Skip to main content

Search

Consumer Credit Regulation: 3.10.1 Introduction

The preceding sections discuss whether federal law displaces state consumer credit law,865 or whether federal law determines which state law applies to interest rate regulation.866 If there is no federal preemption or federal choice of the applicable state whose law applies, then, this section describes how state law determines which state’s law applies to a credit transaction.

Consumer Credit Regulation: 3.10.2 Contractual Choice of Law Clauses

Consumer credit contracts typically include a clause stating that the contract will be governed by a particular state’s laws. A choice of law provision will not be given effect if a statute in the forum state prohibits such a clause for the types of loan contracts at issue,876 or state law requires that the law of that state be chosen for certain types of contracts.877

Consumer Credit Regulation: 3.10.3 State Statutes Explicitly Governing Choice of Law

A state’s courts will almost always follow the forum’s statutory provision requiring that the law of that state apply. For example, a Washington statute provides:

Whenever a loan or forbearance is made outside Washington state to a person then residing in this state the usury laws found in chapter 19.52 RCW, as now or hereafter amended, shall be applicable in all courts of this state to the same extent such usury laws would be applicable if the loan or forbearance was made in this state.891

Consumer Credit Regulation: 3.10.4 Rule for Special Usury Statutes

As long as a transaction bears a substantial relationship to the forum state, courts of that state will typically apply that state’s special usury statutes, such as the small loan laws, installment sales acts, and second mortgage statutes.902 This is consistent with the typical state choice of law rule for contract cases (other than for general usury statutes) that the law of the state with the most significant relationship to the parties and the transaction should apply.903

Consumer Credit Regulation: 3.10.5.1 General

As described in § 3.10.4, supra, the rule for special usury statutes is usually that the forum state’s law applies. But this choice of law rule often does not apply for general usury statutes, at least in the commercial context.

Consumer Credit Regulation: 3.10.6 Military Small Loan Companies and the Military Lending Act

Lenders may target personnel at military bases who are not legal residents of the state where the base is located. Since many state credit laws apply only to state residents, these lenders argue that the laws of the state where the military base is located do not apply, allowing the lender to use interest rates and credit regulation of the state where the lender is headquartered or licensed.

Consumer Banking and Payments Law: E.4.1 Introduction

In addition to the Official Interpretations codified along with Regulation E, the CFPB has adopted various procedures that may result in approvals, interpretations, advisory opinions, no-action letters, or other guidances regarding the EFTA and Regulation E. Good-faith reliance on some, but not all, of these materials may trigger a safe harbor from liability under 15 U.S.C. § 1693m(d)(1).

Consumer Banking and Payments Law: Introduction

The Consumer Financial Protection Bureau’s prepaid accounts rule amends both Regulation E on the Electronic Fund Transfer Act and Regulation Z on the Truth in Lending Act. The rule and the regulatory amendments became effective April 1, 2019.

Consumer Banking and Payments Law: 12 C.F.R. § 1026.2 Definitions and rules of construction.

(a) Definitions. For purposes of this part, the following definitions apply:

(1) Act means the Truth in Lending Act (15 U.S.C. 1601 et seq.).

(2) Advertisement means a commercial message in any medium that promotes, directly or indirectly, a credit transaction.

(3)(i) Application means the submission of a consumer's financial information for the purposes of obtaining an extension of credit.

Consumer Banking and Payments Law: 12 C.F.R. § 1026.4 Finance charge.

(a) Definition. The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.

Consumer Banking and Payments Law: 12 C.F.R. § 1026.6 Account-opening disclosures.

(a) Rules affecting home-equity plans. The requirements of this paragraph (a) apply only to home-equity plans subject to the requirements of § 1026.40. A creditor shall disclose the items in this section, to the extent applicable:

(1) Finance charge. The circumstances under which a finance charge will be imposed and an explanation of how it will be determined, as follows:

Consumer Banking and Payments Law: 12 C.F.R. § 1026.12 Special credit card provisions.

(a) Issuance of credit cards. Regardless of the purpose for which a credit card is to be used, including business, commercial, or agricultural use, no credit card shall be issued to any person except:

(1) In response to an oral or written request or application for the card; or

(2) As a renewal of, or substitute for, an accepted credit card.

(b) Liability of cardholder for unauthorized use—

Consumer Banking and Payments Law: 12 C.F.R. § 1026.13 Billing error resolution.

(a) Definition of billing error. For purposes of this section, the term billing error means:

(1) A reflection on or with a periodic statement of an extension of credit that is not made to the consumer or to a person who has actual, implied, or apparent authority to use the consumer's credit card or open-end credit plan.