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Truth in Lending: 12(a) Issuance of Credit Cards.

Paragraph 12(a)(1)

1. Explicit request. A request or application for a card must be explicit. For example, a request for an overdraft plan tied to a checking account does not constitute an application for a credit card with overdraft checking features.

Truth in Lending: 12(b) Liability of Cardholder for Unauthorized Use.

1. Meaning of cardholder. For purposes of this provision, cardholder includes any person (including organizations) to whom a credit card is issued for any purpose, including business. When a corporation is the cardholder, required disclosures should be provided to the corporation (as opposed to an employee user).

Truth in Lending: 12(b)(1)(ii) Limitation on Amount.

1. Meaning of authority. Section 1026.12(b)(1)(i) defines unauthorized use in terms of whether the user has actual, implied, or apparent authority. Whether such authority exists must be determined under state or other applicable law.

2. Liability limits—dollar amounts. As a general rule, the cardholder’s liability for a series of unauthorized uses cannot exceed either $50 or the value obtained through the unauthorized use before the card issuer is notified, whichever is less.

Truth in Lending: 12(b)(2) Conditions of Liability.

1. Issuer’s option not to comply. A card issuer that chooses not to impose any liability on cardholders for unauthorized use need not comply with the disclosure and identification requirements discussed in § 1026.12(b)(2).

Paragraph 12(b)(2)(ii)

Truth in Lending: 12(b)(3) Notification to Card Issuer.

1. How notice must be provided. Notice given in a normal business manner—for example, by mail, telephone, or personal visit—is effective even though it is not given to, or does not reach, some particular person within the issuer’s organization. Notice also may be effective even though it is not given at the address or phone number disclosed by the card issuer under § 1026.12(b)(2)(ii).

Truth in Lending: 12(b)(5) Business Use of Credit Cards.

1. Agreement for higher liability for business use cards. The card issuer may not rely on § 1026.12(b)(5) if the business is clearly not in a position to provide 10 or more cards to employees (for example, if the business has only 3 employees). On the other hand, the issuer need not monitor the personnel practices of the business to make sure that it has at least 10 employees at all times.

Truth in Lending: 20(b) Assumptions.

1. General definition.

i. An assumption as defined in § 1026.20(b) is a new transaction and new disclosures must be made to the subsequent consumer. An assumption under the regulation requires the following three elements:

A. A residential mortgage transaction.

B. An express acceptance of the subsequent consumer by the creditor.

C. A written agreement.

Truth in Lending: 20(e)(1) Scope.

Editor’s Note241

1. Real property or dwelling. For purposes of § 1026.20(e)(1), the term “real property” includes vacant and unimproved land. The term “dwelling” includes vacation and second homes and mobile homes, boats, and trailers used as residences. See § 1026.2(a)(19) and related commentary for additional guidance regarding the term “dwelling.”

Truth in Lending: 20(e)(2) Content requirements.

1. Clear and conspicuous standard. The clear and conspicuous standard generally requires that disclosures be in a reasonably understandable form and readily noticeable to the consumer.

Paragraph 20(e)(2)(i).

Truth in Lending: 20(e)(3) Optional information.

1. Optional information permitted. Section 1026.20(e)(3) lists information that the creditor or servicer may, at its option, include on the notice required by § 1026.20(e). To comply with § 1026.20(e)(3), the creditor or servicer may place the information required by § 1026.20(e)(3), other than the name and logo of the creditor or servicer, between the heading required by § 1026.20(e)(2) and the disclosures required by § 1026.20(e)(2)(i) and (ii). The name and logo may be placed above the heading required § 1026.20(e)(2).

Truth in Lending: 20(e)(4) Form of disclosures.

1. Grouped and separate. The disclosures required by § 1026.20(e)(2) must be grouped together on the front side of a separate one-page document that contains no other material.

2. Notice must be in writing in a form that the consumer may keep. The notice containing the disclosures required by § 1026.20(e)(2) must be in writing in a form that the consumer may keep. See also § 1026.17(a) and related commentary for additional guidance on the form requirements applicable to the disclosures required by § 1026.20(e)(2).

Truth in Lending: 20(e)(5)(i) Cancellation upon consumer’s request.

1. Timing requirements Section 1026.20(e)(5)(i) provides that if the creditor or servicer cancels the escrow account at the consumer’s request, the creditor or servicer shall ensure that the consumer receives the disclosures required by § 1026.20(e)(2) no later than three business days before closure of the consumer’s escrow account. For example, for closure to occur on Thursday, the consumer must receive the disclosures on or before Monday, assuming each weekday is a business day.

Truth in Lending: 20(e)(5)(iii) Receipt of disclosure.

1. Timing of receipt. Section 1026.20(e)(5)(iii) provides that if the disclosures required under § 1026.20(e)(2) are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail.

Truth in Lending: Amendment History

[76 Fed. Reg. 79,772 (Dec. 22, 2011); 78 Fed. Reg. 11,017 (Feb. 14, 2013); 78 Fed. Reg. 79,730 (Dec. 31, 2013); 81 Fed. Reg. 72,160 (Oct. 19, 2016); 86 Fed. Reg. 69,716 (Dec. 8, 2021); 88 Fed. Reg. 30,598 (May 11, 2023)]

Truth in Lending: 22(a) Accuracy of Annual Percentage Rate.

Paragraph 22(a)(1)

1. Calculation method. The regulation recognizes both the actuarial method and the United States Rule Method (U.S. Rule) as measures of an exact annual percentage rate. Both methods yield the same annual percentage rate when payment intervals are equal. They differ in their treatment of unpaid accrued interest.

Truth in Lending: 22(a)(4) Mortgage Loans.

1. Example.243 If a creditor improperly omits a $75 fee from the finance charge on a regular transaction, the understated finance charge is considered accurate under § 1026.18(d)(1) or § 1026.38(o)(2), as applicable, and the annual percentage rate corresponding to that understated finance charge also is considered accurate even if it falls outside the tolerance of 1/8 of 1 percentage point provided under § 1026.22(a)(2).

Truth in Lending: 22(b) Computation Tools.

Paragraph 22(b)(1)

1. Bureau tables. Volumes I and II of the Bureau’s Annual Percentage Rate Tables provide a means of calculating annual percentage rates for regular and irregular transactions, respectively. An annual percentage rate computed in accordance with the instructions in the tables is deemed to comply with the regulation, even where use of the tables produces a rate that falls outside the general standard of accuracy. To illustrate:

Truth in Lending: 22(c) Single Add-On Rate Transactions.

1. General rule. Creditors applying a single add-on rate to all transactions up to 60 months in length may disclose the same annual percentage rate for all those transactions, although the actual annual percentage rate varies according to the length of the transaction. Creditors utilizing this provision must show the highest of those rates.

Truth in Lending: 22(d) Certain Transactions Involving Ranges of Balances.

1. General rule. Creditors applying a fixed dollar finance charge to all balances within a specified range of balances may understate the annual percentage rate by up to 8 percent of that rate, by disclosing for all those balances the annual percentage rate computed on the median balance within that range. For example: