PART 1026—TRUTH IN LENDING (REGULATION Z)
Full text
This is the first part of the text (pages 1 to 194 of 971). The full document is in our copy of the file, CFR-2025-title12-vol9-part1026.pdf, listed under File and source; the original is at govinfo.gov.
PART 1026—TRUTH IN LENDING 1026.36 Prohibited acts or practices and cer-
tain requirements for credit secured by a
(REGULATION Z) dwelling.
1026.37 Content of disclosures for certain
Subpart A—General mortgage transactions (Loan Estimate).
1026.38 Content of disclosures for certain
Sec. mortgage transactions (Closing Disclo-
1026.1 Authority, purpose, coverage, organi- sure).
zation, enforcement, and liability. 1026.39 Mortgage transfer disclosures.
1026.2 Definitions and rules of construction. 1026.40 Requirements for home equity plans.
1026.3 Exempt transactions. 1026.41 Periodic statements for residential
1026.4 Finance charge. mortgage loans.
1026.42 Valuation independence.
Subpart B—Open-End Credit 1026.43 Minimum standards for transactions
secured by a dwelling.
1026.5 General disclosure requirements. 1026.44–1026.45 [Reserved]
1026.6 Account-opening disclosures.
1026.7 Periodic statement. Subpart F—Special Rules for Private
1026.8 Identifying transactions on periodic Education Loans
statements.
1026.9 Subsequent disclosure requirements. 1026.46 Special disclosure requirements for
1026.10 Payments. private education loans.
1026.11 Treatment of credit balances; ac- 1026.47 Content of disclosures.
count termination. 1026.48 Limitations on private education
1026.12 Special credit card provisions. loans.
1026.13 Billing error resolution.
1026.14 Determination of annual percentage Subpart G—Special Rules Applicable to
rate. Credit Card Accounts and Open-End
1026.15 Right of rescission. Credit Offered to College Students
1026.16 Advertising.
1026.51 Ability to Pay.
Subpart C—Closed-End Credit 1026.52 Limitations on fees.
1026.53 Allocation of payments.
1026.17 General disclosure requirements. 1026.54 Limitations on the imposition of fi-
1026.18 Content of disclosures. nance charges.
1026.19 Certain mortgage and variable-rate 1026.55 Limitations on increasing annual
transactions. percentage rates, fees, and charges.
1026.20 Disclosure requirements regarding 1026.56 Requirements for over-the-limit
post-consummation events. transactions.
1026.21 Treatment of credit balances. 1026.57 Reporting and marketing rules for
1026.22 Determination of annual percentage college student open-end credit.
rate. 1026.58 Internet posting of credit card agree-
1026.23 Right of rescission. ments.
1026.24 Advertising. 1026.59 Reevaluation of rate increases.
1026.60 Credit and charge card applications
Subpart D—Miscellaneous and solicitations.
1026.61 Hybrid prepaid-credit cards.
1026.25 Record retention. 1026.62 Overdraft credit.
1026.26 Use of annual percentage rate in oral APPENDIX A TO PART 1026—EFFECT ON STATE
disclosures. LAWS
1026.27 Language of disclosures. APPENDIX B TO PART 1026—STATE EXEMP-
1026.28 Effect on state laws. TIONS
1026.29 State exemptions. APPENDIX C TO PART 1026—ISSUANCE OF OFFI-
1026.30 Limitation on rates. CIAL INTERPRETATIONS
APPENDIX D TO PART 1026—MULTIPLE AD-
Subpart E—Special Rules for Certain Home VANCE CONSTRUCTION LOANS
Mortgage Transactions APPENDIX E TO PART 1026—RULES FOR CARD
ISSUERS THAT BILL ON A TRANSACTION-BY-
1026.31 General rules. TRANSACTION BASIS
1026.32 Requirements for high-cost mort- APPENDIX F TO PART 1026—OPTIONAL ANNUAL
gages. PERCENTAGE RATE COMPUTATIONS FOR
1026.33 Requirements for reverse mortgages. CREDITORS OFFERING OPEN-END CREDIT
1026.34 Prohibited acts or practices in con- PLANS SECURED BY A CONSUMER’S DWELL-
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nection with high-cost mortgages. ING
1026.35 Requirements for higher-priced APPENDIX G TO PART 1026—OPEN-END MODEL
mortgage loans. FORMS AND CLAUSES
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§ 1026.1 12 CFR Ch. X (1–1–25 Edition)
APPENDIX H TO PART 1026—CLOSED-END forcement Act, as amended (12 U.S.C.
MODEL FORMS AND CLAUSES 3331 et seq.). The Bureau’s information-
APPENDIX I TO PART 1026 [RESERVED] collection requirements contained in
APPENDIX J TO PART 1026—ANNUAL PERCENT-
AGE RATE COMPUTATIONS FOR CLOSED-END
this part have been approved by the Of-
CREDIT TRANSACTIONS fice of Management and Budget (OMB)
APPENDIX K TO PART 1026—TOTAL ANNUAL under the provisions of 44 U.S.C. 3501 et
LOAN COST RATE COMPUTATIONS FOR RE- seq. and have been assigned OMB No.
VERSE MORTGAGE TRANSACTIONS 3170–0015 (Truth in Lending).
APPENDIX L TO PART 1026—ASSUMED LOAN (b) Purpose. The purpose of this part
PERIODS FOR COMPUTATIONS OF TOTAL AN- is to promote the informed use of con-
NUAL LOAN COST RATES
sumer credit by requiring disclosures
APPENDIX M1 TO PART 1026—REPAYMENT DIS-
CLOSURES
about its terms and cost, to ensure
APPENDIX M2 TO PART 1026—SAMPLE CAL- that consumers are provided with
CULATIONS OF REPAYMENT DISCLOSURES greater and more timely information
APPENDIX N TO PART 1026—HIGHER-PRICED on the nature and costs of the residen-
MORTGAGE LOAN APPRAISAL SAFE HARBOR tial real estate settlement process, and
REVIEW to effect certain changes in the settle-
APPENDIX O TO PART 1026—ILLUSTRATIVE ment process for residential real estate
WRITTEN SOURCE DOCUMENTS FOR HIGHER-
that will result in more effective ad-
PRICED MORTGAGE LOAN APPRAISAL
RULES vance disclosure to home buyers and
APPENDIX P TO PART 1026 [RESERVED] sellers of settlement costs. The regula-
SUPPLEMENT I TO PART 1026—OFFICIAL INTER- tion also includes substantive protec-
PRETATIONS tions. It gives consumers the right to
AUTHORITY: 12 U.S.C. 2601, 2603–2605, 2607, cancel certain credit transactions that
2609, 2617, 3353, 5511, 5512, 5532, 5581; 15 U.S.C. involve a lien on a consumer’s prin-
1601 et seq.’’ cipal dwelling, regulates certain credit
card practices, and provides a means
EFFECTIVE DATE NOTE: At 89 FR 64577, Aug.
7, 2024, the authority citation for part 1026 for fair and timely resolution of credit
was revised, effective Oct. 1, 2025. For the billing disputes. The regulation does
convenience of the user, the revised text is not generally govern charges for con-
set forth as follows: sumer credit, except that several provi-
AUTHORITY: 12 U.S.C. 2601, 2603–2605, 2607, sions in subpart G set forth special
2609, 2617, 3353, 3354, 5511, 5512, 5532, 5581; 15 rules addressing certain charges appli-
U.S.C. 1601 et seq. cable to credit card accounts under an
SOURCE: 76 FR 79772, Dec. 22, 2011, unless open-end (not home-secured) consumer
otherwise noted. credit plan. The regulation requires a
maximum interest rate to be stated in
Subpart A—General variable-rate contracts secured by the
consumer’s dwelling. It also imposes
§ 1026.1 Authority, purpose, coverage, limitations on home-equity plans that
organization, enforcement, and li- are subject to the requirements of
ability. § 1026.40 and mortgages that are subject
(a) Authority. This part, known as to the requirements of § 1026.32. The
Regulation Z, is issued by the Bureau regulation prohibits certain acts or
of Consumer Financial Protection to practices in connection with credit se-
implement the Federal Truth in Lend- cured by a dwelling in § 1026.36, and
ing Act, which is contained in title I of credit secured by a consumer’s prin-
the Consumer Credit Protection Act, as cipal dwelling in § 1026.35. The regula-
amended (15 U.S.C. 1601 et seq.). This tion also regulates certain practices of
part also implements title XII, section creditors who extend private education
1204 of the Competitive Equality Bank- loans as defined in § 1026.46(b)(5). In ad-
ing Act of 1987 (Pub. L. 100–86, 101 Stat. dition, it imposes certain limitations
552). Furthermore, this part imple- on increases in costs for mortgage
ments certain provisions of the Real transactions subject to § 1026.19(e) and
Estate Settlement Procedures Act of (f).
