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6500 - Consumer Protection
Subpart B—Open-End Credit
§ 226.5 General disclosure requirements.
(a) Form of disclosures. (1) The creditor shall make
the disclosures required by this subpart clearly and conspicuously in
writing, 7
in a form that the consumer may keep. 8
The disclosures required by this subpart may be provided to the
consumer in electronic form, subject to compliance with the consumer
consent and other applicable provisions of the Electronic Signatures in
Global and National Commerce Act (E-Sign Act) (15 U.S.C. § 7001
et seq.). The disclosures required by §§ 226.5a, 226.5b,
and 226.16 may be provided to the consumer in electronic form without
regard to the consumer consent or other provisions of the E-Sign Act in
the circumstances set forth in those sections.
(2) The terms "finance charge" and "annual percentage
rate," when required to be disclosed with a corresponding amount or
percentage rate, shall be more conspicuous than any other required
disclosure. 9
(3) Certain disclosures required under § 226.5a for credit and
charge card applications and solicitations must be provided in a
tabular format or in a prominent location in accordance with the
requirements of that section.
(4) For rules governing the form of disclosures for home equity
plans, see § 226.5b(a).
(b) Time of disclosures. (1) Initial
disclosures. The creditor shall furnish the initial disclosure
statement required by § 226.6 before the first transaction is made
under the plan.
(2) Periodic statements. (i) The creditor shall mail
or deliver a periodic statement as required by § 226.7 for each
billing cycle at the end of which an account has a debit or credit
balance of more than $1 or on which a finance charge has been imposed.
A periodic statement need not be sent for an account if the creditor
deems it uncollectible, or if delinquency collection proceedings have
been instituted, or if furnishing the statement would violate federal
law.
(ii) The creditor shall mail or deliver the periodic statement at
least 14 days prior to any date or the end of any time period required
to be disclosed under § 226.7(j) in order for the consumer to avoid
an additional finance or other
charge. 10
A creditor that fails to meet this requirement shall not collect any
finance or other charge imposed as a result of such failure.
(3) Credit and charge card application and solicitation
disclosures. The card issuer shall furnish the disclosures for
credit and charge card applications and solicitations in accordance
with the timing requirements of § 226.5a.
{{12-31-07 p.6648.02}}
(4) Home equity plans. Disclosures for home equity
plans shall be made in accordance with the timing requirements of
§ 226.5b(b).
(c) Basis of disclosures and use of
estimates. Disclosures shall reflect the terms of the legal
obligation between the parties. If any information necessary for
accurate disclosure is unknown to the creditor, it shall make the
disclosure based on the best information reasonably available and shall
state clearly that the disclosure is an estimate.
(d) Multiple creditors; multiple consumers. If the
credit plan involves more than one creditor, only one set of
disclosures shall be given, and the creditors shall agree among
themselves which creditor must comply with the requirements that this
regulation imposes on any or all of them. If there is more than one
consumer, the disclosures may be made to any consumer who is primarily
liable on the account. If the right of rescission under § 226.15 is
applicable, however, the disclosures required by
§§ 226.6 and
226.15(b) shall be made to
each consumer having the right to rescind.
(e) Effect of subsequent events. If a disclosure
becomes inaccurate because of an event that occurs after the creditor
mails or delivers the disclosures, the resulting inaccuracy is not a
violation of this regulation, although new disclosures may be required
under § 226.9(c).
[Codified to 12 C.F.R. § 226.5]
[Section 226.5 amended at 54 Fed. Reg. 13865, April 6,
1989, effective April 3, 1989, but compliance is optional until August
31, 1989; 54 Fed. Reg. 24686, June 9, 1989, effective June 7, 1989, but
compliance is optional until November 7, 1989; 65 Fed. Reg. 58908,
October 3, 2000, effective September 27, 2000; compliance is mandatory
as of October 1, 2000; 66 Fed. Reg. 17338, March 30, 2001; 72 Fed. Reg.
63473, November 9, 2007, effective December 10, 2007, the mandatory
compliance date is October 1, 2008]
{{12-31-07 p.6649}}
§ 226.5a Credit and charge card applications and solicitations.
(a) General rules. The card issuer shall provide the
disclosures required under this section on or with a solicitation or an
application to open a credit or charge card account.
(1) Definition of solicitation. For purposes of this
section, the term "solicitation" means an offer by the card
issuer to open a credit or charge card account that does not require
the consumer to complete an application.
(2) Form of disclosures. (i) The disclosures in
paragraph (b)(1) through (7) of this section shall be provided in a
prominent location on or with an application or a solicitation, or
other applicable document, and in the form of a table with headings,
content, and format substantially similar to any of the applicable
tables found in Appendix G.
