Skip to main content

Search

Truth in Lending: 13.3.6.6.2 Gross capitalized cost and the agreed-upon value of the vehicle

Gross capitalized cost is the first disclosure in the monthly payment derivation, defined at section 1013.2(f) [section 213.2(f)] as the amount agreed upon as the leased vehicle’s value and any items that are capitalized (paid for) during the lease term, including but not limited to taxes, insurance, service agreements, and any outstanding balance from a prior loan or lease.

Truth in Lending: 13.3.6.6.4 Capitalized cost reduction

Capitalized cost reduction is the second disclosure in the monthly payment derivation for motor vehicle leases,254 defined as the total amount of any rebate, cash payment, net trade-in, and noncash credit that reduces the gross capitalized cost.255 The lessor must use a description such as “the amount of any rebate, cash payment, net trade-in allowance, or noncash credit you pay that reduces the gross capitalized cost.”

Truth in Lending: 2.9.1 Introduction

Prior to Simplification, most states had enacted credit cost disclosure statutes. The interrelation of state and federal cost disclosure requirements created some confusion for both creditors and consumers. Some states had merely reproduced TILA in their state statutes.

Truth in Lending: 2.9.2 Exemptions

The Truth in Lending Act includes a mechanism by which a state can request that the CFPB exempt any class of credit transactions from TILA requirements.869 In deciding whether certain creditors or credit transactions are exempt from compliance with federal law, the CFPB must determine whether the state law is substantially similar to the requirements imposed under the Act.870 If the state-required disclosure is substantially the same as the disclosure required by the Act, and there is adequate p

Truth in Lending: 2.9.3.2 Meaning of Inconsistency

A state law is inconsistent if it requires a creditor to make disclosures or take actions that contradict the requirements of the federal TILA.903 A state law is contradictory if it requires the use of the state 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.904 A state law is not contradictory, however, if it mandates one manner of disclosure where TIL

Truth in Lending: 2.9.3.5 Relationship Between HOEPA and AMTPA

Until 2011, states that wished to regulate abusive mortgages in a fashion similar to HOEPA could run into claims that another federal law, the Alternative Mortgage Transactions Parity Act (AMTPA)918 trumped the state’s ability to restrict balloon payments, variable rate loans, negative amortization, or prepayment penalties. AMTPA’s preemptive force applied to state institutions as well as federally chartered depositories.

Truth in Lending: 2.9.4.1 Generally

TILA does not preempt state laws that deal with issues not addressed in the Truth in Lending Act.923 Historically, most TILA preemption cases have addressed disclosure issues, which were the core of TILA’s requirements until later substantive protections on mortgage lending.

Truth in Lending: 2.9.4.2 Preemption Regarding Federally Chartered Financial Institutions

Apart from TILA’s narrow preemption standard, state power to require credit disclosures has been significantly limited with respect to federally-chartered financial institutions. Federal regulatory agencies have aggressively expanded the scope of federal preemption of a variety of state laws under the federal banking statutes.934 For example, in American Bankers Association v.

Truth in Lending: 2.8.10.1 What Are Earned Wage Advances?

Earned wage advances (EWAs)761 allow an employee to obtain an advance of wages that have been earned but are not yet due before a scheduled pay date. The only true “earned wage” advances are offered by an employer or by a provider that has a partnership with the employer and can access the time and attendance system that tracks the hours an employee actually worked. In advance of a scheduled pay date an employee may obtain wage advances from such an EWA provider and have these paid into a designed account.

Truth in Lending: 2.8.11 Income Share Agreements

With an income share agreement (ISA), a consumer obtains funding in return for a promise to pay a percentage of future income for a period of time to the entity that advanced the funds. ISAs are typically marketed to students as a way of payment for educational services, though they have been used for other types of expenses as well. Providers often market ISAs as an alternative to traditional student loans. Some ISA providers claim, in both their marketing and on the face of their contracts, that these transactions are not loans and do not involve extensions of “credit.”

Truth in Lending: 2.8.12 Shared Home Value Appreciation Products

There are many versions of shared appreciation products. NCLC’s Mortgage Lending discusses them in detail.850 A common theme is that a homeowner receives a sum of money upfront and promises to pay the funder a percentage of the amount by which the property value has increased by a fixed maturity date or upon some other defined event. For example, assume that a contract says the funder is entitled to 25% of the increase in equity after thirty years, and the property is worth $100,000 when the contract is executed.

Truth in Lending: 2.2.2.1 The Term “Debt” Is a Critical Element of the Definition of “Credit”

As noted above, TILA defines “credit” as “the right granted by a creditor to a debtor to defer payment of a debt or to incur debt and defer its payment.”53 Unless some form of “debt” is involved, TILA does not apply to the transaction.

However, neither the Act nor Regulation Z defines the term “debt.” Potential sources of law for supplying that definition and the few court decisions interpreting term “debt” in the TILA context are discussed in this subsection.

Truth in Lending: 2.6.5.1 General

The obligation must be initially payable, either on the face of the note or by agreement when there is no written contract, to the creditor.214 This requirement was added in 1980.215 The requirement does not apply to open-end credit card plans.216

Truth in Lending: 2.4.1 Defined

To fall within TILA’s scope, credit must be offered or extended to a “consumer,” defined as a “natural person.”133 In addition, a separate section of TILA, section 1603, specifically exempts credit granted to “organizations.”134

Truth in Lending: 2.4.3 Who Must Receive Disclosures

TILA disclosures must be made to the consumer who is obligated in the transaction.150 If more than one consumer is involved, disclosures may be given to any one consumer who has primary liability on the obligation.151 That consumer must be a principal debtor and not a surety or guarantor.152

Truth in Lending: 2.5 Primarily for Personal, Family, or Household Purposes

Whether a particular transaction was “primarily for personal, family, or household purposes” is frequently litigated. The official interpretations offer no “precise test” for what constitutes the primary purpose of credit nor for what constitutes personal, family, or household purposes for credit.159 Instead, it punts to its discussion of business purposes.

Truth in Lending: 2.6.2.1 General

A creditor must be a “person.” While a “consumer” ordinarily must be a natural person,168 a creditor can be a natural person or an organization.169 Regulation Z states that an organization can include a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit.170 The official interpretations add that a joint venture also constitutes an organization and therefore a person under TILA.

Truth in Lending: 2.6.4.1 Introduction

The credit extended must meet either one of two alternative tests.201 The credit must be either:

  • • Subject to a finance charge; or
  • • Payable by written agreement in more than four installments.

While the vast majority of consumer credit transactions will meet both tests, satisfaction of either one is sufficient for a person to be considered a creditor.202

Truth in Lending: 2.6.5.2 Status and Liability of Assignees

The official interpretations take a strict position on the “initially payable” rule. Even if the obligation by its terms is simultaneously assigned to another person, the person to whom it is initially payable is still the creditor and the person to whom it is assigned is only the assignee.226