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Truth in Lending: 8.4.3.3 Real-Estate-Related Charges

The official interpretations treat real-estate-related charges that are not finance charges in two different ways, depending on which section of Regulation Z excludes them from the definition of a finance charge.

Truth in Lending: 8.4.4 Home-Equity Plan Information

HELOC account-opening disclosures must generally repeat, as applicable, some of the early HELOC disclosures. Regulation Z refers to these disclosures as “home-equity plan information.”306 Creditors must provide these disclosures in a form the consumer may keep.307 The disclosures must meet the general format requirements for open-end credit disclosures, except that they need not be segregated, so they may be integrated into the contract.308

Truth in Lending: 8.4.7.1 Overview

Under the Competitive Equality Banking Act of 1987, any adjustable rate loan must have a disclosed maximum interest rate.322 Determination of the maximum rate is within the creditor’s discretion, but failure to set a maximum rate is a violation of TILA.323

Open-end plans that are subject to the maximum rate disclosure include:

Truth in Lending: 8.4.7.2 Changes to the Maximum Interest Rate

A new maximum interest rate can be set only if an open-end plan is terminated and a new one opened. Modifications of an existing agreement that do not constitute a new plan cannot change the maximum interest rate cap set under the original agreement, even if additional credit is extended. If an open-end plan subject to section 1026.30 has a fixed maturity and a creditor renews the plan at maturity, without having a legal obligation to do so, a new maximum interest rate may be set at that time.329

Truth in Lending: 8.5.1.1 General Requirements

Home equity line of credit (HELOC) creditors are required to send periodic statements when the account has a debit or credit balance of at least $1 or if the creditor has imposed a finance charge.330 The provision governing periodic statements for HELOCs is found in subpart B of Regulation Z, which applies to open-end credit.

Truth in Lending: 8.5.1.3 Disclosure of Other Charges

The periodic statement must include the amount of any other charges debited to the account, itemized and identified by type.354 Each type must be separately itemized; all charges of the same type may be disclosed individually or as a total of that type. Neither the total of all the types of other charges nor the date of debiting need be disclosed.355

Truth in Lending: 8.5.2 Credit Limit Increases

The official interpretations explicitly exempt credit-limit increases from the ban on changing the HELOC terms because it is perceived to “unequivocally benefit the consumer.”361 The official interpretations also say no change-in-terms notice is required when increasing a consumer’s credit limit.362

Truth in Lending: 8.5.3.1 Generally

Sometimes, though not always, creditors must give notice when changing the terms of a home equity line of credit (HELOC).366 The following subsections discuss four categories: changes that require fifteen days advance notice; notice by the effective date; notice after the change; and changes requiring no notice at all.

Truth in Lending: 8.5.3.3 Change of Terms—Notice by the Effective Date

When the borrower agrees to a change in terms, the creditor may mail or deliver the notice as late as the effective date of the change.373 This exception, however, only applies to “unusual” changes that are “relatively unique” to an individual homeowner, such as replacing the collateral for a loan or where the creditor can advance additional credit or where the creditor raised the minimum payment.374 Creditors are not permitted to presume assent to the changes through the consumer’s use of the a

Truth in Lending: 8.5.3.5 Change of Terms—No Notice Required

According to Regulation Z, HELOC creditors are not required to provide a change-of-terms notice when making changes resulting from an agreement involving a court proceeding (such as a settlement)380 or when reducing any finance charge or other charges.381 But, effective October 1, 2022, the exception for reducing charges does not apply to changing the margin in conjunction with replacing the LIBOR as the index specified in the contract.382

Truth in Lending: 8.6.1 General

TILA and Regulation Z impose important substantive limitations on home equity line of credit (HELOC) contracts and HELOC creditors. The limitations apply to assignees and holders, as well as the original creditors. The limitations apply to both the draw and repayment periods of a HELOC, and to any renewal or modification of the HELOC agreement.388

Truth in Lending: 8.6.2.1 Refund of Fees

A creditor must refund all fees paid by the consumer to anyone in connection with an application for a HELOC if any disclosed term changes (other than one resulting from a variable rate index change) before the plan is opened, and if, as a result of the change, the consumer decides not to enter into the plan.392 All fees paid in connection with the plan are subject to this requirement, including fees paid to third parties (e.g., insurance premiums and appraisal fees) as well as those paid directly to the creditor.

Truth in Lending: 8.6.2.2 Nonrefundable Fees

Neither the creditor nor any other person may impose a nonrefundable fee in connection with an application for a HELOC until three business days after the disclosure and required brochure have been received by the consumer.398 If the disclosures are mailed, the consumer is considered to have received them three business days after they were mailed.399

Truth in Lending: 8.6.3 Indices for Variable Rate HELOCs

HELOCs may not have a variable rate unless the controlling index is both publicly available and not under the control of the creditor.403 A publicly available index need not always be published in a newspaper, but it must be independently verifiable by a consumer.404 Section 8.6.7.3, infra, describes what happens if the specif

Truth in Lending: 8.6.4 Changing the APR

The creditor’s ability to change the APR (i.e., the interest rate405) on a HELOC is more limited than for non-home-secured lines of credit. A HELOC creditor may not change the interest rate except in the following circumstances:

Truth in Lending: 8.6.5 Early Termination of HELOCs

With the exception of the three circumstances described below, creditors may not terminate a HELOC and accelerate payment of the balance before the scheduled expiration of the HELOC plan412 (except for reverse mortgage transactions subject to Regulation Z § 1026.33). For example, unlike non-home-secured open-end credit, a HELOC may not be terminated simply because the interest rate has reached the maximum rate cap.413

Truth in Lending: 8.6.7.1 General

Except for the circumstances described below, a creditor may not unilaterally change the terms of a HELOC plan, including increasing or adding any fees, after the account has been opened.430 This includes third-party fees for services.431 Creditors may, however, pass on increases in taxes and property or credit insurance that is otherwise properly excluded from the finance charge.432 A creditor may also have the right to change the terms where it w