1974, as amended (12 U.S.C. 2601 et seq.). (c) Coverage. (1) In general, this part
In addition, this part implements cer- applies to each individual or business
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tain provisions of the Financial Insti- that offers or extends credit, other
tutions Reform, Recovery, and En- than a person excluded from coverage
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Consumer Financial Protection Bureau § 1026.1
of this part by section 1029 of the Con- (iii) The transactions that are ex-
sumer Financial Protection Act of 2010, empt from coverage; and
title X of the Dodd-Frank Wall Street (iv) The method of determining the
Reform and Consumer Protection Act, finance charge.
Public Law 111–203, 124 Stat. 1376, when (2) Subpart B contains the rules for
four conditions are met: open-end credit. It requires that ac-
(i) The credit is offered or extended count-opening disclosures and periodic
to consumers; statements be provided, as well as addi-
(ii) The offering or extension of cred- tional disclosures for credit and charge
it is done regularly; card applications and solicitations and
(iii) The credit is subject to a finance for home-equity plans subject to the
charge or is payable by a written requirements of § 1026.60 and § 1026.40,
agreement in more than four install- respectively. It also describes special
ments; and rules that apply to credit card trans-
(iv) The credit is primarily for per- actions, treatment of payments and
sonal, family, or household purposes. credit balances, procedures for resolv-
(2) If a credit card is involved, how- ing credit billing errors, annual per-
ever, certain provisions apply even if centage rate calculations, rescission
the credit is not subject to a finance requirements, and advertising.
charge, or is not payable by a written (3) Subpart C relates to closed-end
agreement in more than four install-
credit. It contains rules on disclosures,
ments, or if the credit card is to be
treatment of credit balances, annual
used for business purposes.
percentage rate calculations, rescission
(3) In addition, certain requirements
requirements, and advertising.
of § 1026.40 apply to persons who are not
creditors but who provide applications (4) Subpart D contains rules on oral
for home-equity plans to consumers. disclosures, disclosures in languages
(4) Furthermore, certain require- other than English, record retention,
ments of § 1026.57 apply to institutions effect on state laws, state exemptions,
of higher education. and rate limitations.
(5) Except in transactions subject to (5) Subpart E contains special rules
§ 1026.19(e) and (f), no person is required for mortgage transactions. Section
to provide the disclosures required by 1026.32 requires certain disclosures and
sections 128(a)(16) through (19), provides limitations for closed-end
128(b)(4), 129C(f)(1), 129C(g)(2) and (3), credit transactions and open-end credit
129D(h), or 129D(j)(1)(A) of the Truth in plans that have rates or fees above
Lending Act, section 4(c) of the Real specified amounts or certain prepay-
Estate Settlement Procedures Act, or ment penalties. Section 1026.33 requires
the disclosure required prior to settle- special disclosures, including the total
ment by section 129C(h) of the Truth in annual loan cost rate, for reverse mort-
Lending Act. Except in transactions gage transactions. Section 1026.34 pro-
subject to § 1026.20(e), no person is re- hibits specific acts and practices in
quired to provide the disclosure re- connection with high-cost mortgages,
quired by section 129D(j)(1)(B) of the as defined in § 1026.32(a). Section 1026.35
Truth in Lending Act. Except in trans- prohibits specific acts and practices in
actions subject to § 1026.39(d)(5), no per- connection with closed-end higher-
son becoming a creditor with respect to priced mortgage loans, as defined in
an existing residential mortgage loan § 1026.35(a). Section 1026.36 prohibits
is required to provide the disclosure re- specific acts and practices in connec-
quired by section 129C(h) of the Truth tion with an extension of credit se-
in Lending Act. cured by a dwelling. Sections 1026.37
(d) Organization. The regulation is di- and 1026.38 set forth special disclosure
vided into subparts and appendices as requirements for certain closed-end
follows: transactions secured by real property
(1) Subpart A contains general infor- or a cooperative unit, as required by
mation. It sets forth: § 1026.19(e) and (f).
(i) The authority, purpose, coverage, (6) Subpart F relates to private edu-
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and organization of the regulation; cation loans. It contains rules on dis-
(ii) The definitions of basic terms; closures, limitations on changes in
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§ 1026.1, Nt. 12 CFR Ch. X (1–1–25 Edition)
terms after approval, the right to can- porates by reference administrative en-
cel the loan, and limitations on co- forcement and civil liability provisions
branding in the marketing of private of sections 108 and 130 of the Truth in
education loans. Lending Act. Section 19 of the Real Es-
(7) Subpart G relates to credit card tate Settlement Procedures Act con-
accounts under an open-end (not home- tains the administrative enforcement
secured) consumer credit plan (except provisions for that Act.
for § 1026.57(c), which applies to all [76 FR 79772, Dec. 22, 2011, as amended at 77
open-end credit plans). Section 1026.51 FR 70114, Nov. 23, 2012; 78 FR 6962, Jan. 31,
contains rules on evaluation of a con- 2013; 78 FR 80106, Dec. 31, 2013; 80 FR 32687,
sumer’s ability to make the required June 9, 2015; 82 FR 37768, Aug. 11, 2017]
payments under the terms of an ac- EFFECTIVE DATE NOTE: At 89 FR 64577, Aug.
count. Section 1026.52 limits the fees 7, 2024, § 1026.1 was amended by adding para-
that a consumer can be required to pay graph (c)(6), effective Oct. 1, 2025. For the
with respect to an open-end (not home- convenience of the user, the added text is set
secured) consumer credit plan during forth as follows:
the first year after account opening. § 1026.1 Authority, purpose, coverage, orga-
Section 1026.53 contains rules on allo- nization, enforcement, and liability.
cation of payments in excess of the
minimum payment. Section 1026.54 sets * * * * *
forth certain limitations on the impo-
sition of finance charges as the result (c) * * *
(6) The requirements of § 1026.42(i) apply to
of a loss of a grace period. Section certain persons regardless of whether they
1026.55 contains limitations on in- are creditors and even if the mortgage, as de-
creases in annual percentage rates, fined in § 1026.42(i)(2)(v), is primarily for busi-
fees, and charges for credit card ac- ness, commercial, agricultural, or organiza-
counts. Section 1026.56 prohibits the as- tional purposes.
sessment of fees or charges for over-
the-limit transactions unless the con- * * * * *
sumer affirmatively consents to the
creditor’s payment of over-the-limit § 1026.2 Definitions and rules of con-
transactions. Section 1026.57 sets forth struction.
rules for reporting and marketing of (a) Definitions. For purposes of this
college student open-end credit. Sec- part, the following definitions apply:
tion 1026.58 sets forth requirements for (1) Act means the Truth in Lending
the Internet posting of credit card ac- Act (15 U.S.C. 1601 et seq.).
counts under an open-end (not home- (2) Advertisement means a commercial
secured) consumer credit plan. message in any medium that promotes,
(8) Several appendices contain infor- directly or indirectly, a credit trans-
mation such as the procedures for de- action.
terminations about state laws, state (3)(i) Application means the submis-
exemptions and issuance of official in- sion of a consumer’s financial informa-
terpretations, special rules for certain tion for the purposes of obtaining an
kinds of credit plans, and the rules for extension of credit.
computing annual percentage rates in (ii) For transactions subject to
closed-end credit transactions and § 1026.19(e), (f), or (g) of this part, an ap-
total-annual-loan-cost rates for reverse plication consists of the submission of
mortgage transactions. the consumer’s name, the consumer’s
(e) Enforcement and liability. Section income, the consumer’s social security
108 of the Truth in Lending Act con- number to obtain a credit report, the
tains the administrative enforcement property address, an estimate of the
provisions for that Act. Sections 112, value of the property, and the mort-
113, 130, 131, and 134 contain provisions gage loan amount sought.
relating to liability for failure to com- (4) Billing cycle or cycle means the in-
ply with the requirements of the Truth terval between the days or dates of reg-
in Lending Act and the regulation. Sec- ular periodic statements. These inter-
tion 1204(c) of title XII of the Competi- vals shall be equal and no longer than
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tive Equality Banking Act of 1987, Pub- a quarter of a year. An interval will be
lic Law 100–86, 101 Stat. 552, incor- considered equal if the number of days
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Consumer Financial Protection Bureau § 1026.2
in the cycle does not vary more than credit is offered or extended. However,
four days from the regular day or date for purposes of rescission under
of the periodic statement. §§ 1026.15 and 1026.23, the term also in-
(5) Bureau means the Bureau of Con- cludes a natural person in whose prin-
sumer Financial Protection. cipal dwelling a security interest is or
(6) Business day means a day on will be retained or acquired, if that
which the creditor’s offices are open to person’s ownership interest in the
the public for carrying on substantially dwelling is or will be subject to the se-
all of its business functions. However, curity interest. For purposes of
for purposes of rescission under §§ 1026.20(c) through (e), 1026.36(c),
§§ 1026.15 and 1026.23, and for purposes of 1026.39, and 1026.41, the term includes a
§§ 1026.19(a)(1)(ii), 1026.19(a)(2), confirmed successor in interest.
