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Truth in Lending: 5.9.2 Disclosure of the Creditor

The identity of the creditor must be disclosed.490 Only the name of the creditor is required, but the creditor’s address and/or telephone number may also be included.491 At the option of the creditor, this disclosure may appear apart from the other disclosures.492

Truth in Lending: 5.9.3.1 General

The creditor has a choice: it must either automatically disclose an itemization of the amount financed or it may inform the consumer, on the segregated disclosures, that a written itemization will be provided on request, furnishing the itemization only if the consumer in fact requests it.500 If the consumer indicates that he or she wants the itemization, the creditor must provide it; if the consumer does not indicate that he or she wants the itemization, then the creditor does not have to disclose the itemization.

Truth in Lending: 5.9.3.2 Amount of Any Proceeds Distributed Directly to the Consumer

This category includes any funds given to the consumer. It does not matter whether it is in the form of cash or check (including joint proceeds checks) or a deposit in a savings or checking account.517 It also does not matter whether an amount paid into a bank account is considered a required deposit;518 if it is also part of the amount financed, it must be included in the itemization.519

Truth in Lending: 5.9.3.4.1 General

The official interpretations list several examples of amounts paid to others: tag and title fees, insurance premiums, security interest fees, credit bureau fees, appraisal fees, and fees paid to public officials.523 Each person who receives funds on behalf of the consumer must be identified by name,524 except that public officials, government agencies, credit reporting agencies, appraisers, and insurance companies may be described with generic or other general terms.

Truth in Lending: 5.9.3.4.2 Car dealer mark-ups and commissions

One common practice among auto dealers is to disclose service contract charges among “amounts paid to others.” Because dealers usually mark up the price of service contracts (often considerably), and retain the mark-up as profit, the practice was challenged as both a TILA violation and a UDAP violation.534 The primary TILA claim was that the charge was not in fact “paid to a third party,” and so was an inaccurate disclosure (and one for which the consumer should recover actual damages, in the amount of the mark-up.) A second claim was that

Truth in Lending: 5.9.3.5 Prepaid Finance Charge

If an itemization of the amount financed is given, it must include a disclosure of the total prepaid finance charge.553 The creditor may, but need not, itemize the prepaid finance charge; for example, a creditor who has assessed a $40 prepaid finance charge may, at its option, also disclose that this prepaid finance charge consists of $30 interim interest and a $10 credit report fee, both of which were collected at consummation.554

Truth in Lending: 5.9.5.1 General

In a credit sale567 the “total sale price” must be disclosed using that term.568 The “total sale price” need not be disclosed except in a credit sale, even if the creditor takes a security interest in the consumer’s collateral.569

Truth in Lending: 5.9.5.2 Treatment of Down Payments

Down payments are included in the total sale price, as a general rule.579 Things get tricky when that down payment includes either “negative equity,” occasioned when the existing lien on a trade-in is greater than the value of the trade-in, or deferred “pickup payments.”

Truth in Lending: 5.9.6.1 General

Disclosures are required about the consequences of prepayment.585 For interest-bearing transactions, creditors must disclose whether there may be a prepayment penalty. For precomputed transactions creditors must disclose whether the consumer may be entitled to a rebate of unearned interest. The official interpretations contain examples of prepayment penalties.586

Truth in Lending: 5.9.6.2 Interest-Bearing Transactions

For interest-bearing transactions, the creditor must disclose whether or not the creditor will impose a “penalty” if the debt is prepaid in full prior to the last scheduled payment.595 The model forms596 suggest disclosing “Prepayment: If you pay off early, you ___ may ___ may not have to pay a penalty” and checking the appropriate box.

Truth in Lending: 5.9.6.3 Precomputed Transactions

In precomputed transactions the creditor must disclose whether or not the consumer is entitled to a rebate of any finance charge if the obligation is prepaid in full. The model forms607 suggest disclosing “Prepayment: If you pay off early, you ___ may ___ will not be entitled to a refund of part of the finance charge” and checking the appropriate box. In virtually every case, state law will require some rebate.