(ii) The disclosures in paragraphs (b)(8) through (11) of this
section shall be provided either in the table containing the
disclosures in paragraph (b)(1) through (7), or clearly and
conspicuously elsewhere on or with the application or solicitation.
(iii) The disclosure required under paragraph (b)(5) of this
section shall contain the term "grace period."
(iv) The terminology in the disclosures under paragraph (b) of
this section shall be consistent with that to be used in the
disclosures under §§ 226.6 and 226.7.
(v) For an application or a solicitation that is accessed by the
consumer in electronic form, the disclosures required under this
section may be provided to the consumer in electronic form on or with
the application or solicitation.
(3) Exceptions. This section does not apply to
home-equity plans accessible by a credit or charge card that are of the
type subject to the requirements of § 226.5b; overdraft lines of
credit tied to asset accounts accessed by check-guarantee cards or by
debit cards; or lines of credit accessed by check-guarantee cards or by
debit cards that can be used only at automated teller machines.
(4) Fees based on a percentage. If the amount of any
fee required to be disclosed under this section is determined on the
basis of a percentage of another amount, the percentage used and the
identification of the amount against which the percentage is applied
may be disclosed instead of the amount of the fee.
(5) Certain fees that vary by state. If the amount of
any fee referred to in paragraphs (b)(8) through (11) of this section
varies from state to state, the card issuer may disclose the range of
the fees instead of the amount for each state, if the disclosure
includes a statement that the amount of the fee varies from state to
state.
(b) Required disclosures. The card issuer shall
disclose the items in this paragraph on or with an application or a
solicitation in accordance with the requirements of paragraphs (c), (d)
or (e) of this section. A credit card issuer shall disclose all
applicable items in this paragraph except for paragraph (b)(7) of this
section. A charge card issuer shall disclose the applicable items in
paragraphs (b)(2), (4), and (7) through (11) of this section.
(1) Annual percentage rate. Each periodic rate
that may be used to compute the finance charge on an outstanding
balance for purchases, a cash advance, or a balance transfer, expressed
as an annual percentage rate (as determined by
§ 226.14(b)). When more than
one rate applies for a category of transactions, the range of balances
to which each rate is applicable shall also be disclosed. The annual
percentage rate for purchases disclosed pursuant to this paragraph
shall be in at least 18-point type, except for the following: a
temporary initial rate that is lower than the rate that will apply
after the temporary rate expires, and a penalty rate that will apply
upon the occurrence of one or more specific events.
(i) If the account has a variable rate, the card issuer shall
also disclose the fact that the rate may vary and how the rate is
determined.
(ii) When variable rate disclosures are provided under paragraph
(c) of this section, an annual percentage rate disclosure is accurate
if the rate was in effect within 60 days before mailing the
disclosures. When variable rate disclosures are provided under
paragraph (e) of this section, an annual percentage rate disclosure is
accurate if the rate was in effect within 30 days before printing the
disclosures. Disclosures provided by electronic communication are
subject to paragraph (b)(1)(iii) of this section.
(iii) When variable rate disclosures are provided by electronic
communication, an annual percentage rate disclosure is accurate if the
rate was in effect within 30 days before mailing the disclosures to a
consumer's electronic mail address. If disclosures are made available
at another location such as the card issuer's Internet web site, the
annual percentage rate must be one in effect within the last 30
days.
{{12-31-07 p.6650}}
(2) Fees for issuance or availability. Any annual or
other periodic fee, expressed as an annualized amount, or any other fee
that may be imposed for the issuance or availability of a credit or
charge card, including any fee based on account activity or inactivity.
(3) Minimum finance charge. Any minimum or fixed
finance charge that could be imposed during a billing cycle.
(4) Transaction charges. Any transaction charge
imposed for the use of the card for purchases.
(5) Grace period. The date by which or the period
within which any credit extended for purchases may be repaid without
incurring a finance charge. If no grace period is provided, that fact
must be disclosed. If the length of the grace period varies, the card
issuer may disclose the range of days, the minimum number of days, or
the average number of days in the grace period, if the disclosure is
identified as a range, minimum, or average.
(6) Balance computation method. The name of the
balance computation method listed in paragraph (g) of this section that
is used to determine the balance for purchases on which the finance
charge is computed, or an explanation of the method used if it is not
listed. The explanation may appear outside the table if the table
contains a reference to the explanation. In determining which balance
computation method to disclose, the card issuer shall assume that
credit extended for purchases will not be repaid within the grace
period, if any.
(7) Statement on charge card payments. A statement
that charges incurred by use of the charge card are due when the
periodic statement is received.
(8) Cash advance fee. Any fee imposed for an
extension of credit in the form of cash.
