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Truth in Lending: 13(b) Billing Error Notice.

1. Withdrawal of billing error notice by consumer. The creditor need not comply with the requirements of § 1026.13(c) through (g) of this section if the consumer concludes that no billing error occurred and voluntarily withdraws the billing error notice. The consumer’s withdrawal of a billing error notice may be oral, electronic or written.

Truth in Lending: 13(c) Time for Resolution; General Procedures.

1. Temporary or provisional corrections. A creditor may temporarily correct the consumer’s account in response to a billing error notice, but is not excused from complying with the remaining error resolution procedures within the time limits for resolution.

Truth in Lending: 13(d) Rules Pending Resolution.

1. Disputed amount. Disputed amount is the dollar amount alleged by the consumer to be in error. When the allegation concerns the description or identification of the transaction (such as the date or the seller’s name) rather than a dollar amount, the disputed amount is the amount of the transaction or charge that corresponds to the disputed transaction identification. If the consumer alleges a failure to send a periodic statement under § 1026.13(a)(7), the disputed amount is the entire balance owing.

Truth in Lending: 13(d)(2) Adverse Credit Reports Prohibited.

1. Report of dispute. Although the creditor must not issue an adverse credit report because the consumer fails to pay the disputed amount or any related charges, the creditor may report that the amount or the account is in dispute. Also, the creditor may report the account as delinquent if undisputed amounts remain unpaid.

Truth in Lending: 13(e) Procedures If Billing Error Occurred as Asserted.

1. Correction of error. The phrase as applicable means that the necessary corrections vary with the type of billing error that occurred. For example, a misidentified transaction (or a transaction that is identified by one of the alternative methods in § 1026.8) is cured by properly identifying the transaction and crediting related finance and any other charges imposed. The creditor is not required to cancel the amount of the underlying obligation incurred by the consumer.

Truth in Lending: 13(f) Procedures If Different Billing Error or No Billing Error Occurred.

1. Different billing error. Examples of a different billing error include:

i. Differences in the amount of an error (for example, the customer asserts a $55.00 error but the error was only $53.00).

ii. Differences in other particulars asserted by the consumer (such as when a consumer asserts that a particular transaction never occurred, but the creditor determines that only the seller’s name was disclosed incorrectly).

Truth in Lending: 13(g) Creditor’s Rights and Duties After Resolution.

Paragraph 13(g)(1)

1. Amounts owed by consumer. Amounts the consumer still owes may include both minimum periodic payments and related finance and other charges that accrued during the resolution period. As explained in the commentary to § 1026.13(d)(1), even if the creditor later determines that no billing error occurred, the creditor may not include finance or other charges that are imposed on undisputed balances solely as a result of a consumer’s withholding payment of a disputed amount.

Truth in Lending: Amendment History

[65 Fed. Reg. 17,131 (Mar. 31, 2000); 74 Fed. Reg. 5244 (Jan. 29, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 23,019 (Apr. 25, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 81 Fed. Reg. 84,369 (Nov. 22, 2016); 82 Fed. Reg. 18,975 (Apr. 25, 2017); 83 Fed. Reg. 6364 (Feb. 13, 2018)]

Truth in Lending: 14(a) General Rule.

1. Tolerance. The tolerance of 1/8th of 1 percentage point above or below the annual percentage rate applies to any required disclosure of the annual percentage rate. The disclosure of the annual percentage rate is required in §§ 1026.60, 1026.40, 1026.6, 1026.7, 1026.9, 1026.15, 1026.16, 1026.26, 1026.55, and 1026.56.

Truth in Lending: 14(b) Annual Percentage Rate—In General.

1. Corresponding annual percentage rate computation. For purposes of §§ 1026.60, 1026.40, 1026.6, 1026.7(a)(4) or (b)(4), 1026.9, 1026.15, 1026.16, 1026.26, 1026.55, and 1026.56, the annual percentage rate is determined by multiplying the periodic rate by the number of periods in the year. This computation reflects the fact that, in such disclosures, the rate (known as the corresponding annual percentage rate) is prospective and does not involve any particular finance charge or periodic balance.

