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Truth in Lending: 2(a)(8) Cardholder.

1. General rule. A cardholder is a natural person at whose request a card is issued for consumer credit purposes or who is a co-obligor or guarantor for such a card issued to another. The second category does not include an employee who is a co-obligor or guarantor on a card issued to the employer for business purposes, nor does it include a person who is merely the authorized user of a card issued to another.

Truth in Lending: 2(a)(9) Cash Price.

1. Components. This amount is a starting point in computing the amount financed and the total sale price under § 1026.18 for credit sales. Any charges imposed equally in cash and credit transactions may be included in the cash price, or they may be treated as other amounts financed under § 1026.18(b)(2).

2. Service contracts. Service contracts include contracts for the repair or the servicing of goods, such as mechanical breakdown coverage, even if such a contract is characterized as insurance under state law.

Truth in Lending: 2(a)(10) Closed-End Credit.

1. General. The coverage of this term is defined by exclusion. That is, it includes any credit arrangement that does not fall within the definition of open-end credit. Subpart C contains the disclosure rules for closed-end credit when the obligation is subject to a finance charge or is payable by written agreement in more than four installments.

Truth in Lending: 2(a)(11) Consumer.

1. Scope. Guarantors, endorsers, and sureties are not generally consumers for purposes of the regulation, but they may be entitled to rescind under certain circumstances and they may have certain rights if they are obligated on credit card plans.

Truth in Lending: 2(a)(12) Consumer Credit.

1. Primary purpose. There is no precise test for what constitutes credit offered or extended for personal, family, or household purposes, nor for what constitutes the primary purpose. (See, however, the discussion of business purposes in the commentary to § 1026.3(a).)

Truth in Lending: 2(a)(13) Consummation.

1. State law governs. When a contractual obligation on the consumer’s part is created is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation. Consummation, however, does not occur merely because the consumer has made some financial investment in the transaction (for example, by paying a nonrefundable fee) unless, of course, applicable law holds otherwise.

Truth in Lending: 2(a)(14) Credit.

1. Exclusions. The following situations are not considered credit for purposes of the regulation:

i. Layaway plans, unless the consumer is contractually obligated to continue making payments. Whether the consumer is so obligated is a matter to be determined under applicable law. The fact that the consumer is not entitled to a refund of any amounts paid towards the cash price of the merchandise does not bring layaways within the definition of credit.

Truth in Lending: 2(a)(16) Credit Sale.

1. Special disclosure. If the seller is a creditor in the transaction, the transaction is a credit sale and the special credit sale disclosures (that is, the disclosures under § 1026.18(j)) must be given. This applies even if there is more than one creditor in the transaction and the creditor making the disclosures is not the seller. (See the commentary to § 1026.17(d).)

Truth in Lending: 2(a)(17) Creditor.

1. General. The definition contains four independent tests. If any one of the tests is met, the person is a creditor for purposes of that particular test.

Paragraph 2(a)(17)(i)

1. Prerequisites. This test is composed of two requirements, both of which must be met in order for a particular credit extension to be subject to the regulation and for the credit extension to count towards satisfaction of the numerical tests mentioned in § 1026.2(a)(17)(v).

Truth in Lending: 2(a)(18) Downpayment.

1. Allocation. If a consumer makes a lump-sum payment, partially to reduce the cash price and partially to pay prepaid finance charges, only the portion attributable to reducing the cash price is part of the downpayment. (See the commentary to § 1026.2(a)(23).)

2. Pick-up payments.

i. Creditors may treat the deferred portion of the downpayment, often referred to as pick-up payments, in a number of ways. If the pick-up payment is treated as part of the downpayment:

Truth in Lending: 2(a)(19) Dwelling.

1. Scope. A dwelling need not be the consumer’s principal residence to fit the definition, and thus a vacation or second home could be a dwelling. However, for purposes of the definition of residential mortgage transaction and the right to rescind, a dwelling must be the principal residence of the consumer. (See the commentary to §§ 1026.2(a)(24), 1026.15, and 1026.23.)

Truth in Lending: 2(a)(20) Open-End Credit.

1. General. This definition describes the characteristics of open-end credit (for which the applicable disclosure and other rules are contained in Subpart B), as distinct from closed-end credit. Open-end credit is consumer credit that is extended under a plan and meets all 3 criteria set forth in the definition.