(9) Late payment fee. Any fee imposed for a late
payment.
(10) Over-the-limit fee. Any fee imposed for
exceeding a credit limit.
(11) Balance transfer fee. Any fee imposed to
transfer an outstanding balance.
(c) Direct mail and electronic applications and
solicitations. The card issuer shall disclose the applicable
items in paragraph (b) of this section on or with an application or
solicitation that is mailed to consumers or provided by electronic
communication.
(d) Telephone applications and
solicitations--(1) Oral disclosure. The card issuer
shall orally disclose the information in paragraph (b)(1) through (7)
of this section, to the extent applicable, in a telephone application
or solicitation initiated by the card issuer.
(2) Alternative disclosure. The oral disclosure under
paragraph (d)(1) of this section need not be given if the card issuer
either does not impose a fee described in paragraph (b)(2) of this
section or does not impose such a fee unless the consumer uses the
card, and the card issuer discloses in writing within 30 days after the
consumer requests the card (but in no event later than the delivery of
the card) the following:
(i) The applicable information in paragraph (b) of this section;
and
(ii) The fact that the consumer need not accept the card or pay
any fee disclosed unless the consumer uses the card.
(e) Applications and solicitations made available to general
public. The card issuer shall provide disclosures, to the extent
applicable, on or with an application or solicitation that is made
available to the general public, including one contained in a catalog,
magazine, or other generally available publication. The disclosures
shall be provided in accordance with paragraph (e)(1), (2) or (3) of
this section.
(1) Disclosure of required credit information. The
card issuer may disclose in a prominent location on the application or
solicitation the following:
(i) The applicable information in paragraph (b) of this section;
(ii) The date the required information was printed, including a
statement that the required information was accurate as of that date
and is subject to change after that date; and
(iii) A statement that the consumer should contact the card
issuer for any change in the required information since it was printed,
and a toll-free telephone number or a mailing address for that purpose.
(2) Inclusion of certain initial disclosures. The
card issuer may disclose on or with the application or solicitation the
following:
{{12-31-07 p.6651}}
(i) The disclosures required under § 226.6(a) through (c); and
(ii) A statement that the consumer should contact the card issuer
for any change in the required information, and a toll-free telephone
number or a mailing address for that purpose.
(3) No disclosure of credit information. If none of
the items in paragraph (b) of this section is provided on or with the
application or solicitation, the card issuer may state in a prominent
location on the application or solicitation the following:
(i) There are costs associated with the use of the card; and
(ii) The consumer may contact the card issuer to request specific
information about the costs, along with a toll-free telephone number
and a mailing address for that purpose.
(4) Prompt response to requests for information. Upon
receiving a request for any of the information referred to in this
paragraph, the card issuer shall promptly and fully disclose the
information requested.
(f) Special charge card rule--card issuer and person
extending credit not the same person. If a cardholder may by use
of a charge card access an open-end credit plan that is not maintained
by the charge card issuer, the card issuer need not provide the
disclosures in paragraphs (c), (d) or (e) of this section for the
open-end credit plan if the card issuer states on or with an
application or a solicitation the following:
(1) The card issuer will make an independent decision whether to
issue the card;
(2) The charge card may arrive before the decision is made about
extending credit under the open-end credit plan; and
(3) Approval for the charge card does not constitute approval for
the open-end credit plan.
(g) Balance computation methods defined. The following
methods may be described by name. Methods that differ due to variations
such as the allocation of payments, whether the finance charge begins
to accrue on the transaction date or the date of posting the
transaction, the existence or length of a grace period, and whether the
balance is adjusted by charges such as late fees, annual fees and
unpaid finance charges do not constitute separate balance computation
methods.
(1)(i) Average daily balance (including new
purchases). This balance is figured by adding the outstanding
balance (including new purchases and deducting payments and credits)
for each day in the billing cycle, and then dividing by the number of
days in the billing cycle.
(ii) Average daily balance (excluding new
purchases). This balance is figured by adding the outstanding
balance (excluding new purchases and deducting payments and credits)
for each day in the billing cycle, and then dividing by the number of
days in the billing cycle.
(2)(i) Two-cycle average daily balance (including new
purchases). This balance is the sum of the average daily balances
for two billing cycles. The first balance is for the current billing
cycle, and is figured by adding the outstanding balance (including new
purchases and deducting payments and credits) for each day in the
billing cycle, and then dividing by the number of days in the billing
cycle. The second balance is for the preceding billing cycle and is
figured in the same way as the first balance.
(ii) Two-cycle average daily balance (excluding new
purchases). This balance is the sum of the average daily balances
for two billing cycles. The first balance is for the current billing
cycle, and is figured by adding the outstanding balance (excluding new
purchases and deducting payments and credits) for each day in the
billing cycle, and then dividing by the number of days in the billing
cycle. The second balance is for the preceding billing cycle and is
figured in the same way as the first balance.