1026.19(e)(1)(iii)(B), 1026.19(e)(1)(iv), (12) Consumer credit means credit of-
1026.19(e)(2)(i)(A), 1026.19(e)(4)(ii), fered or extended to a consumer pri-
1026.19(f)(1)(ii), 1026.19(f)(1)(iii), marily for personal, family, or house-
1026.20(e)(5), 1026.31, and 1026.46(d)(4), hold purposes.
the term means all calendar days ex- (13) Consummation means the time
cept Sundays and the legal public holi- that a consumer becomes contractually
days specified in 5 U.S.C. 6103(a), such obligated on a credit transaction.
as New Year’s Day, the Birthday of (14) Credit means the right to defer
Martin Luther King, Jr., Washington’s payment of debt or to incur debt and
Birthday, Memorial Day, Independence defer its payment.
Day, Labor Day, Columbus Day, Vet- (15)(i) Credit card means any card,
erans Day, Thanksgiving Day, and plate, or other single credit device that
Christmas Day. may be used from time to time to ob-
(7) Card issuer means a person that tain credit. The term credit card in-
issues a credit card or that person’s cludes a hybrid prepaid-credit card as
agent with respect to the card. defined in § 1026.61.
(8) Cardholder means a natural person (ii) Credit card account under an open-
to whom a credit card is issued for con- end (not home-secured) consumer credit
sumer credit purposes, or a natural plan means any open-end credit ac-
person who has agreed with the card count that is accessed by a credit card,
issuer to pay consumer credit obliga- except:
tions arising from the issuance of a (A) A home-equity plan subject to
credit card to another natural person. the requirements of § 1026.40 that is
For purposes of § 1026.12(a) and (b), the accessed by a credit card;
term includes any person to whom a (B) An overdraft line of credit that is
credit card is issued for any purpose, accessed by a debit card; or
including business, commercial or agri- (C) An overdraft line of credit that is
cultural use, or a person who has accessed by an account number, except
agreed with the card issuer to pay obli- if the account number is a hybrid pre-
gations arising from the issuance of paid-credit card that can access a cov-
such a credit card to another person. ered separate credit feature as defined
(9) Cash price means the price at in § 1026.61.
which a creditor, in the ordinary (iii) Charge card means a credit card
course of business, offers to sell for on an account for which no periodic
cash property or service that is the rate is used to compute a finance
subject of the transaction. At the charge.
creditor’s option, the term may include (iv) Debit card means any card, plate,
the price of accessories, services re- or other single device that may be used
lated to the sale, service contracts and from time to time to access an asset
taxes and fees for license, title, and account other than a prepaid account
registration. The term does not include as defined in § 1026.61. The term debit
any finance charge. card does not include a prepaid card as
(10) Closed-end credit means consumer defined in § 1026.61.
credit other than ‘‘open-end credit’’ as (16) Credit sale means a sale in which
defined in this section. the seller is a creditor. The term in-
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(11) Consumer means a cardholder or cludes a bailment or lease (unless ter-
natural person to whom consumer minable without penalty at any time
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§ 1026.2 12 CFR Ch. X (1–1–25 Edition)
by the consumer) under which the con- nates more than one credit extension
sumer: that is subject to the requirements of
(i) Agrees to pay as compensation for § 1026.32 or one or more such credit ex-
use a sum substantially equivalent to, tensions through a mortgage broker.
or in excess of, the total value of the (18) Downpayment means an amount,
property and service involved; and including the value of property used as
(ii) Will become (or has the option to a trade-in, paid to a seller to reduce
become), for no additional consider- the cash price of goods or services pur-
ation or for nominal consideration, the chased in a credit sale transaction. A
owner of the property upon compliance deferred portion of a downpayment
with the agreement. may be treated as part of the downpay-
(17) Creditor means: ment if it is payable not later than the
(i) A person who regularly extends due date of the second otherwise regu-
consumer credit that is subject to a fi- larly scheduled payment and is not
nance charge or is payable by written subject to a finance charge.
agreement in more than four install- (19) Dwelling means a residential
ments (not including a down payment), structure that contains one to four
and to whom the obligation is initially units, whether or not that structure is
payable, either on the face of the note attached to real property. The term in-
or contract, or by agreement when cludes an individual condominium
there is no note or contract. unit, cooperative unit, mobile home,
(ii) For purposes of §§ 1026.4(c)(8) (Dis- and trailer, if it is used as a residence.
counts), 1026.9(d) (Finance charge im- (20) Open-end credit means consumer
posed at time of transaction), and credit extended by a creditor under a
1026.12(e) (Prompt notification of re- plan in which:
turns and crediting of refunds), a per-
(i) The creditor reasonably con-
son that honors a credit card.
templates repeated transactions;
(iii) For purposes of subpart B, any
(ii) The creditor may impose a fi-
card issuer that extends either open-
nance charge from time to time on an
end credit or credit that is not subject
outstanding unpaid balance; and
to a finance charge and is not payable
by written agreement in more than (iii) The amount of credit that may
four installments. be extended to the consumer during the
(iv) For purposes of subpart B (except term of the plan (up to any limit set by
for the credit and charge card disclo- the creditor) is generally made avail-
sures contained in §§ 1026.60 and able to the extent that any out-
1026.9(e) and (f), the finance charge dis- standing balance is repaid.
closures contained in § 1026.6(a)(1) and (21) Periodic rate means a rate of fi-
(b)(3)(i) and § 1026.7(a)(4) through (7) and nance charge that is or may be imposed
(b)(4) through (6) and the right of re- by a creditor on a balance for a day,
scission set forth in § 1026.15) and sub- week, month, or other subdivision of a
part C, any card issuer that extends year.
closed-end credit that is subject to a fi- (22) Person means a natural person or
nance charge or is payable by written an organization, including a corpora-
agreement in more than four install- tion, partnership, proprietorship, asso-
ments. ciation, cooperative, estate, trust, or
(v) A person regularly extends con- government unit.
sumer credit only if it extended credit (23) Prepaid finance charge means any
(other than credit subject to the re- finance charge paid separately in cash
quirements of § 1026.32) more than 25 or by check before or at consummation
times (or more than 5 times for trans- of a transaction, or withheld from the
actions secured by a dwelling) in the proceeds of the credit at any time.
preceding calendar year. If a person did (24) Residential mortgage transaction
not meet these numerical standards in means a transaction in which a mort-
the preceding calendar year, the nu- gage, deed of trust, purchase money se-
merical standards shall be applied to curity interest arising under an install-
the current calendar year. A person ment sales contract, or equivalent con-
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regularly extends consumer credit if, in sensual security interest is created or
any 12-month period, the person origi- retained in the consumer’s principal
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Consumer Financial Protection Bureau § 1026.2, Nt.
dwelling to finance the acquisition or serve System to replace, as applicable,
initial construction of that dwelling. the 1-month, 3-month, 6-month, or 12-
(25) Security interest means an inter- month tenor of U.S. Dollar LIBOR, as
est in property that secures perform- set forth in the Board of Governors of
ance of a consumer credit obligation the Federal Reserve System’s regula-
and that is recognized by State or Fed- tion at 12 CFR part 253, which imple-
eral law. It does not include incidental ments the Adjustable Interest Rate
interests such as interests in proceeds, (LIBOR) Act, Public Law 117–103, divi-
accessions, additions, fixtures, insur- sion U.
ance proceeds (whether or not the cred- (b) Rules of construction. For purposes
itor is a loss payee or beneficiary), pre- of this part, the following rules of con-
mium rebates, or interests in after-ac- struction apply:
quired property. For purposes of disclo- (1) Where appropriate, the singular
sures under §§ 1026.6, 1026.18, 1026.19(e) form of a word includes the plural form
and (f), and 1026.38(l)(6), the term does and plural includes singular.
not include an interest that arises sole- (2) Where the words obligation and
ly by operation of law. However, for transaction are used in the regulation,
purposes of the right of rescission they refer to a consumer credit obliga-
under §§ 1026.15 and 1026.23, the term tion or transaction, depending upon
does include interests that arise solely the context. Where the word credit is
by operation of law. used in the regulation, it means con-
(26) State means any state, the Dis- sumer credit unless the context clearly
trict of Columbia, the Commonwealth indicates otherwise.
of Puerto Rico, and any territory or (3) Unless defined in this part, the
possession of the United States. words used have the meanings given to
(27)(i) Successor in interest means a them by state law or contract.
