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Truth in Lending: 1. Transactions not covered

1. Transactions not covered. Credit extensions that are not subject to the regulation are not covered by § 1026.23 even if a customer’s principal dwelling is the collateral securing the credit. For example, the right of rescission does not apply to a business purpose loan, even though the loan is secured by the customer’s principal dwelling.

Truth in Lending: 23(a) Consumer’s Right to Rescind.

Paragraph 23(a)(1)

1. Security interest arising from transaction.

i. In order for the right of rescission to apply, the security interest must be retained as part of the credit transaction. For example:

A. A security interest that is acquired by a contractor who is also extending the credit in the transaction.

Truth in Lending: 23(c) Delay of Creditor’s Performance.

1. General rule. Until the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded, the creditor must not, either directly or through a third party:

i. Disburse loan proceeds to the consumer.

ii. Begin performing services for the consumer.

iii. Deliver materials to the consumer.

Truth in Lending: 23(d) Effects of Rescission.

Paragraph 23(d)(1)

1. Termination of security interest. Any security interest giving rise to the right of rescission becomes void when the consumer exercises the right of rescission. The security interest is automatically negated regardless of its status and whether or not it was recorded or perfected. Under § 1026.23(d)(2), however, the creditor must take any action necessary to reflect the fact that the security interest no longer exists.

Paragraph 23(d)(2)

Truth in Lending: 23(e) Consumer’s Waiver of Right to Rescind.

1. Need for waiver. To waive the right to rescind, the consumer must have a bona fide personal financial emergency that must be met before the end of the rescission period. The existence of the consumer’s waiver will not, of itself, automatically insulate the creditor from liability for failing to provide the right of rescission.

Truth in Lending: 23(f) Exempt Transactions.

1. Residential mortgage transaction. Any transaction to construct or acquire a principal dwelling, whether considered real or personal property, is exempt. (See the commentary to § 1026.23(a).) For example, a credit transaction to acquire a mobile home or houseboat to be used as the consumer’s principal dwelling would not be rescindable.

Truth in Lending: 23(h) Special Rules for Foreclosures.

1. Rescission. Section 1026.23(h) applies only to transactions that are subject to rescission under § 1026.23(a)(1).

Paragraph 23(h)(1)(i)

1. Mortgage broker fees. A consumer may rescind a loan in foreclosure if a mortgage broker fee that should have been included in the finance charge was omitted, without regard to the dollar amount involved. If the amount of the mortgage broker fee is included but misstated the rule in § 1026.23(h)(2) applies.

Truth in Lending: 23(h)(2) Tolerance for Disclosures.

1. General.245 The tolerance for disclosure of

the finance charge is based on the accuracy of the total finance charge rather than its component charges. For transactions subject to § 1026.19(e) and (f), the tolerance for disclosure of the total of payments is based on the accuracy of the total of payments, taken as a whole, rather than its component charges.

Truth in Lending: Amendment History

[66 Fed. Reg. 17,340 (Mar. 30, 2001); 69 Fed. Reg. 16,769 (Mar. 31, 2004); 72 Fed. Reg. 63,476 (Nov. 9, 2007); 76 Fed. Reg. 18,365 (Apr. 4, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 82 Fed. Reg. 37,656 (Aug. 11, 2017)]

Truth in Lending: 24(a) Actually Available Terms.

1. General rule. To the extent that an advertisement mentions specific credit terms, it may state only those terms that the creditor is actually prepared to offer. For example, a creditor may not advertise a very low annual percentage rate that will not in fact be available at any time. This provision is not intended to inhibit the promotion of new credit programs, but to bar the advertising of terms that are not and will not be available.

Truth in Lending: 24(b) Clear and Conspicuous Standard.

1. Clear and conspicuous standard—general. This section is subject to the general “clear and conspicuous” standard for this subpart, see § 1026.17(a)(1), but prescribes no specific rules for the format of the necessary disclosures, other than the format requirements related to the advertisement of rates and payments as described in comment 24(b)-2 below. The credit terms need not be printed in a certain type size nor need they appear in any particular place in the advertisement.

Truth in Lending: 24(c) Advertisement of Rate of Finance Charge.

1. Annual percentage rate. Advertised rates must be stated in terms of an annual percentage rate, as defined in § 1026.22. Even though state or local law permits the use of add-on, discount, time-price differential, or other methods of stating rates, advertisements must state them as annual percentage rates. Unlike the transactional disclosure of an annual percentage rate under § 1026.18(e), the advertised annual percentage rate need not include a descriptive explanation of the term and may be expressed using the abbreviation APR.

Truth in Lending: 24(d) Advertisement of Terms That Require Additional Disclosures.

1. General rule. Under § 1026.24(d)(1), whenever certain triggering terms appear in credit advertisements, the additional credit terms enumerated in § 1026.24(d)(2) must also appear. These provisions apply even if the triggering term is not stated explicitly but may be readily determined from the advertisement. For example, an advertisement may state “80 percent financing available,” which is in fact indicating that a 20 percent downpayment is required.

Truth in Lending: 24(d)(1) Triggering Terms.

1. Downpayment.

i. The dollar amount of a downpayment or a statement of the downpayment as a percentage of the price requires further information. By virtue of the definition of downpayment in § 1026.2, this triggering term is limited to credit sale transactions. It includes such statements as:

A. Only 5% down.

B. As low as $100 down.

C. Total move-in costs of $800.

Truth in Lending: 24(d)(2) Additional Terms.

1. Disclosure of downpayment. The total downpayment as a dollar amount or percentage must be shown, but the word “downpayment” need not be used in making this disclosure. For example, “10% cash required from buyer” or “credit terms require minimum $100 trade-in” would suffice.

Truth in Lending: 24(f)(3) Disclosure of Payments.

1. Amounts and time periods of payments. Section 1026.24(f)(3)(i) requires disclosure of the amounts and time periods of all payments that will apply over the term of the loan. This section may require disclosure of several payment amounts, including any balloon payment.

Truth in Lending: 24(g) Alternative Disclosures—Television or Radio Advertisements.

1. Multi-purpose telephone number. When an advertised telephone number provides a recording, disclosures should be provided early in the sequence to ensure that the consumer receives the required disclosures. For example, in providing several options—such as providing directions to the advertiser’s place of business—the option allowing the consumer to request disclosures should be provided early in the telephone message to ensure that the option to request disclosures is not obscured by other information.

Truth in Lending: 24(i) Prohibited Acts or Practices in Advertisements for Credit Secured by a Dwelling.

1. Comparisons in advertisements. The requirements of § 1026.24(i)(2) apply to all advertisements for credit secured by a dwelling, including radio and television advertisements. A comparison includes a claim about the amount a consumer may save under the advertised product. For example, a statement such as “save $300 per month on a $300,000 loan” constitutes an implied comparison between the advertised product’s payment and a consumer’s current payment.

Truth in Lending: Amendment History

[66 Fed. Reg. 17,340 (Mar. 30, 2001); 72 Fed. Reg. 63,476 (Nov. 9, 2007); 73 Fed. Reg. 44,608 (July 30, 2008); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 78 Fed. Reg. 79,730 (Dec. 31, 2013)]

Truth in Lending: 25(a) General Rule.

1. Evidence of required actions. The creditor must retain evidence that it performed the required actions as well as made the required disclosures. This includes, for example, evidence that the creditor properly handled adverse credit reports in connection with amounts subject to a billing dispute under § 1026.13, and properly handled the refunding of credit balances under §§ 1026.11 and 1026.21.