all or
part of this subchapter does not provide a meaningful benefit to
consumers in the form of useful information or protection.
(2) Factors for consideration
In determining which classes of transactions to exempt in whole or
in part under paragraph (1), the Board shall consider the following
factors and publish its rationale at the time a proposed exemption
is published for comment:
(A) The amount of the loan and whether the disclosures, right of
rescission, and other provisions provide a benefit to the consumers
who are parties to such transactions, as determined by the Board.
(B) The extent to which the requirements of this subchapter
complicate, hinder, or make more expensive the credit process for
the class of transactions.
(C) The status of the borrower, including—
(i) any related financial arrangements of the borrower, as
determined by the Board;
(ii) the financial sophistication of the borrower relative to the
type of transaction; and
(iii) the importance to the borrower of the credit, related
supporting property, and coverage under this subchapter, as
determined by the Board;
(D) whether the loan is secured by the principal residence of the
consumer; and
(E) whether the goal of consumer protection would be undermined by
such an exemption.
(g) Waiver for certain borrowers
(1) In general
The Board, by regulation, may exempt from the requirements of this
subchapter certain credit transactions if—
(A) the transaction involves a consumer—
(i) with an annual earned income of more than $200,000; or
(ii) having net assets in excess of $1,000,000 at the time of the
transaction; and
(B) a waiver that is handwritten, signed, and dated by the consumer
is first obtained from the consumer.
(2) Adjustments by the Board
The Board, at its discretion, may adjust the annual earned income
and net asset requirements of paragraph (1) for inflation. |
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