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Truth in Lending: 6(b)(4)(i)(D) Balance Computation Method.

1. Explanation of balance computation method. Creditors do not provide a sufficient explanation of a balance computation method by using a shorthand phrase such as “previous balance method” or the name of a balance computation method listed in § 1026.60(g). (See Model Clauses G-1(A) in appendix G to part 1026. See § 1026.6(b)(2)(vi) regarding balance computation descriptions in the account-opening summary.)

Truth in Lending: 6(b)(4)(ii) Variable-Rate Accounts.

1. Variable-rate disclosures—coverage.

i. Examples. Examples of open-end plans that permit the rate to change and are considered variable-rate plans include:

A. Rate changes that are tied to the rate the creditor pays on its six-month certificates of deposit.

B. Rate changes that are tied to Treasury bill rates.

C. Rate changes that are tied to changes in the creditor’s commercial lending rate.

Truth in Lending: 6(b)(4)(iii) Rate Changes Not Due to Index or Formula.

1. Events that cause the initial rate to change.

i. Changes based on expiration of time period. If the initial rate will change at the expiration of a time period, creditors that disclose the initial rate in the account-opening disclosure must identify the expiration date and the fact that the initial rate will end at that time.

Truth in Lending: 6(b)(5)(i) Voluntary Credit Insurance, Debt Cancellation or Debt Suspension.

1. Timing. Under § 1026.4(d), disclosures required to exclude the cost of voluntary credit insurance or debt cancellation or debt suspension coverage from the finance charge must be provided before the consumer agrees to the purchase of the insurance or coverage. Creditors comply with § 1026.6(b)(5)(i) if they provide those disclosures in accordance with § 1026.4(d). For example, if the disclosures required by § 1026.4(d) are provided at application, creditors need not repeat those disclosures at account opening.

Truth in Lending: Amendment History

[68 Fed. Reg. 16,189 (Apr. 3, 2003); 74 Fed. Reg. 5244 (Jan. 29, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 23,010 (Apr. 25, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 81 Fed. Reg. 84,369 (Nov. 22, 2016); 82 Fed. Reg. 18,975 (Apr. 25, 2017); 83 Fed. Reg. 6364 (Feb. 13, 2018)]

Truth in Lending: 1. Multifeatured plans.

1. Multifeatured plans. Some plans involve a number of different features, such as purchases, cash advances, or overdraft checking. Groups of transactions subject to different finance charge terms because of the dates on which the transactions took place are treated like different features for purposes of disclosures on the periodic statements. The commentary includes additional guidance for multifeatured plans.

Truth in Lending: 7(a)(1) Previous Balance.

1. Credit balances. If the previous balance is a credit balance, it must be disclosed in such a way so as to inform the consumer that it is a credit balance, rather than a debit balance.

2. Multifeatured plans. In a multifeatured plan, the previous balance may be disclosed either as an aggregate balance for the account or as separate balances for each feature (for example, a previous balance for purchases and a previous balance for cash advances). If separate balances are disclosed, a total previous balance is optional.

Truth in Lending: 7(a)(2) Identification of Transactions.

1. Multifeatured plans. In identifying transactions under § 1026.7(a)(2) for multifeatured plans, creditors may, for example, choose to arrange transactions by feature (such as disclosing sale transactions separately from cash advance transactions) or in some other clear manner, such as by arranging the transactions in general chronological order.

Truth in Lending: 7(a)(3) Credits.

1. Identification—sufficiency. The creditor need not describe each credit by type (returned merchandise, rebate of finance charge, etc.)—“credit” would suffice—except if the creditor is using the periodic statement to satisfy the billing-error correction notice requirement. (See the commentary to § 1026.13(e) and (f).)

Truth in Lending: 7(a)(4) Periodic Rates.

1. Disclosure of periodic rates—whether or not actually applied. Except as provided in § 1026.7(a)(4)(ii), any periodic rate that may be used to compute finance charges (and its corresponding annual percentage rate) must be disclosed whether or not it is applied during the billing cycle. For example:

i. If the consumer’s account has both a purchase feature and a cash advance feature, the creditor must disclose the rate for each, even if the consumer only makes purchases on the account during the billing cycle.

Truth in Lending: 7(a)(5) Balance on Which Finance Charge Computed.

1. Limitation to periodic rates. Section 1026.7(a)(5) only requires disclosure of the balance(s) to which a periodic rate was applied and does not apply to balances on which other kinds of finance charges (such as transaction charges) were imposed. For example, if a consumer obtains a $1,500 cash advance subject to both a 1% transaction fee and a 1% monthly periodic rate, the creditor need only disclose the balance subject to the monthly rate (which might include portions of earlier cash advances not paid off in previous cycles).

Truth in Lending: 7(a)(6)(ii) Other Charges.

1. Identification. In identifying any other charges actually imposed during the billing cycle, the type is adequately described as late charge or membership fee, for example.

Truth in Lending: 7(a)(7) Annual Percentage Rate.

1. Plans subject to the requirements of § 1026.40. For home-equity plans subject to the requirements of § 1026.40, creditors are not required to disclose an effective annual percentage rate. Creditors that state an annualized rate in addition to the corresponding annual percentage rate required by § 1026.7(a)(4) must calculate that rate in accordance with § 1026.14(c).

Truth in Lending: 7(a)(8) Grace Period.

1. Terminology. Although the creditor is required to indicate any time period the consumer may have to pay the balance outstanding without incurring additional finance charges, no specific wording is required, so long as the language used is consistent with that used on the account-opening disclosure statement. For example, “To avoid additional finance charges, pay the new balance before _________” would suffice.

Truth in Lending: 7(b) Rules Affecting Open-End (Not Home-Secured) Plans.

1. Deferred interest or similar transactions. Creditors offer a variety of payment plans for purchases that permit consumers to avoid interest charges if the purchase balance is paid in full by a certain date. “Deferred interest” has the same meaning as in § 1026.16(h)(2) and associated commentary. The following provides guidance for a deferred interest or similar plan where, for example, no interest charge is imposed on a $500 purchase made in January if the $500 balance is paid by July 31.

Truth in Lending: 7(b)(1) Previous Balance.

1. Credit balances. If the previous balance is a credit balance, it must be disclosed in such a way so as to inform the consumer that it is a credit balance, rather than a debit balance.

2. Multifeatured plans. In a multifeatured plan, the previous balance may be disclosed either as an aggregate balance for the account or as separate balances for each feature (for example, a previous balance for purchases and a previous balance for cash advances). If separate balances are disclosed, a total previous balance is optional.

Truth in Lending: 7(b)(2) Identification of Transactions.

1. Multifeatured plans. Creditors may, but are not required to, arrange transactions by feature (such as disclosing purchase transactions separately from cash advance transactions). Pursuant to § 1026.7(b)(6), however, creditors must group all fees and all interest separately from transactions and may not disclose any fees or interest charges with transactions.

Truth in Lending: 7(b)(3) Credits.

1. Identification—sufficiency. The creditor need not describe each credit by type (returned merchandise, rebate of finance charge, etc.)—“credit” would suffice—except if the creditor is using the periodic statement to satisfy the billing-error correction notice requirement. (See the commentary to § 1026.13(e) and (f).) Credits may be distinguished from transactions in any way that is clear and conspicuous, for example, by use of debit and credit columns or by use of plus signs and/or minus signs.