(3) Adjusted balance. This balance is figured by
deducting payments and credits made during the billing cycle from the
outstanding balance at the beginning of the billing cycle.
(4) Previous balance. This balance is the outstanding
balance at the beginning of the billing cycle.
[Codified to 12 C.F.R. § 226.5a]
[Section 226.5a added at 54 Fed. Reg. 13865, effective April 3,
1989, but compliance is optional until August 31, 1989 (November 29,
1989, for applications and solicitations
{{12-31-07 p.6652}}subject to § 226.5a(e) of the
regulation); amended at 54 Fed. Reg. 24686, June 9, 1989, effective
June 7, 1989, but compliance is optional until November 7, 1989; 65
Fed. Reg. 17131, March 31, 2000, effective March 24, 2000, but
compliance optional until October 1, 2000; 65 Fed. Reg. 58908, October
3, 2000, effective September 27, 2000; compliance is mandatory as of
October 1, 2000; 66 Fed. Reg. 17338, March 30, 2001, effective March
30, 2001; 72 Fed. Reg. 63473, November 9, 2007, effective December 10,
2007, the mandatory compliance date is October 1,
2008]
§ 226.5b Requirements for home equity plans.
The requirements of this section apply to open-end credit plans
secured by the consumer's dwelling. For purposes of this section, an
annual percentage rate is the annual percentage rate corresponding to
the periodic rate as determined under
§ 226.14(b).
(a) Form of disclosures--(1) General.
The disclosures required by paragraph (d) of this section shall be made
clearly and conspicuously and shall be grouped together and segregated
from all unrelated information. The disclosures may be provided on the
application form or on a separate form. The disclosure described in
paragraph (d)(4)(iii), the itemization of third-party fees described in
paragraph (d)(8), and the variable-rate information described in
paragraph (d)(12) of this section may be provided separately from the
other required disclosures.
(2) Precedence of certain disclosures. The
disclosures described in paragraph (d)(1) through (4)(ii) of this
section shall precede the other required disclosures.
(3) For an application that is accessed by the consumer in
electronic form, the disclosures required under this section may be
provided to the consumer in electronic form on or with the application.
(b) Time of disclosures. The disclosures and brochure
required by paragraphs (d) and (e) of this section shall be provided at
the time an application is provided to the
consumer. 10a
(c) Duties of third parties. Persons other than the
creditor who provide applications to consumers for home equity plans
must provide the brochure required under paragraph (e) of this section
at the time an application is provided. If such persons have the
disclosures required under paragraph (d) of this section for a
creditor's home equity plan, they also shall provide the disclosures at
such time.10a
(d) Content of disclosures. The creditor shall
provide the following disclosures, as applicable:
(1) Retention of information. A statement that the
consumer should make or otherwise retain a copy of the disclosures.
(2) Conditions for disclosed terms. (i) A
statement of the time by which the consumer must submit an application
to obtain specific terms disclosed and an identification of any
disclosed term that is subject to change prior to opening the plan.
(ii) A statement that, if a disclosed term changes (other than a
change due to fluctuations in the index in a variable-rate plan) prior
to opening the plan and the consumer therefore elects not to open the
plan, the consumer may receive a refund of all fees paid in connection
with the application.
(3) Security interest and risk to home. A statement
that the creditor will acquire a security interest in the consumer's
dwelling and that loss of the dwelling may occur in the event of
default.
(4) Possible actions by creditor. (i) A statement
that, under certain conditions, the creditor may terminate the plan and
require payment of the outstanding balance in full in a single payment
and impose fees upon termination; prohibit additional extensions of
credit or reduce the credit limit; and, as specified in the initial
agreement, implement certain changes in the plan.
{{12-31-07 p.6652.01}}
(ii) A statement that the consumer may receive, upon request,
information about the conditions under which such actions may occur.
(iii) In lieu of the disclosure required under paragraph
(d)(4)(ii) of this section, a statement of such conditions.
(5) Payment terms. The payment terms of the plan,
including:
(i) The length of the draw period and any repayment period.
(ii) An explanation of how the minimum periodic payment will be
determined and the timing of the payments. If paying only the minimum
periodic payments may not repay any of the principal or may repay less
than the outstanding balance, a statement of this fact, as well as a
statement that a balloon payment may
result. 10b
(iii) An example, based on a $10,000 outstanding balance and a
recent annual percentage
rate, 10c
showing the minimum periodic payment, any balloon payment, and the time
it would take to repay the $10,000 outstanding balance if the consumer
made only those payments and obtained no additional extensions of
credit.