person to whom an ownership interest (4) Where the word amount is used in
in a dwelling securing a closed-end con- this part to describe disclosure require-
sumer credit transaction is transferred ments, it refers to a numerical amount.
from a consumer, provided that the
[76 FR 79772, Dec. 22, 2011, as amended at 78
transfer is:
FR 80106, Dec. 31, 2013; 81 FR 72388, Oct. 19,
(A) A transfer by devise, descent, or 2016; 81 FR 84369, Nov. 22, 2016; 88 FR 30622,
operation of law on the death of a joint May 11, 2023]
tenant or tenant by the entirety;
EFFECTIVE DATE NOTES: 1. At 89 FR 64577,
(B) A transfer to a relative resulting
Aug. 7, 2024, § 1026.2 was amended by revising
from the death of the consumer; paragraph (a)(11), effective Oct. 1, 2025. For
(C) A transfer where the spouse or the convenience of the user, the revised text
children of the consumer become an is set forth as follows:
owner of the property;
(D) A transfer resulting from a decree § 1026.2 Definitions and rules of construc-
tion.
of a dissolution of marriage, legal sepa-
ration agreement, or from an inci- (a) * * *
(11) Consumer means a cardholder or nat-
dental property settlement agreement, ural person to whom consumer credit is of-
by which the spouse of the consumer fered or extended. However, for purposes of
becomes an owner of the property; or rescission under §§ 1026.15 and 1026.23, the
(E) A transfer into an inter vivos trust term also includes a natural person in whose
in which the consumer is and remains principal dwelling a security interest is or
a beneficiary and which does not relate will be retained or acquired, if that person’s
to a transfer of rights of occupancy in ownership interest in the dwelling is or will
the property. be subject to the security interest. For pur-
poses of § 1026.42(i), the term means a natural
(ii) Confirmed successor in interest person to whom credit is offered or extended,
means a successor in interest once a even if the credit is primarily for business,
servicer has confirmed the successor in commercial, agricultural, or organizational
interest’s identity and ownership inter- purposes. For purposes of §§ 1026.20(c)
est in the dwelling. through (e), 1026.36(c), 1026.39, and 1026.41, the
(28) The Board-selected benchmark re- term includes a confirmed successor in inter-
placement for consumer loans means the est.
jspears on DSK121TN23PROD with CFR
SOFR-based index selected by the
Board of Governors of the Federal Re- * * * * *
11
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§ 1026.3 12 CFR Ch. X (1–1–25 Edition)
2. At 89 FR 106837, Dec. 30, 2024, § 1026.2 was (A) Secured by any real property, or
amended by revising paragraph (a)(15), effec- by personal property used or expected
tive Oct. 1, 2025. For the convenience of the to be used as the principal dwelling of
user, the added text is set forth as follows:
the consumer; or
§ 1026.2 Definitions and rules of construc- (B) A private education loan as de-
tion. fined in § 1026.46(b)(5).
(a) * * * (ii) Annual adjustments. The threshold
(15)(i) Credit card means any card, plate, or amount in paragraph (b)(1)(i) of this
other single credit device that may be used section is adjusted annually to reflect
from time to time to obtain credit. The term increases in the Consumer Price Index
credit card includes both a hybrid prepaid-
credit card as defined in § 1026.61 and a hybrid
for Urban Wage Earners and Clerical
debit-credit card as defined in § 1026.62. Workers, as applicable. See the official
(ii) Credit card account under an open-end commentary to this paragraph (b) for
(not home-secured) consumer credit plan means the threshold amount applicable to a
any open-end credit account that is accessed specific extension of credit or express
by a credit card, except: written commitment to extend credit.
(A) A home-equity plan subject to the re- (2) Transition rule for open-end ac-
quirements of § 1026.40 that is accessed by a counts exempt prior to July 21, 2011. An
credit card; or
(B) A covered overdraft credit account as open-end account that is exempt on
defined in § 1026.62 offered by a creditor other July 20, 2011 based on an express writ-
than a very large financial institution as de- ten commitment to extend credit in ex-
fined in § 1026.62 that is accessed by a debit cess of $25,000 remains exempt until De-
card or account number. cember 31, 2011 unless:
(iii) Charge card means a credit card on an (i) The creditor takes a security in-
account for which no periodic rate is used to terest in any real property, or in per-
compute a finance charge. The term does not
sonal property used or expected to be
include a hybrid debit-credit card as defined
in § 1026.62. used as the principal dwelling of the
(iv) Debit card means any card, plate, or consumer; or
other single device that may be used from (ii) The creditor reduces the express
time to time to access an asset account written commitment to extend credit
other than a prepaid account as defined in to $25,000 or less.
§ 1026.61. The term debit card does not include (c) Public utility credit. An extension
a prepaid card as defined in § 1026.61. of credit that involves public utility
services provided through pipe, wire,
* * * * * other connected facilities, or radio or
similar transmission (including exten-
§ 1026.3 Exempt transactions. sions of such facilities), if the charges
The following transactions are not for service, delayed payment, or any
subject to this part or, if the exemp- discounts for prompt payment are filed
tion is limited to specified provisions with or regulated by any government
of this part, are not subject to those unit. The financing of durable goods or
provisions: home improvements by a public utility
(a) Business, commercial, agricultural, is not exempt.
or organizational credit. (1) An extension (d) Securities or commodities accounts.
of credit primarily for a business, com- Transactions in securities or commod-
mercial or agricultural purpose. ities accounts in which credit is ex-
(2) An extension of credit to other tended by a broker-dealer registered
than a natural person, including credit with the Securities and Exchange Com-
to government agencies or instrumen- mission or the Commodity Futures
talities. Trading Commission.
(b) Credit over applicable threshold (e) Home fuel budget plans. An install-
amount—(1) Exemption—(i) Require- ment agreement for the purchase of
ments. An extension of credit in which home fuels in which no finance charge
the amount of credit extended exceeds is imposed.
the applicable threshold amount or in (f) Student loan programs. Loans
which there is an express written com- made, insured, or guaranteed pursuant
mitment to extend credit in excess of to a program authorized by title IV of
jspears on DSK121TN23PROD with CFR
the applicable threshold amount, un- the Higher Education Act of 1965 (20
less the extension of credit is: U.S.C. 1070 et ).
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Consumer Financial Protection Bureau § 1026.4
(g) Employer-sponsored retirement (A) Recording fees;
plans. An extension of credit to a par- (B) Transfer taxes;
ticipant in an employer-sponsored re- (C) A bona fide and reasonable appli-
tirement plan qualified under section cation fee; and
401(a) of the Internal Revenue Code, a (D) A bona fide and reasonable fee for
tax-sheltered annuity under section housing counseling services; and
403(b) of the Internal Revenue Code, or (ii) The total of costs payable by the
an eligible governmental deferred com- consumer under paragraph (h)(5)(i)(C)
pensation plan under section 457(b) of and (D) of this section is less than 1
the Internal Revenue Code (26 U.S.C. percent of the amount of credit ex-
401(a); 26 U.S.C. 403(b); 26 U.S.C. 457(b)), tended; and
provided that the extension of credit is (6) The following disclosures are pro-
comprised of fully vested funds from vided:
such participant’s account and is made (i) Disclosures described in § 1026.18
in compliance with the Internal Rev- that comply with this part; or
enue Code (26 U.S.C. 1 et seq.). (ii) Alternatively, disclosures de-
(h) Partial exemption for certain mort- scribed in § 1026.19(e) and (f) that com-
gage loans. The special disclosure re- ply with this part.
quirements in § 1026.19(g) and, unless
the creditor chooses to provide the dis- [76 FR 79772, Dec. 22, 2011, as amended at 78
closures described in § 1026.19(e) and (f), FR 80107, Dec. 31, 2013; 82 FR 37768, Aug. 11,
in § 1026.19(e) and (f) do not apply to a 2017]
transaction that satisfies all of the fol- EFFECTIVE DATE NOTE: At 89 FR 64577, Aug.
lowing criteria: 7, 2024, § 1026.3 was amended by adding para-
(1) The transaction is secured by a graph (i), effective Oct. 1, 2025. For the con-
subordinate lien; venience of the user, the added text is set
(2) The transaction is for the purpose forth as follows:
of: § 1026.3 Exempt transactions.
(i) Downpayment, closing costs, or
other similar home buyer assistance,
* * * * *
such as principal or interest subsidies;
(ii) Property rehabilitation assist- (i) The exemptions in this section are not
ance; applicable to § 1026.42(i) (Quality Control
(iii) Energy efficiency assistance; or Standards for Automated Valuation Models).