2. Existence of a plan.

Truth in Lending: 2(a)(21) Periodic Rate.

1. Basis. The periodic rate may be stated as a percentage (for example, 1 and 1/2 % per month) or as a decimal equivalent (for example, .015 monthly). It may be based on any portion of a year the creditor chooses. Some creditors use 1/360 of an annual rate as their periodic rate. These creditors:

Truth in Lending: 2(a)(22) Person.

1. Joint ventures. A joint venture is an organization and is therefore a person.

2. Attorneys. An attorney and his or her client are considered to be the same person for purposes of this part when the attorney is acting within the scope of the attorney-client relationship with regard to a particular transaction.

3. Trusts. A trust and its trustee are considered to be the same person for purposes of this part.

Truth in Lending: 2(a)(23) Prepaid Finance Charge.

1. General. Prepaid finance charges must be taken into account under § 1026.18(b) in computing the disclosed amount financed, and must be disclosed if the creditor provides an itemization of the amount financed under § 1026.18(c).

2. Examples.

i. Common examples of prepaid finance charges include:

A. Buyer’s points.

B. Service fees.

C. Loan fees.

Truth in Lending: 2(a)(24) Residential Mortgage Transaction.

1. Relation to other sections. This term is important in five provisions in the regulation:

i. Section 1026.4(c)(7)—exclusions from the finance charge.

ii. Section 1026.15(f)—exemption from the right of rescission.

iii. Section 1026.18(q)—whether or not the obligation is assumable.

iv. Section 1026.20(b)—disclosure requirements for assumptions.

Truth in Lending: 2(a)(25) Security Interest.

1. Threshold test. The threshold test is whether a particular interest in property is recognized as a security interest under applicable law. The regulation does not determine whether a particular interest is a security interest under applicable law. If the creditor is unsure whether a particular interest is a security interest under applicable law (for example, if statutes and case law are either silent or inconclusive on the issue), the creditor may at its option consider such interests as security interests for Truth in Lending purposes.

Truth in Lending: 2(a)(27)(i) Successor in interest.

Editor’s Note28

1. Joint tenants and tenants by the entirety. If a consumer who has an ownership interest as a joint tenant or tenant by the entirety in a dwelling securing a closed-end consumer credit transaction dies, a surviving joint tenant or tenant by the entirety with a right of survivorship in the property is a successor in interest as defined in § 1026.2(a)(27)(i).

Truth in Lending: Amendment History

[65 Fed. Reg. 17,131 (Mar. 31, 2000); 67 Fed. Reg. 16,982 (Apr. 9, 2002); 69 Fed. Reg. 16769 (Mar. 31, 2004); 73 Fed. Reg. 44 (July 30, 2008); 74 Fed. Reg. 5244 (Jan. 29, 2009); 74 Fed. Reg. 23,302 (May 19, 2009); 74 Fed. Reg. 41,248 (Aug. 14, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 18,363 (Apr. 4, 2011); 76 Fed. Reg. 23,005 (Apr. 25, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 78 Fed. Reg. 79,730 (Dec. 31, 2013); 81 Fed. Reg. 72,160 (Oct. 19, 2016); 81 Fed. Reg. 84,369 (Nov. 22, 2016); 82 Fed. Reg. 18,975 (Apr. 25, 2017); 82 Fed. Reg.

Truth in Lending: 1. Relationship to § 1026.12

1. Relationship to § 1026.12. The provisions in § 1026.12(a) and (b) governing the issuance of credit cards and the limitations on liability for their unauthorized use apply to all credit cards, even if the credit cards are issued for use in connection with extensions of credit that otherwise are exempt under this section.

Truth in Lending: 3(a) Business, Commercial, Agricultural, or Organizational Credit.

1. Primary purposes. A creditor must determine in each case if the transaction is primarily for an exempt purpose. If some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt. (See comment 3(a)-2, however, with respect to credit cards.)

2. Business purpose purchases.

Truth in Lending: 3(c) Public Utility Credit.

1. Examples. Examples of public utility services include:

i. General.

A. Gas, water, or electrical services.

B. Cable television services.

C. Installation of new sewer lines, water lines, conduits, telephone poles, or metering equipment in an area not already serviced by the utility.