If different payment terms may apply to the draw and any repayment
period, or if different payment terms may apply within either period,
the disclosures shall reflect the different payment terms.
(6) Annual percentage rate. For fixed-rate plans, a
recent annual percentage rate10c imposed under the plan and a
statement that the rate does not include costs other than interest.
(7) Fees imposed by creditor. An itemization of any
fees imposed by the creditor to open, use, or maintain the plan, stated
as a dollar amount or percentage, and when such fees are payable.
(8) Fees imposed by third parties to open a plan. A
good faith estimate, stated as a single dollar amount or range, of any
fees that may be imposed by persons other than the creditor to open the
plan, as well as a statement that the consumer may receive, upon
request, a good faith itemization of such fees. In lieu of the
statement, the itemization of such fees may be provided.
(9) Negative amortization. A statement that
negative amortization may occur and that negative amortization
increases the principal balance and reduces the consumer's equity in
the dwelling.
(10) Transaction requirements. Any limitations on
the number of extensions of credit and the amount of credit that may be
obtained during any time period, as well as any minimum outstanding
balance and minimum draw requirements, stated as dollar amounts or
percentages.
(11) Tax implications. A statement that the
consumer should consult a tax advisor regarding the deductibility of
interest and charges under the plan.
(12) Disclosures for variable-rate plans. For a
plan in which the annual percentage rate is variable, the following
disclosures, as applicable:
(i) The fact that the annual percentage rate, payment, or term
may change due to the variable-rate feature.
(ii) A statement that the annual percentage rate does not include
costs other than interest.
(iii) The index used in making rate adjustments and a source of
information about the index.
(iv) An explanation of how the annual percentage rate will be
determined, including an explanation of how the index is adjusted, such
as by the addition of a margin.
(v) A statement that the consumer should ask about the current
index value, margin, discount or premium, and annual percentage
rate.
{{12-31-07 p.6652.02}}
(vi) A statement that the initial annual percentage rate is not
based on the index and margin used to make later rate adjustments, and
the period of time such initial rate will be in effect.
(vii) The frequency of changes in the annual percentage rate.
(viii) Any rules relating to changes in the index value and the
annual percentage rate and resulting changes in the payment amount,
including, for example, an explanation of payment limitations and rate
carryover.
(ix) A statement of any annual or more frequent periodic
limitations on changes in the annual percentage rate (or a statement
that no annual limitation exists), as well as a statement of the
maximum annual percentage rate that may be imposed under each payment
option.
(x) The minimum periodic payment required when the maximum annual
percentage rate for each payment option is in effect for a $10,000
outstanding balance, and a statement of the earliest date or time the
maximum rate may be imposed.
(xi) An historical example, based on a $10,000 extension of
credit, illustrating how annual percentage rates and payments would
have been affected by index value changes implemented according to the
terms of the plan. The historical example shall be based on the most
recent 15 years of index values (selected for the same time period each
year) and shall reflect all signficant plan terms, such as negative
amortization, rate carryover, rate discounts, and rate and payment
limitations, that would have been affected by the index movement during
the period.
(xii) A statement that rate information will be provided on or
with each periodic statement.
(e) Brochure. The home equity brochure published by
the Board or a suitable substitute shall be provided.
(f) Limitations on home equity plans. No creditor
may, by contract or otherwise:
(1) Change the annual percentage rate unless:
(i) Such change is based on an index that is not under the
creditor's control; and
(ii) Such index is available to the general public.
(2) Terminate a plan and demand repayment of the entire
outstanding balance in advance of the original term (except for reverse
mortgage transactions that are subject to paragraph (f)(4) of this
section) unless:
(i) There is fraud or material misrepresentation by the consumer
in connection with the plan;
(ii) The consumer fails to meet the repayment terms of the
agreement for any outstanding balance;
(iii) Any action or inaction by the consumer adversely affects
the creditor's security for the plan, or any right of the creditor in
such security; or
(iv) Federal law dealing with credit extended by a depository
institution to its executive officers specifically requires that as a
condition of the plan the credit shall become due and payable on
demand, provided that the creditor includes such a provision in the
initial agreement.
(3) Change any term, except that a creditor may:
(i) Provide in the initial agreement that it may prohibit
additional extension of credit or reduce the credit limit during any
period in which the maximum annual percentage rate is reached. A
creditor also may provide in the initial agreement that specified
changes will occur if a specified event takes place (for example, that
the annual percentage rate will increase a specified amount if the
consumer leaves the creditor's employment).
(ii) Change the index and margin used under the plan if the
original index is no longer available, the new index has an historical
movement substantially similar to that of the original index, and the
new index and margin would have resulted in an annual percentage rate
substantially similar to the rate in effect at the time the original
index became unavailable.
