Truth in Lending: 23(g)(2) One Percent Tolerance.
1. New advance. The phrase “new advance” has the same meaning as in comment 23(f)-4.
1. New advance. The phrase “new advance” has the same meaning as in comment 23(f)-4.
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.
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.
[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)]
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.
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.
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.
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.
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.
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.
1. Definition. The multiple-page advertisements to which this section refers are advertisements consisting of a series of sequentially numbered pages—for example, a supplement to a newspaper. A mailing consisting of several separate flyers or pieces of promotional material in a single envelope does not constitute a single multiple-page advertisement for purposes of § 1026.24(e).
1. Applicability. The requirements of § 1026.24(f)(2) apply to advertisements for loans where more than one simple annual rate of interest will apply. The requirements of § 1026.24(f)(3)(i)(A) require a clear and conspicuous disclosure of each payment that will apply over the term of the loan.
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.
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.
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.
[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)]
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.
[75 Fed. Reg. 58,534 (Sept. 24, 2010) (EFFECTIVE DATE NOTE: Effective Apr. 1, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 78 Fed. Reg. 6408 (Jan. 30, 2013); 78 Fed. Reg. 11,413 (Feb. 15, 2013); 78 Fed. Reg. 60,442 (Oct. 1, 2013); 82 Fed. Reg. 37,656 (Aug. 11, 2017).]
1. Application of rules. The restrictions of § 1026.26 apply only if the creditor chooses to respond orally to the consumer’s request for credit cost information. Nothing in the regulation requires the creditor to supply rate information orally. If the creditor volunteers information (including rate information) through oral solicitations directed generally to prospective customers, as through a telephone solicitation, those communications may be advertisements subject to the rules in §§ 1026.16 and 1026.24.
1. Information that may be given. The creditor may state periodic rates in addition to the required annual percentage rate, but it need not do so. If the annual percentage rate is unknown because transaction charges, loan fees, or similar finance charges may be imposed, the creditor must give the corresponding annual percentage rate (that is, the periodic rate multiplied by the number of periods in a year, as described in §§ 1026.6(a)(1)(ii) and (b)(4)(i)(A) and 1026.7(a)(4) and (b)(4)).
1. Information that may be given. The creditor may state other annual or periodic rates that are applied to an unpaid balance, along with the required annual percentage rate. This rule permits disclosure of a simple interest rate, for example, but not an add-on, discount, or similar rate. If the creditor cannot give a precise annual percentage rate in its oral response because of variables in the transaction, it must give the annual percentage rate for a comparable sample transaction; in this case, other cost information may, but need not, be given.
[74 Fed. Reg. 5244 (Jan. 29, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 79,772 (Dec. 22, 2011)]