(iv) Foreclosure avoidance or preven-
§ 1026.4 Finance charge.
tion;
(3) The credit contract does not re- (a) Definition. The finance charge is
quire the payment of interest; the cost of consumer credit as a dollar
(4) The credit contract provides that amount. It includes any charge payable
repayment of the amount of credit ex- directly or indirectly by the consumer
tended is: and imposed directly or indirectly by
(i) Forgiven either incrementally or the creditor as an incident to or a con-
in whole, at a date certain, and subject dition of the extension of credit. It
only to specified ownership and occu- does not include any charge of a type
pancy conditions, such as a require- payable in a comparable cash trans-
ment that the consumer maintain the action.
property as the consumer’s principal (1) Charges by third parties. The fi-
dwelling for five years; nance charge includes fees and
(ii) Deferred for a minimum of 20 amounts charged by someone other
years after consummation of the trans- than the creditor, unless otherwise ex-
action; cluded under this section, if the cred-
(iii) Deferred until sale of the prop- itor:
erty securing the transaction; or (i) Requires the use of a third party
(iv) Deferred until the property se- as a condition of or an incident to the
curing the transaction is no longer the extension of credit, even if the con-
principal dwelling of the consumer; sumer can choose the third party; or
(5)(i) The costs payable by the con- (ii) Retains a portion of the third-
jspears on DSK121TN23PROD with CFR
sumer in connection with the trans- party charge, to the extent of the por-
action at consummation are limited to: tion retained.
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§ 1026.4 12 CFR Ch. X (1–1–25 Edition)
(2) Special rule; closing agent charges. (8) Premiums or other charges for in-
Fees charged by a third party that con- surance against loss of or damage to
ducts the loan closing (such as a settle- property, or against liability arising
ment agent, attorney, or escrow or out of the ownership or use of property,
title company) are finance charges written in connection with a credit
only if the creditor: transaction.
(i) Requires the particular services (9) Discounts for the purpose of in-
for which the consumer is charged; ducing payment by a means other than
(ii) Requires the imposition of the the use of credit.
charge; or
(10) Charges or premiums paid for
(iii) Retains a portion of the third-
debt cancellation or debt suspension
party charge, to the extent of the por-
tion retained. coverage written in connection with a
(3) Special rule; mortgage broker fees. credit transaction, whether or not the
Fees charged by a mortgage broker (in- coverage is insurance under applicable
cluding fees paid by the consumer di- law.
rectly to the broker or to the creditor (11) With regard to a covered separate
for delivery to the broker) are finance credit feature and an asset feature on a
charges even if the creditor does not prepaid account that are both acces-
require the consumer to use a mort- sible by a hybrid prepaid-credit card as
gage broker and even if the creditor defined in § 1026.61:
does not retain any portion of the (i) Any fee or charge described in
charge. paragraphs (b)(1) through (10) of this
(b) Examples of finance charges. The fi- section imposed on the covered sepa-
nance charge includes the following rate credit feature, whether it is struc-
types of charges, except for charges tured as a credit subaccount of the pre-
specifically excluded by paragraphs (c) paid account or a separate credit ac-
through (e) of this section: count.
(1) Interest, time price differential, (ii) Any fee or charge imposed on the
and any amount payable under an add-
asset feature of the prepaid account to
on or discount system of additional
the extent that the amount of the fee
charges.
(2) Service, transaction, activity, and or charge exceeds comparable fees or
carrying charges, including any charge charges imposed on prepaid accounts in
imposed on a checking or other trans- the same prepaid account program that
action account (except a prepaid ac- do not have a covered separate credit
count as defined in § 1026.61) to the ex- feature accessible by a hybrid prepaid-
tent that the charge exceeds the charge credit card.
for a similar account without a credit (c) Charges excluded from the finance
feature. charge. The following charges are not
(3) Points, loan fees, assumption fees, finance charges:
finder’s fees, and similar charges. (1) Application fees charged to all ap-
(4) Appraisal, investigation, and cred- plicants for credit, whether or not
it report fees. credit is actually extended.
(5) Premiums or other charges for (2) Charges for actual unanticipated
any guarantee or insurance protecting late payment, for exceeding a credit
the creditor against the consumer’s de- limit, or for delinquency, default, or a
fault or other credit loss. similar occurrence.
(6) Charges imposed on a creditor by (3) Charges imposed by a financial in-
another person for purchasing or ac-
stitution for paying items that over-
cepting a consumer’s obligation, if the
draw an account, unless the payment
consumer is required to pay the
charges in cash, as an addition to the of such items and the imposition of the
obligation, or as a deduction from the charge were previously agreed upon in
proceeds of the obligation. writing. This paragraph does not apply
(7) Premiums or other charges for to credit offered in connection with a
credit life, accident, health, or loss-of- prepaid account as defined in § 1026.61.
jspears on DSK121TN23PROD with CFR
income insurance, written in connec-
tion with a credit transaction.
14
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Consumer Financial Protection Bureau § 1026.4
(4) Fees charged for participation in a credit transactions, closed-end credit
credit plan, whether assessed on an an- transactions by mail or telephone
nual or other periodic basis. This para- under § 1026.17(g), and certain closed-
graph does not apply to a fee to partici- end credit transactions involving an in-
pate in a covered separate credit fea- surance plan that limits the total
ture accessible by a hybrid prepaid- amount of indebtedness subject to cov-
credit card as defined in § 1026.61, re- erage.
gardless of whether this fee is imposed (iii) The consumer signs or initials an
on the credit feature or on the asset affirmative written request for the in-
feature of the prepaid account. surance after receiving the disclosures
(5) Seller’s points. specified in this paragraph, except as
(6) Interest forfeited as a result of an provided in paragraph (d)(4) of this sec-
interest reduction required by law on a tion. Any consumer in the transaction
time deposit used as security for an ex- may sign or initial the request.
tension of credit. (2) Property insurance premiums. Pre-
(7) Real-estate related fees. The fol- miums for insurance against loss of or
lowing fees in a transaction secured by damage to property, or against liabil-
real property or in a residential mort- ity arising out of the ownership or use
gage transaction, if the fees are bona of property, including single interest
fide and reasonable in amount: insurance if the insurer waives all
(i) Fees for title examination, ab- right of subrogation against the con-
stract of title, title insurance, property sumer, may be excluded from the fi-
survey, and similar purposes. nance charge if the following condi-
(ii) Fees for preparing loan-related tions are met:
documents, such as deeds, mortgages,
(i) The insurance coverage may be
and reconveyance or settlement docu-
obtained from a person of the con-
ments.
sumer’s choice, and this fact is dis-
(iii) Notary and credit-report fees.
closed. (A creditor may reserve the
(iv) Property appraisal fees or fees
right to refuse to accept, for reasonable
for inspections to assess the value or
cause, an insurer offered by the con-
condition of the property if the service
is performed prior to closing, including sumer.)
fees related to pest-infestation or (ii) If the coverage is obtained from
flood-hazard determinations. or through the creditor, the premium
(v) Amounts required to be paid into for the initial term of insurance cov-
escrow or trustee accounts if the erage shall be disclosed. If the term of
amounts would not otherwise be in- insurance is less than the term of the
cluded in the finance charge. transaction, the term of insurance
(8) Discounts offered to induce pay- shall also be disclosed. The premium
ment for a purchase by cash, check, or may be disclosed on a unit-cost basis
other means, as provided in section only in open-end credit transactions,
167(b) of the Act. closed-end credit transactions by mail
(d) Insurance and debt cancellation and or telephone under § 1026.17(g), and cer-
debt suspension coverage—(1) Voluntary tain closed-end credit transactions in-
credit insurance premiums. Premiums for volving an insurance plan that limits
credit life, accident, health, or loss-of- the total amount of indebtedness sub-
income insurance may be excluded ject to coverage.
from the finance charge if the fol- (3) Voluntary debt cancellation or debt
lowing conditions are met: suspension fees. Charges or premiums
(i) The insurance coverage is not re- paid for debt cancellation coverage for
quired by the creditor, and this fact is amounts exceeding the value of the
disclosed in writing. collateral securing the obligation or
(ii) The premium for the initial term for debt cancellation or debt suspen-
of insurance coverage is disclosed in sion coverage in the event of the loss of
writing. If the term of insurance is less life, health, or income or in case of ac-
than the term of the transaction, the cident may be excluded from the fi-
term of insurance also shall be dis- nance charge, whether or not the cov-
jspears on DSK121TN23PROD with CFR
closed. The premium may be disclosed erage is insurance, if the following con-
on a unit-cost basis only in open-end ditions are met:
15
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§ 1026.4, Nt. 12 CFR Ch. X (1–1–25 Edition)
(i) The debt cancellation or debt sus- (2) The premium for insurance in lieu
pension agreement or coverage is not of perfecting a security interest to the
required by the creditor, and this fact extent that the premium does not ex-
is disclosed in writing; ceed the fees described in paragraph
(ii) The fee or premium for the initial (e)(1) of this section that otherwise
term of coverage is disclosed in writ- would be payable.
ing. If the term of coverage is less than (3) Taxes on security instruments. Any
the term of the credit transaction, the tax levied on security instruments or
term of coverage also shall be dis- on documents evidencing indebtedness
closed. The fee or premium may be dis- if the payment of such taxes is a re-
closed on a unit-cost basis only in quirement for recording the instru-
open-end credit transactions, closed- ment securing the evidence of indebt-
end credit transactions by mail or tele- edness.
phone under § 1026.17(g), and certain (f) Prohibited offsets. Interest, divi-
closed-end credit transactions involv- dends, or other income received or to
ing a debt cancellation agreement that be received by the consumer on depos-
limits the total amount of indebted- its or investments shall not be de-
ness subject to coverage; ducted in computing the finance
(iii) The following are disclosed, as charge.
applicable, for debt suspension cov-
[76 FR 79772, Dec. 22, 2011, as amended at 81
erage: That the obligation to pay loan FR 84369, Nov. 22, 2016]
principal and interest is only sus-
pended, and that interest will continue EFFECTIVE DATE NOTE: At 89 FR 106837,
Dec. 30, 2024, § 1026.4 was amended by revising
to accrue during the period of suspen-
paragraph (b)(2), adding paragraph (b)(12),
sion. and revising paragraph (c)(3), effective Oct.