(iii) Make a specified change if the consumer specifically agrees
to it in writing at that time.
(iv) Make a change that will unequivocally benefit the consumer
throughout the remainder of the plan.
{{12-31-07 p.6652.03}}
(v) Make an insignificant change to terms.
(vi) Prohibit additional extensions of credit or reduce the
credit limit applicable to an agreement during any period in which:
(A) The value of the dwelling that secures the plan declines
significantly below the dwelling's appraised value for purposes of the
plan;
(B) The creditor reasonably believes that the consumer will be
unable to fulfill the repayment obligations under the plan because of a
material change in the consumer's financial circumstances;
(C) The consumer is in default of any material obligation under
the agreement;
(D) The creditor is precluded by government action from imposing
the annual percentage rate provided for in the agreement;
(E) The priority of the creditor's security interest is adversely
affected by government action to the extent that the value of the
security interest is less than 120 percent of the credit line; or
(F) The creditor is notified by its regulatory agency that
continued advances constitute an unsafe and unsound practice.
(4) For reverse mortgage transactions that are subject to
§ 226.33, terminate a plan
and demand repayment of the entire outstanding balance in advance of
the original term except:
(i) In the case of default;
(ii) If the consumer transfers title to the property securing the
note;
(iii) If the consumer ceases using the property securing the note
as the primary dwelling; or
(iv) Upon the consumer's death.
(g) Refund of fees. A creditor shall refund all fees
paid by the consumer to anyone in connection with an application if any
term required to be disclosed under paragraph (d) of this section
changes (other than a change due to fluctuations in the index in a
variable-rate plan) before the plan is opened and, as a result, the
consumer elects not to open the plan.
(h) Imposition of nonrefundable fees. Neither a
creditor nor any other person may impose a nonrefundable fee in
connection with an application until three business days after the
consumer receives the disclosures and brochure required under this
section. 10d
[Codified to 12 C.F.R. § 226.5b]
[Section 226.5b added at 54 Fed. Reg. 24686, June 9, 1989,
effective June 7, 1989, but compliance is optional until November 7,
1989; amended at 55 Fed. Reg. 38312, September 18, 1990, effective
September 18, 1990, but compliance is optional until October 1, 1991;
57 Fed. Reg. 34681, August 6, 1992, effective June 29, 1992, but
compliance optional until October 1, 1993; 60 Fed. Reg. 15471, March
24, 1995, effective March 22, 1995, compliance is optional until
October 1, 1995; 66 Fed. Reg. 17338, March 30, 2001, effective March
30, 2001; 72 Fed. Reg. 63474, November 9, 2007, effective December 10,
2007, the mandatory compliance date is October 1,
2008]
§ 226.6 Initial disclosure statement.
The creditor shall disclose to the consumer, in terminology
consistent with that to be used on the periodic statement, each of the
following items, to the extent applicable:
(a) Finance charge. The circumstances under which a
finance charge will be imposed and an explanation of how it will be
determined, as follows:
(1) A statement of when finance charges begin to accrue,
including an explanation of whether or not any time period exists
within which any credit extended may be repaid without incurring a
finance charge. If such a time period is provided, a creditor may, at
its option and without disclosure, impose no finance charge when
payment is received after the time period's expiration.
{{12-31-07 p.6652.04}}
(2) A disclosure of each periodic rate that may be used to
compute the finance charge, the range of balances to which it is
applicable, 11
and the corresponding annual percentage
rate. 12
When different periodic rates apply to different types of transactions,
the types of transactions to which the periodic rates apply shall also
be disclosed.
(3) An explanation of the method used to determine the balance on
which the finance charge may be computed.
(4) An explanation of how the amount of any finance charge will
be determined, 13
including a description of how any finance charge other than the
periodic rate will be determined.
(b) Other charges. The amount of any charge other than
a finance charge that may be imposed as part of the plan, or an
explanation of how the charge will be determined.
(c) Security interests. The fact that the creditor has
or will acquire a security interest in the property purchased under the
plan, or in other property identified by item or type.
(d) Statement of billing rights. A statement that
outlines the consumer's rights and the creditor's responsibilities
under §§ 226.12(c) and
226.13 and that is
substantially similar to the statement found in appendix G.
(e) Home equity plan information. The following
disclosures described in § 226.5b(d), as applicable:
(1) A statement of the conditions under which the creditor may
take certain action, as described in § 226.5b(d)(4)(i), such as
terminating the plan or changing the terms.
(2) The payment information described in § 226.5b(d)(5)(i) and
(ii) for both the draw period and any repayment period.