Truth in Lending: 14(c) Optional Effective Annual Percentage Rate for Periodic Statements for Creditors Offering Open-End Credit Plans Secured by a Consumer’s Dwelling.

1. General rule. The periodic statement may reflect (under § 1026.7(a)(7)) the annualized equivalent of the rate actually applied during a particular cycle; this rate may differ from the corresponding annual percentage rate because of the inclusion of, for example, fixed, minimum, or transaction charges. Sections 1026.14(c)(1) through (c)(4) state the computation rules for the effective rate.

Truth in Lending: 14(c)(1) Solely Periodic Rates Imposed.

1. Periodic rates. Section 1026.14(c)(1) applies if the only finance charge imposed is due to the application of a periodic rate to a balance. The creditor may compute the annual percentage rate either:

i. By multiplying each periodic rate by the number of periods in the year; or

Truth in Lending: 14(c)(2) Minimum or Fixed Charge, But Not Transaction Charge, Imposed.

1. Certain charges not based on periodic rates. Section 1026.14(c)(2) specifies use of the quotient method to determine the annual percentage rate if the finance charge imposed includes a certain charge not due to the application of a periodic rate (other than a charge relating to a specific transaction). For example, if the creditor imposes a minimum $1 finance charge on all balances below $50, and the consumer’s balance was $40 in a particular cycle, the creditor would disclose an annual percentage rate of 30 percent (1/40 x12).

Truth in Lending: 14(d) Calculations Where Daily Periodic Rate Applied.

1. Quotient method. Section 1026.14(d) addresses use of a daily periodic rate(s) to determine some or all of the finance charge and use of the quotient method to determine the annual percentage rate. Since the quotient formula in § 1026.14(c)(1)(ii) and (c)(2) cannot be used when a daily rate is being applied to a series of daily balances, § 1026.14(d) provides two alternative ways to calculate the annual percentage rate—either of which satisfies the provisions of § 1026.7(a)(7).

Truth in Lending: Amendment History

[74 Fed. Reg. 5244 (Jan. 29, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 23,019 (Apr. 25, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011)]

Truth in Lending: 1. Transactions not covered

1. Transactions not covered. Credit extensions that are not subject to the regulation are not covered by § 1026.15 even if the customer’s principal dwelling is the collateral securing the credit. For this purpose, credit extensions also would include the occurrences listed in comment 15(a)(1)-1. For example, the right of rescission does not apply to the opening of a business-purpose credit line, even though the loan is secured by the customer’s principal dwelling.

Truth in Lending: 15(a) Consumer’s Right to Rescind.

Paragraph 15(a)(1)

1. Occurrences subject to right. Under an open-end credit plan secured by the consumer’s principal dwelling, the right of rescission generally arises with each of the following occurrences:

i. Opening the account.

ii. Each credit extension.

iii. Increasing the credit limit.

iv. Adding to an existing account a security interest in the consumer’s principal dwelling.

Truth in Lending: 15(b) Notice of Right To Rescind.

1. Who receives notice. Each consumer entitled to rescind must be given two copies of the rescission notice and the material disclosures. In a transaction involving joint owners, both of whom are entitled to rescind, both must receive the notice of the right to rescind and disclosures.

Truth in Lending: 15(c) Delay of Creditor’s Performance.

1. General rule.

i. 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:

A. Disburse advances to the consumer.

B. Begin performing services for the consumer.

C. Deliver materials to the consumer.

Truth in Lending: 15(d) Effects of Rescission.

Paragraph 15(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 § 1026.15(d)(2), however, the creditor must take any action necessary to reflect the fact that the security interest no longer exists.

Truth in Lending: 15(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: 15(f) Exempt Transactions.

1. Residential mortgage transaction. Although residential mortgage transactions would seldom be made on bona fide open-end credit plans (under which repeated transactions must be reasonably contemplated), an advance on an open-end plan could be for a downpayment for the purchase of a dwelling that would then secure the remainder of the line. In such a case, only the particular advance for the downpayment would be exempt from the rescission right.