(iv) The consumer signs or initials an 1, 2025. For the convenience of the user, the
affirmative written request for cov- added and revised text is set forth as follows:
erage after receiving the disclosures
specified in this paragraph, except as § 1026.4 Finance charge.
provided in paragraph (d)(4) of this sec-
tion. Any consumer in the transaction * * * * *
may sign or initial the request. (b) * * *
(4) Telephone purchases. If a consumer (2) Service, transaction, activity, and car-
purchases credit insurance or debt can- rying charges, including any charge imposed
cellation or debt suspension coverage on a checking or other transaction account
for an open-end (not home-secured) (except a prepaid account as defined in
plan by telephone, the creditor must § 1026.61 or a covered asset account as that
make the disclosures under paragraphs term is defined in § 1026.62) to the extent that
the charge exceeds the charge for a similar
(d)(1)(i) and (ii) or (d)(3)(i) through (iii) account without a credit feature.
of this section, as applicable, orally. In
such a case, the creditor shall:
(i) Maintain evidence that the con- * * * * *
sumer, after being provided the disclo- (12) With regard to a covered asset account
sures orally, affirmatively elected to as that term is defined in § 1026.62(b)(2):
purchase the insurance or coverage; (i) Any service, transaction, activity, or
and(ii) Mail the disclosures under para- carrying charge imposed on the separate
credit account required by § 1026.62(c); and
graphs (d)(1)(i) and (ii) or (d)(3)(i)
(ii) Any service, transaction, activity, or
through (iii) of this section, as applica- carrying charge imposed on the covered
ble, within three business days after asset account to the extent that the charge
the telephone purchase. exceeds a comparable charge imposed on a
(e) Certain security interest charges. If checking or other transaction account that
itemized and disclosed, the following does not have overdraft credit.
charges may be excluded from the fi- (iii) For purposes of paragraph (b)(12)(ii) of
nance charge: this section, a charge or combination of
charges, including a per transaction fee, im-
(1) Taxes and fees prescribed by law
posed on a covered asset account when over-
that actually are or will be paid to pub- draft credit is extended is not comparable to
lic officials for determining the exist-
jspears on DSK121TN23PROD with CFR
the following fees or charges imposed on a
ence of or for perfecting, releasing, or checking or other transaction account that
satisfying a security interest. does not have overdraft credit:
16
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Consumer Financial Protection Bureau § 1026.5
(A) A charge for authorizing or paying a § 1026.9(e); and the payment require-
transaction that overdraws the checking or ments under § 1026.10(b), except as pro-
other transaction account.
vided in § 1026.7(b)(13).
(B) A charge for declining to authorize or
pay a transaction. (iii) The disclosures required by this
(C) A charge for returning a transaction subpart may be provided to the con-
unpaid. sumer in electronic form, subject to
(D) A charge for transferring funds into the compliance with the consumer consent
checking or other transaction account from
and other applicable provisions of the
any credit account.
(E) A charge for transferring funds into the Electronic Signatures in Global and
checking or other transaction account from National Commerce Act (E-Sign Act)
any other asset account. (15 U.S.C. 7001 et seq.). The disclosures
(c) * * * required by §§ 1026.60, 1026.40, and 1026.16
(3) Charges imposed by a financial institu- may be provided to the consumer in
tion for paying items that overdraw an ac-
count, unless the payment of such items and electronic form without regard to the
the imposition of the charge were previously consumer consent or other provisions
agreed upon in writing. This paragraph (c)(3) of the E-Sign Act in the circumstances
does not apply to credit offered in connec- set forth in those sections.
tion with a prepaid account as defined in (2) Terminology. (i) Terminology used
§ 1026.61. This paragraph (c)(3) also does not
apply to above breakeven overdraft credit as
in providing the disclosures required by
defined in § 1026.62. this subpart shall be consistent.
(ii) For home-equity plans subject to
* * * * * § 1026.40, the terms finance charge and
annual percentage rate, when required
to be disclosed with a corresponding
Subpart B—Open-End Credit
amount or percentage rate, shall be
§ 1026.5 General disclosure require- more conspicuous than any other re-
ments. quired disclosure. The terms need not
(a) Form of disclosures—(1) General. (i) be more conspicuous when used for
The creditor shall make the disclosures periodic statement disclosures under
required by this subpart clearly and § 1026.7(a)(4) and for advertisements
conspicuously. under § 1026.16.
(ii) The creditor shall make the dis- (iii) If disclosures are required to be
closures required by this subpart in presented in a tabular format pursuant
writing, in a form that the consumer to paragraph (a)(3) of this section, the
may keep, except that: term penalty APR shall be used, as ap-
(A) The following disclosures need plicable. The term penalty APR need
not be written: Disclosures under not be used in reference to the annual
§ 1026.6(b)(3) of charges that are im- percentage rate that applies with the
posed as part of an open-end (not home- loss of a promotional rate, assuming
secured) plan that are not required to the annual percentage rate that applies
be disclosed under § 1026.6(b)(2) and re- is not greater than the annual percent-
lated disclosures of charges under age rate that would have applied at the
§ 1026.9(c)(2)(iii)(B); disclosures under
end of the promotional period; or if the
§ 1026.9(c)(2)(vi); disclosures under
annual percentage rate that applies
§ 1026.9(d) when a finance charge is im-
posed at the time of the transaction; with the loss of a promotional rate is a
and disclosures under § 1026.56(b)(1)(i). variable rate, the annual percentage
(B) The following disclosures need rate is calculated using the same index
not be in a retainable form: Disclosures and margin as would have been used to
that need not be written under para- calculate the annual percentage rate
graph (a)(1)(ii)(A) of this section; dis- that would have applied at the end of
closures for credit and charge card ap- the promotional period. If credit insur-
plications and solicitations under ance or debt cancellation or debt sus-
§ 1026.60; home-equity disclosures under pension coverage is required as part of
§ 1026.40(d); the alternative summary the plan, the term required shall be
used and the program shall be identi-
jspears on DSK121TN23PROD with CFR
billing-rights statement under
§ 1026.9(a)(2); the credit and charge card fied by its name. If an annual percent-
renewal disclosures required under age rate is required to be presented in
17
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§ 1026.5 12 CFR Ch. X (1–1–25 Edition)
a tabular format pursuant to para- count opening but before the consumer
graph (a)(3)(i) or (a)(3)(iii) of this sec- agrees to pay or becomes obligated to
tion, the term fixed, or a similar term, pay for the charge, provided they are
may not be used to describe such rate disclosed at a time and in a manner
unless the creditor also specifies a time that a consumer would be likely to no-
period that the rate will be fixed and tice them. This provision does not
the rate will not increase during that apply to charges imposed as part of a
period, or if no such time period is pro- home-equity plan subject to the re-
vided, the rate will not increase while quirements of § 1026.40.