(3) A statement that negative amortization may occur as described
in § 226.5b(d)(9).
(4) A statement of any transaction requirements as described in
§ 226.5b(d)(10).
(5) A statement regarding the tax implications as described in
§ 226.5b(d)(11).
(6) A statement that the annual percentage rate imposed under the
plan does not include costs other than interest as described in
§§ 226.5b(d)(6) and 226.5b(d)(12)(ii).
(7) The variable-rate disclosures described in
§ 226.5b(d)(12)(viii), (x), (xi), and (xii), as well as the
disclosure described in § 226.5b(d)(5)(iii), unless the disclosures
provided with the application were in a form the consumer could keep
and included a representative payment example for the category of
payment option chosen by the consumer.
[Codified to 12 C.F.R. § 226.6]
[Section 226.6 amended at 54 Fed. Reg. 24688, June 9, 1989, but
compliance is optional until November 7,
1989]
§ 226.7 Periodic statement.
The creditor shall furnish the consumer with a periodic statement
that discloses the following items, to the extent applicable:
(a) Previous balance. The account balance outstanding
at the beginning of the billing cycle.
(b) Identification of transactions. An identification
of each credit transaction in accordance with § 226.8.
(c) Credits. Any credit to the account during the
billing cycle, including the amount and the date of crediting. The date
need not be provided if a delay in crediting does not result in any
finance or other charge.
{{10-31-07 p.6652.05}}
(d) Periodic rates. Each periodic rate that may be used
to compute the finance charge, the range of balances to which it is
applicable, 14
and the corresponding annual percentage
rate. 15
If different periodic rates apply to different types of transactions,
the types of transactions to which the periodic rates apply shall also
be disclosed.
(e) Balance on which finance charge computed. The
amount of the balance to which a periodic rate was applied and an
explanation of how that balance was determined. When a balance is
determined without first deducting all credits and payments made during
the billing cycle, that fact and the amount of the credits and payments
shall be disclosed.
(f) Amount of finance charge. The amount of any finance
charge debited or added to the account during the billing cycle, using
the term "finance charge." The components of the finance charge
shall be individually itemized and identified to show the amount(s) due
to the application of any periodic rates and the amount(s) of any other
type of finance charge. If there is more than one periodic rate, the
amount of the finance charge attributable to each rate need not be
separately itemized and identified.
(g) Annual percentage rate. When a finance charge is
imposed during the billing cycle, the annual percentage rate(s)
determined under § 226.14,
using the term "annual percentage rate."
(h) Other charges. The amounts, itemized and identified
by type, of any charges other than finance charges debited to the
account during the billing cycle.
(i) Closing date of billing cycle; new balance. The
closing date of the billing cycle and the account balance outstanding
on that date.
(j) Free-ride period. The date by which or the time
period within which the new balance or any portion of the new balance
must be paid to avoid additional finance charges. If such a time period
is provided, a creditor may, at its option and without disclosure,
impose no finance charge when payment is received after the time
period's expiration.
(k) Address for notice of billing errors. The address
to be used for notice of billing errors. Alternatively, the address may
be provided on the billing rights statement permitted by
§ 226.9(a)(2).
[Codified to 12 C.F.R. § 226.7]
[Section 226.7 amended at 46 Fed. Reg. 29246, June 1, 1981; 71 Fed.
Reg. 30577, May 30, 2006]
§ 226.8 Identification of transactions.
The creditor shall identify credit transactions on or with the first
periodic statement that reflects the transaction by furnishing the
following information, as
applicable. 16
(a) Sale credit. For each credit transaction involving
the sale of property or services, the following rules shall apply:
(1) Copy of credit document provided. When an actual
copy of the receipt or other credit document is provided with the first
periodic statement reflecting the transaction, the transaction is
sufficiently identified if the amount of the transaction and either the
date of the transaction or the date of debiting the transaction to the
consumer's account are disclosed on the copy or on the periodic
statement.
(2) Copy of credit document not provided--creditor and
seller same or related person(s). When the creditor and the
seller are the same person or related persons, and an
{{10-31-07 p.6652.06}}actual copy of the receipt or other
credit document is not provided with the periodicstatement, the
creditor shall disclose the amount and date of the transaction, and a
brief identification 17
of the property or services
purchased. 18
(3) Copy of credit document not provided--creditor and
seller not same or related person(s). When the creditor and
seller are not the same person or related persons, and an actual copy
of the receipt or other credit document is not provided with the
periodic statement, the creditor shall disclose the amount and date of
the transaction; the seller's name; and the city, and state or foreign
country where the transaction took
place. 19
(b) Nonsale credit. A nonsale credit transaction is
sufficiently identified if the first periodic statement reflecting the
transaction discloses a brief identification of the
transaction; 20
the amount of the transaction; and at least one of the following dates:
the date of the transaction, the date of debiting the transaction to
the consumer's account, or, if the consumer signed the credit document,
the date appearing on the document. If an actual copy of the receipt or
other credit document is provided and that copy shows the amount and at
least one of the specified dates, the brief identification may be
omitted.
