Skip to main content

Search

Truth in Lending: 6.7.4.2.1 Sale credit described

Sale credit is the access of an open-end account such as a credit card for the direct purpose of buying goods or services on credit. This is distinguished from nonsale credit: the access of an open-end account by use of cash advances or overdraft checking.

Truth in Lending: 6.7.4.2.2 Amount and date of transaction

All transactions for sale credit must include the amount and date of the transaction. If only one date is disclosed, it must be the transaction date and need not be further identified as such. If more than one date is disclosed, for example, a posting date as well as the transaction date, both must be identified.1403 Ordinarily the date is adequately identified by the month and date, unless there is such a delay that the consumer might be confused unless the year is also disclosed.1404

Truth in Lending: 6.7.4.2.5 Sale credit rules where creditor provides copies of credit documents

If an actual copy of the charge slip, chit, receipt or other credit document is provided with the periodic statement, the periodic statement need only state the amount and date of the transaction.1423 This date may appear on the copy of the credit document or on the periodic statement.1424 The consumer can thereby compare the credit document provided with the statement to verify the identity and amount of the transaction.

Truth in Lending: 6.7.4.3 Nonsale Credit

Nonsale credit comprises such things as cash advances, advances from an overdraft line of credit, miscellaneous debits to charge the consumer for payment checks which did not clear, other returned checks, misposted items (correcting a posting on the wrong date which resulted in a finance charge, for instance) and similar bookkeeping entries. Nonsale credit also includes the use of a check or draft or the overdraft feature of a credit card even if the feature is used in connection with a purchase of goods or services.1425

Truth in Lending: 6.7.5 Disclosure of Credits

The periodic statement must disclose any credits to the account during the billing cycle,1438 such as payments, credits for returned merchandise and other credits relating to an obligation previously incurred by the consumer.

Truth in Lending: 6.7.6.1 General

The periodic statement must disclose each periodic rate that may be applied, expressed as an annual percentage rate, as well as the range of balances and/or types of transactions to which the APR is applicable.1446 Regulation Z was revised effective July 2010 to remove the requirement to disclose the periodic rate itself.1447 Since disclosure of the periodic rate is required by the Act itself,1448 the FRB (that possessed rule-writing authorit

Truth in Lending: 6.7.6.2 Disclosure of Multiple Rates

The periodic rate so disclosed must show all the rates which were in effect during that billing cycle, even if none of the rates were applied, because the consumer took advantage of the grace period, or had no cash advances or overdrafts to which the rate might otherwise have been applied.1458 This information helps the consumer make spending and budgeting decisions relating to an effective use of the account and the credit offered.

Truth in Lending: 6.7.6.3 Deferred Interest Programs

Creditors may offer deferred interest programs, which do not impose a periodic rate on the balance if paid off by the end of the deferred interest period.1470 If the balance is not repaid by then, the creditor will impose finance charges attributable to the periodic rates that apply to period between the date of purchase and the end of the deferred interest period.

Truth in Lending: 6.7.6.4.1 Elimination of the effective APR disclosures

Until July 2010, open-end creditors were required to disclose an annual percentage rate that includes both finance charges from periodic rates and other finance charges, such as fixed, minimum, and transaction charges.1472 This APR disclosure is specifically mandated by TILA,1473 and in fact the Act even sets forth how it must be calculated.1474 This disclosure, sometimes referred to as the historical or effective APR, represents the true cos

Truth in Lending: 6.7.6.4.2 Calculation of the effective APR

Prior to 2010, or for HELOC creditors that choose to continue to disclose the effective APR, the method for computation of the effective APR is detailed at Regulation Z § 1026.14(c).1497 The disclosed effective APR is accurate if it is not more than 1/8 of 1 percentage point above or below the correct effective APR.1498

Truth in Lending: 6.7.7.1 General Rule

In order to help the consumer to do his or her own computations, the creditor must disclose the balance on which the finance charge was computed, and must explain how the balance was determined.1505 This balance must be labeled as “Balance Subject to Interest Rate.”1506 In addition, if the creditor uses one of the four balance computation methods that Regulation Z1507 lists by name as the most common methods,

Truth in Lending: 6.7.7.3 Multi-Featured Plans; Split Rates

In multi-featured plans, such as an account that permits both purchases and cash advances, the creditor must disclose a separate balance for each feature subject to different periodic rates or different balance computation methods. The creditor has the option of disclosing a total plan balance as well.1518

Truth in Lending: 6.7.7.5 Deferred Interest Plan Balance

Creditors may offer deferred interest programs, which do not impose a periodic rate on a balance if it is paid off by the end of the deferred interest period.1529 If the balance is not repaid by then, the creditor will impose finance charges attributable to the periodic rates that apply to the period between the date of purchase and the end of the deferred interest period.

Truth in Lending: 6.7.8.1 Revisions to Regulation Z Replace Finance Charge with Interest and Fees Disclosure

Previously, creditors were required to disclose the amount of the “finance charge” imposed in a billing cycle.1533 This “finance charge” included both finance charges resulting from the imposition of a periodic rate as well as non-interest charges, such as cash advance fees.1534 This requirement parallels the disclosures of the “finance charge” in closed-end context, which includes both interest and non-interest charges.1535

Truth in Lending: 6.7.8.2 Formatting Requirements

Certain formatting requirements apply to the disclosures of “interest” and “fees.” They must be grouped together, and must be disclosed in proximity to transactions for the account,1538 as identified under section 1026.7(b)(2).1539 In disclosing these charges, creditors must use a format substantially similar to the model form G-18(A).1540

Truth in Lending: 6.7.8.3.1 General

Finance charges resulting from the application of a periodic interest rate to a balance must be disclosed on a periodic statement using the term “interest charge.”1543 The disclosures must be itemized and totaled by type of transaction, e.g., interest charge from purchases versus cash advance, and must be grouped together under the heading “Interest Charged.” A total of all of these finance charges attributable to periodic interest rates must be disclosed, using the term “Total Interest,” for both the billing cycle and calendar year-to-date

Truth in Lending: 6.7.8.3.2 Deferred interest

Creditors may offer deferred interest programs, which do not impose a periodic rate on the balance if paid off by the end of the deferred interest period.1545 If the balance is not repaid by then, the creditor will impose finance charges attributable to the periodic rates that apply to period between the date of purchase and the end of the deferred interest period.

Truth in Lending: 6.7.8.4 Disclosure of Fees

All charges that are part of the plan other than interest charges must be grouped together and disclosed under the heading “Fees.”1549 The rules as to what charges are consider “part of the plan” are set forth in Regulation Z § 1026.6(b)(3).1550

Truth in Lending: 6.7.8.5 Disclosure of Year-to-Date Totals at End of Calendar Year

Creditors are required to disclose year-to-date totals for “Interest” and “Fees.”1555 Most open-end creditors send monthly periodic statements; however, the billing cycle often does not coincide with calendar months. For example, a creditor may have a billing cycle begin on the tenth day of each month and ends on the 9th day of the next month. In disclosing calendar year-to-date totals for such accounts, these creditors have two options for disclosing the year-to-date total at the end of the calendar year.

Truth in Lending: 6.7.9 Summary of Changes-in-Terms and Penalty Rate Notices

Creditors for non-home-secured open-end plans are required to include a summary of any changes in terms or imposition of a penalty rate on the front of a periodic statement.1560 This requirement only applies if the notice of a change in terms or imposition of a penalty rate is included within or accompanies the periodic statement.1561 The summary must be on the front of the periodic statement, but need not be on the first page.1562 See