the plan is open. (iii) Telephone purchases. Disclosures
(3) Specific formats. (i) Certain disclo- required by § 1026.6 may be provided as
sures for credit and charge card appli- soon as reasonably practicable after
cations and solicitations must be pro- the first transaction if:
vided in a tabular format in accordance (A) The first transaction occurs when
with the requirements of § 1026.60(a)(2). a consumer contacts a merchant by
(ii) Certain disclosures for home-eq- telephone to purchase goods and at the
uity plans must precede other disclo- same time the consumer accepts an
sures and must be given in accordance offer to finance the purchase by estab-
with the requirements of § 1026.40(a). lishing an open-end plan with the mer-
(iii) Certain account-opening disclo- chant or third-party creditor;
sures must be provided in a tabular for- (B) The merchant or third-party
mat in accordance with the require- creditor permits consumers to return
ments of § 1026.6(b)(1). any goods financed under the plan and
(iv) Certain disclosures provided on provides consumers with a sufficient
periodic statements must be grouped time to reject the plan and return the
together in accordance with the re- goods free of cost after the merchant or
quirements of § 1026.7(b)(6) and (b)(13). third-party creditor has provided the
(v) Certain disclosures provided on written disclosures required by § 1026.6;
periodic statements must be given in and
accordance with the requirements of (C) The consumer’s right to reject
§ 1026.7(b)(12). the plan and return the goods is dis-
(vi) Certain disclosures accom- closed to the consumer as a part of the
panying checks that access a credit offer to finance the purchase.
card account must be provided in a tab- (iv) Membership fees—(A) General. In
ular format in accordance with the re- general, a creditor may not collect any
quirements of § 1026.9(b)(3). fee before account-opening disclosures
(vii) Certain disclosures provided in a are provided. A creditor may collect, or
change-in-terms notice must be pro- obtain the consumer’s agreement to
vided in a tabular format in accordance pay, membership fees, including appli-
with the requirements of cation fees excludable from the finance
§ 1026.9(c)(2)(iv)(D). charge under § 1026.4(c)(1), before pro-
(viii) Certain disclosures provided viding account-opening disclosures if,
when a rate is increased due to delin- after receiving the disclosures, the con-
quency, default or as a penalty must be sumer may reject the plan and have no
provided in a tabular format in accord- obligation to pay these fees (including
ance with the requirements of application fees) or any other fee or
§ 1026.9(g)(3)(ii). charge. A membership fee for purposes
(b) Time of disclosures—(1) Account- of this paragraph has the same mean-
opening disclosures—(i) General rule. The ing as a fee for the issuance or avail-
creditor shall furnish account-opening ability of credit described in
disclosures required by § 1026.6 before § 1026.60(b)(2). If the consumer rejects
the first transaction is made under the the plan, the creditor must promptly
plan. refund the membership fee if it has
(ii) Charges imposed as part of an open- been paid, or take other action nec-
end (not home-secured) plan. Charges essary to ensure the consumer is not
that are imposed as part of an open-end obligated to pay that fee or any other
(not home-secured) plan and are not re- fee or charge.
jspears on DSK121TN23PROD with CFR
quired to be disclosed under (B) Home-equity plans. Creditors offer-
§ 1026.6(b)(2) may be disclosed after ac- ing home-equity plans subject to the
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Consumer Financial Protection Bureau § 1026.5
requirements of § 1026.40 are not subject (i) Periodic statements are mailed or
to the requirements of paragraph delivered at least 21 days prior to the
(b)(1)(iv)(A) of this section. date on which the grace period expires;
(v) Application fees. A creditor may and
collect an application fee excludable (ii) The creditor does not impose fi-
from the finance charge under nance charges as a result of the loss of
§ 1026.4(c)(1) before providing account- the grace period if a payment that sat-
opening disclosures. However, if a con- isfies the terms of the grace period is
sumer rejects the plan after receiving received by the creditor within 21 days
account-opening disclosures, the con- after mailing or delivery of the peri-
sumer must have no obligation to pay odic statement.
such an application fee, or if the fee (2) Regardless of whether a grace pe-
was paid, it must be refunded. See riod applies to the account:
§ 1026.5(b)(1)(iv)(A). (i) Periodic statements are mailed or
(2) Periodic statements—(i) Statement delivered at least 14 days prior to the
required. The creditor shall mail or de- date on which the required minimum
liver a periodic statement as required periodic payment must be received in
by § 1026.7 for each billing cycle at the order to avoid being treated as late for
end of which an account has a debit or any purpose; and
credit balance of more than $1 or on (ii) The creditor does not treat as late
which a finance charge has been im- for any purpose a required minimum
posed. A periodic statement need not periodic payment received by the cred-
be sent for an account if the creditor itor within 14 days after mailing or de-
deems it uncollectible, if delinquency livery of the periodic statement.
collection proceedings have been insti- (3) For purposes of paragraph
tuted, if the creditor has charged off (b)(2)(ii)(B) of this section, ‘‘grace pe-
the account in accordance with loan- riod’’ means a period within which any
credit extended may be repaid without
loss provisions and will not charge any
incurring a finance charge due to a
additional fees or interest on the ac-
periodic interest rate.
count, or if furnishing the statement
(3) Credit and charge card application
would violate Federal law.
and solicitation disclosures. The card
(ii) Timing requirements—(A) Credit issuer shall furnish the disclosures for
card accounts under an open-end (not credit and charge card applications and
home-secured) consumer credit plan. For solicitations in accordance with the
credit card accounts under an open-end timing requirements of § 1026.60.
(not home-secured) consumer credit (4) Home-equity plans. Disclosures for
plan, a card issuer must adopt reason- home-equity plans shall be made in ac-
able procedures designed to ensure cordance with the timing requirements
that: of § 1026.40(b).
(1) Periodic statements are mailed or (c) Basis of disclosures and use of esti-
delivered at least 21 days prior to the mates. Disclosures shall reflect the
payment due date disclosed on the terms of the legal obligation between
statement pursuant to the parties. If any information nec-
§ 1026.7(b)(11)(i)(A); and essary for accurate disclosure is un-
(2) The card issuer does not treat as known to the creditor, it shall make
late for any purpose a required min- the disclosure based on the best infor-
imum periodic payment received by mation reasonably available and shall
the card issuer within 21 days after state clearly that the disclosure is an
mailing or delivery of the periodic estimate.
statement disclosing the due date for (d) Multiple creditors; multiple con-
that payment. sumers. If the credit plan involves more
(B) Open-end consumer credit plans. than one creditor, only one set of dis-
For accounts under an open-end con- closures shall be given, and the credi-
sumer credit plan, a creditor must tors shall agree among themselves
adopt reasonable procedures designed which creditor must comply with the
to ensure that: requirements that this part imposes on
jspears on DSK121TN23PROD with CFR
(1) If a grace period applies to the ac- any or all of them. If there is more
count: than one consumer, the disclosures
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§ 1026.6 12 CFR Ch. X (1–1–25 Edition)
may be made to any consumer who is (iv) An explanation of how the
primarily liable on the account. If the amount of any finance charge will be
right of rescission under § 1026.15 is ap- determined, including a description of
plicable, however, the disclosures re- how any finance charge other than the
quired by §§ 1026.6 and 1026.15(b) shall be periodic rate will be determined.
made to each consumer having the (2) Other charges. The amount of any
right to rescind. charge other than a finance charge
(e) Effect of subsequent events. If a dis- that may be imposed as part of the
closure becomes inaccurate because of plan, or an explanation of how the
an event that occurs after the creditor charge will be determined.
mails or delivers the disclosures, the (3) Home-equity plan information. The
resulting inaccuracy is not a violation following disclosures described in
of this part, although new disclosures § 1026.40(d), as applicable:
may be required under § 1026.9(c). (i) A statement of the conditions
under which the creditor may take cer-
§ 1026.6 Account-opening disclosures. tain action, as described in
(a) Rules affecting home-equity plans. § 1026.40(d)(4)(i), such as terminating
The requirements of this paragraph (a) the plan or changing the terms.
apply only to home-equity plans sub- (ii) The payment information de-
ject to the requirements of § 1026.40. A scribed in § 1026.40(d)(5)(i) and (ii) for
creditor shall disclose the items in this both the draw period and any repay-
section, to the extent applicable: ment period.
(1) Finance charge. The circumstances (iii) A statement that negative amor-
under which a finance charge will be tization may occur as described in
imposed and an explanation of how it § 1026.40(d)(9).
will be determined, as follows: (iv) A statement of any transaction
(i) A statement of when finance requirements as described in
charges begin to accrue, including an § 1026.40(d)(10).
explanation of whether or not any time (v) A statement regarding the tax im-
period exists within which any credit plications as described in
extended may be repaid without incur- § 1026.40(d)(11).
ring a finance charge. If such a time (vi) A statement that the annual per-
period is provided, a creditor may, at centage rate imposed under the plan
its option and without disclosure, im- does not include costs other than inter-
pose no finance charge when payment est as described in § 1026.40(d)(6) and
is received after the time period’s expi- (d)(12)(ii).
ration. (vii) The variable-rate disclosures de-
(ii) A disclosure of each periodic rate scribed in § 1026.40(d)(12)(viii), (d)(12)(x),
that may be used to compute the fi- (d)(12)(xi), and (d)(12)(xii), as well as
nance charge, the range of balances to the disclosure described in
which it is applicable, and the cor- § 1026.40(d)(5)(iii), unless the disclosures
responding annual percentage rate. If a provided with the application were in a
creditor offers a variable-rate plan, the form the consumer could keep and in-
creditor shall also disclose: The cir- cluded a representative payment exam-
cumstances under which the rate(s) ple for the category of payment option
may increase; any limitations on the chosen by the consumer.
increase; and the effect(s) of an in- (4) Security interests. The fact that the
crease. When different periodic rates creditor has or will acquire a security
apply to different types of trans- interest in the property purchased
actions, the types of transactions to under the plan, or in other property
which the periodic rates shall apply identified by item or type.
shall also be disclosed. A creditor is (5) Statement of billing rights. A state-
not required to adjust the range of bal- ment that outlines the consumer’s
ances disclosure to reflect the balance rights and the creditor’s responsibil-
below which only a minimum charge ities under §§ 1026.12(c) and 1026.13 and
applies. that is substantially similar to the
(iii) An explanation of the method statement found in Model Form G–3 or,
jspears on DSK121TN23PROD with CFR
used to determine the balance on which at the creditor’s option, G–3(A), in ap-
the finance charge may be computed. pendix G to this part.