[Codified to 12 C.F.R. § 226.8]
[Section 226.8 amended at 46 Fed. Reg. 29246, June 1,
1981]
7 The disclosure required by § 226.9(d) when a finance charge
is imposed at the time of a transaction need not be written. Go Back to Text
8The disclosures required under § 226.5a for credit and
charge card applications and solicitations, the home equity disclosures
required under § 226.5b(d), the alternative summary billing rights
statement provided for in
§ 226.9(a)(2), the credit and
charge card renewal disclosures required under § 226.9(e), and the
disclosures made under
§ 226.10(b) about payment
requirements need not be in a form that the consumer can keep. Go Back to Text
9 The terms need not be more conspicuous when used under
§ 226.5a generally for credit and charge card applications and
solicitations under § 226.7(d) on periodic statements, under
§ 226.9(e) in credit and charge card renewal disclosures, and under
§ 226.16 in advertisements. (But see special rule for annual
percentage rate for purchases, § 226.5a(b)(1).) Go Back to Text
10 This timing requirement does not apply if the creditor is
unable to meet the requirement because of an act of God, war, civil
disorder, natural disaster, or strike. Go Back to Text
10aThe disclosures and the brochure may be delivered or placed
in the mail not later than three business days following receipt of a
consumer's application in the case of applications contained in
magazines or other publications, or when the application is received by
telephone or through an intermediary agent or broker. Go Back to Text
10bA balloon payment results if paying the minimum periodic
payments does not fully amortize the outstanding balance by a specified
date or time, and the consumer must repay the entire outstanding
balance at such time. Go Back to Text
10cFor fixed-rate plans, a recent annual percentage rate is a
rate that has been in effect under the plan within the twelve months
preceding the date the disclosures are provided to the consumer. For
variable-rate plans, a recent annual percentage rate is the most recent
rate provided in the historical example described in paragraph
(d)(12)(xi) of this section or a rate that has been in effect under the
plan since the date of the most recent rate in the table. Go Back to Text
10dIf the disclosures and brochure are mailed to the consumer,
the consumer is considered to have received them three business days
after they are mailed. Go Back to Text
11 A creditor is not required to adjust the range of balances
disclosure to reflect the balance below which only a minimum charge
applies. Go Back to Text
12 If a creditor is offering a variable rate plan, the creditor
shall also disclose: (1) the circumstances under which the rate(s) may
increase; (2) any limitations on the increase; and (3) the effect(s) of
an increase. Go Back to Text
13 If no finance charge is imposed when the outstanding balance
is less than a certain amount, no disclosure is required of that fact
or of the balance below which no finance charge will be imposed. Go Back to Text
14 See footnotes 11 and 13. Go Back to Text
15 If a variable rate plan is involved, the creditor shall
disclose the fact that the periodic rate(s) may vary. Go Back to Text
16 Failure to disclose the information required by this section
shall not be deemed a failure to comply with the regulation if: (1) the
creditor maintains procedures reasonably adapted to obtain and provide
the information; and (2) the creditor treats an inquiry for
clarification or documentation as a notice of a billing error,
including correcting the account in accordance with § 226.13(e). This
applies to transactions that take place outside a state, as defined in
§ 226.2(a), whether or not the creditor maintains procedures
reasonably adapted to obtain the required information. Go Back to Text
17 As an alternative to the brief identification, the creditor
may disclose a number or symbol that also appears on the receipt or
other credit document given to the consumer, if the number or symbol
reasonably identifies that transaction with that creditor, and if the
creditor treats an inquiry for clarification or documentation as a
notice of a billing error, including correcting the account in
accordance with
§ 226.13(e). Go Back to Text
18 An identification of property or services may be replaced by
the seller's name and location of the transaction when: (1) the
creditor and the seller are the same person; (2) the creditor's
open-end plan has fewer than 15,000 accounts; (3) the creditor provides
the consumer with point-of-sale documentation for that transaction; and
(4) the creditor treats an inquiry for clarification or documentation
as a notice of a billing error, including correcting the account in
accordance with § 226.13(e). Go Back to Text
19 The creditor may omit the address or provide any suitable
designation that helps the consumer to identify the transaction when
the transaction (1) took place at a location that is not fixed; (2)
took place in the consumer's home; or (3) was a mail or telephone
order. Go Back to Text
20 See footnote 17. Go Back to Text
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