Truth in Lending: 5.9.6.4 Prepaid Finance Charge

A prepaid finance charge, by itself, does not require a prepayment disclosure.616 The prepaid finance charge is not considered a penalty nor does it require a rebate disclosure, as it is usually considered fully earned and non-rebatable upon prepayment in full.617

Truth in Lending: 5.9.6.5 Mixed Transactions

Most transactions will involve only one kind of finance charge and therefore will require only one kind of prepayment disclosure.619 If the transaction involves a finance charge computed by application of a rate to the unpaid balance, then the creditor should disclose only whether a penalty will be imposed in the event of prepayment in full. If the transaction involves a precomputed finance charge, then the creditor should disclose only whether a rebate of any finance charge will be given in the event of prepayment in full.

Truth in Lending: 5.9.7 Disclosure of Late Payment Charges

The creditor must disclose any dollar or percentage charge (other than a deferral or extension charge) that may be imposed before maturity due to a late payment.621 Disclosures are required only if charges are added to individual delinquent installments by a creditor who otherwise considers the transaction ongoing on its original terms.622 Statutory damages are not available for violating the late payment disclosure requirements.623 Actual da

Truth in Lending: 5.9.8 Disclosure of Insurance Charges and Debt Cancellation Agreements

Several types of insurance and debt cancellation agreements are commonly sold by a creditor in connection with a credit transaction (credit life insurance, credit disability insurance, and credit property insurance).630 While the Dodd-Frank Act banned the financing of single premium credit insurance or debt cancellation agreements for closed-end mortgages,631 insurance with monthly premiums and credit unemployment insurance may still be sold in connection with mortgages, and there is no gene

Truth in Lending: 5.9.9 Disclosure of Security Interest Charges

A creditor will often impose a variety of charges allegedly to help perfect its security interest in the consumer’s property. Ordinarily, those charges must be included in the finance charge.642 However, as with credit insurance,643 some of those charges may be excluded from the finance charge if they are correctly itemized and disclosed.644 If the disclosures are made properly, the premiums may be included in the amount financed.

Truth in Lending: 5.9.11 Disclosure of Mortgage Lenders’ Assumption Policy

In a residential mortgage transaction,661 one important factor that could presumably affect the consumer’s decision to enter into the transaction is the creditor’s assumption policy, that is, whether the creditor will allow the next purchaser of the house or manufactured home to assume the payments of the original transaction without any increase in the term, interest rate, or payment amounts.

Truth in Lending: 5.9.12 Disclosure of Required Deposits

Occasionally a creditor will require a consumer to maintain a deposit account (frequently with itself) as a condition of the transaction. For example, a bank might require a loan applicant to open and maintain a $500 savings account as a condition of the loan.

Truth in Lending: 5.10.1.2 Format Requirements

Advertisements are subject to a clear and conspicuous requirement.692 For closed-end transactions not secured by a dwelling, no particular format is prescribed.693 For advertisements related to mortgage loans on or after October 1, 2009, certain terms must be disclosed in larger type than others or must be grouped together.694 There are additional rules for catalogs, multiple page advertisements, and electronic advertisements,

Truth in Lending: 5.10.1.3 Interest Rate or APR?

Generally, if a creditor states a rate for the finance charge it must express it as annual percentage rate.697 If the creditor responds orally to an inquiry about the cost of the credit, it also must state rates expressed as an annual percentage rate; but if the major component of the finance charge consists of interest calculated at a simple interest rate, the creditor also may state the simple annual rate.698 If the interest rate or APR may increase, the advertisement must state that fact.

Truth in Lending: 5.10.1.4 Application of Advertising Rules to Mortgages

The rules pertaining to written or visual advertisements related to closed-end loans do not apply to advertisements of “residential real estate,” unless the CFPB says otherwise by regulation.700 This language appears intended to exempt advertisements for the real estate itself, not advertisements for mortgage loans, and the Regulation Z advertising rule includes many specific rules for advertisement of mortgage loans.701 By contrast, TILA defines a “residential mortgage transaction” as a pur