20
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Consumer Financial Protection Bureau § 1026.6
(b) Rules affecting open-end (not home- graphs (b)(2)(vii) through (b)(2)(xi) of
secured) plans. The requirements of this section that vary by state and that
paragraph (b) of this section apply to provide the disclosures required by
plans other than home-equity plans paragraph (b) of this section in person
subject to the requirements of § 1026.40. at the time the open-end (not home-se-
(1) Form of disclosures; tabular format cured) plan is established in connection
for open-end (not home-secured) plans. with financing the purchase of goods or
Creditors must provide the account- services may, at the creditor’s option,
opening disclosures specified in para- disclose in the account-opening table
graph (b)(2)(i) through (b)(2)(v) (except the specific fee applicable to the con-
for (b)(2)(i)(D)(2)) and (b)(2)(vii) sumer’s account, or the range of the
through (b)(2)(xiv) of this section in the fees, if the disclosure includes a state-
form of a table with the headings, con- ment that the amount of the fee varies
tent, and format substantially similar by state and refers the consumer to the
to any of the applicable tables in G–17 account agreement or other disclosure
in appendix G. provided with the account-opening
(i) Highlighting. In the table, any an- table where the amount of the fee ap-
nual percentage rate required to be dis- plicable to the consumer’s account is
closed pursuant to paragraph (b)(2)(i) of disclosed. A creditor may not list fees
this section; any introductory rate per- for multiple states in the account-
mitted to be disclosed pursuant to opening summary table.
paragraph (b)(2)(i)(B) or required to be (iv) Fees based on a percentage. If the
disclosed under paragraph (b)(2)(i)(F) of amount of any fee required to be dis-
this section, any rate that will apply closed under this section is determined
after a premium initial rate expires on the basis of a percentage of another
permitted to be disclosed pursuant to amount, the percentage used and the
paragraph (b)(2)(i)(C) or required to be identification of the amount against
disclosed pursuant to paragraph which the percentage is applied may be
(b)(2)(i)(F), and any fee or percentage disclosed instead of the amount of the
amounts or maximum limits on fee fee.
amounts disclosed pursuant to para- (2) Required disclosures for account-
graphs (b)(2)(ii), (b)(2)(iv), (b)(2)(vii) opening table for open-end (not home-se-
through (b)(2)(xii) of this section must cured) plans. A creditor shall disclose
be disclosed in bold text. However, bold the items in this section, to the extent
text shall not be used for: The amount applicable:
of any periodic fee disclosed pursuant (i) Annual percentage rate. Each peri-
to paragraph (b)(2) of this section that odic rate that may be used to compute
is not an annualized amount; and other the finance charge on an outstanding
annual percentage rates or fee amounts balance for purchases, a cash advance,
disclosed in the table. or a balance transfer, expressed as an
(ii) Location. Only the information annual percentage rate (as determined
required or permitted by paragraphs by § 1026.14(b)). When more than one
(b)(2)(i) through (v) (except for rate applies for a category of trans-
(b)(2)(i)(D)(2)) and (b)(2)(vii) through actions, the range of balances to which
(xiv) of this section shall be in the each rate is applicable shall also be dis-
table. Disclosures required by para- closed. The annual percentage rate for
graphs (b)(2)(i)(D)(2), (b)(2)(i)(D)(3), purchases disclosed pursuant to this
(b)(2)(vi), and (b)(2)(xv) of this section paragraph shall be in at least 16-point
shall be placed directly below the type, except for the following: A pen-
table. Disclosures required by para- alty rate that may apply upon the oc-
graphs (b)(3) through (5) of this section currence of one or more specific events.
that are not otherwise required to be in (A) Variable-rate information. If a rate
the table and other information may be disclosed under paragraph (b)(2)(i) of
presented with the account agreement this section is a variable rate, the cred-
or account-opening disclosure state- itor shall also disclose the fact that the
ment, provided such information ap- rate may vary and how the rate is de-
pears outside the required table. termined. In describing how the appli-
jspears on DSK121TN23PROD with CFR
(iii) Fees that vary by state. Creditors cable rate will be determined, the cred-
that impose fees referred to in para- itor must identify the type of index or
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§ 1026.6 12 CFR Ch. X (1–1–25 Edition)
formula that is used in setting the section, if a rate may increase as a pen-
rate. The value of the index and the alty for one or more events specified in
amount of the margin that are used to the account agreement, such as a late
calculate the variable rate shall not be payment or an extension of credit that
disclosed in the table. A disclosure of exceeds the credit limit, the creditor
any applicable limitations on rate in- must disclose pursuant to paragraph
creases or decreases shall not be in- (b)(2)(i) of this section the increased
cluded in the table. rate that may apply, a brief description
(B) Discounted initial rates. If the ini- of the event or events that may result
tial rate is an introductory rate, as in the increased rate, and a brief de-
that term is defined in § 1026.16(g)(2)(ii), scription of how long the increased
the creditor must disclose the rate that rate will remain in effect. If more than
would otherwise apply to the account one penalty rate may apply, the cred-
pursuant to paragraph (b)(2)(i) of this itor at its option may disclose the
section. Where the rate is not tied to highest rate that could apply, instead
an index or formula, the creditor must of disclosing the specific rates or the
disclose the rate that will apply after range of rates that could apply.
the introductory rate expires. In a (2) Introductory rates. If the creditor
variable-rate account, the creditor discloses in the table an introductory
must disclose a rate based on the appli- rate, as that term is defined in
cable index or formula in accordance § 1026.16(g)(2)(ii), creditors must briefly
with the accuracy requirements of disclose directly beneath the table the
paragraph (b)(4)(ii)(G) of this section. circumstances under which the intro-
Except as provided in paragraph ductory rate may be revoked, and the
(b)(2)(i)(F) of this section, the creditor rate that will apply after the introduc-
is not required to, but may disclose in tory rate is revoked.
the table the introductory rate along (3) Employee preferential rates. If a
with the rate that would otherwise creditor discloses in the table a pref-
apply to the account if the creditor erential annual percentage rate for
also discloses the time period during which only employees of the creditor,
which the introductory rate will re- employees of a third party, or other in-
main in effect, and uses the term ‘‘in- dividuals with similar affiliations with
troductory’’ or ‘‘intro’’ in immediate the creditor or third party, such as ex-
proximity to the introductory rate. ecutive officers, directors, or principal
(C) Premium initial rate. If the initial shareholders are eligible, the creditor
rate is temporary and is higher than must briefly disclose directly beneath
the rate that will apply after the tem- the table the circumstances under
porary rate expires, the creditor must which such preferential rate may be re-
disclose the premium initial rate pur- voked, and the rate that will apply
suant to paragraph (b)(2)(i) of this sec- after such preferential rate is revoked.
tion. Consistent with paragraph (E) Point of sale where APRs vary by
(b)(2)(i) of this section, the premium state or based on creditworthiness. Credi-
initial rate for purchases must be in at tors imposing annual percentage rates
least 16-point type. Except as provided that vary by state or based on the con-
in paragraph (b)(2)(i)(F) of this section, sumer’s creditworthiness and providing
the creditor is not required to, but may the disclosures required by paragraph
disclose in the table the rate that will (b) of this section in person at the time
apply after the premium initial rate the open-end (not home-secured) plan
expires if the creditor also discloses is established in connection with fi-
the time period during which the pre- nancing the purchase of goods or serv-
mium initial rate will remain in effect. ices may, at the creditor’s option, dis-
If the creditor also discloses in the close pursuant to paragraph (b)(2)(i) of
table the rate that will apply after the this section in the account-opening
premium initial rate for purchases ex- table:
pires, that rate also must be in at least (1) The specific annual percentage
16-point type. rate applicable to the consumer’s ac-
(D) Penalty rates—(1) In general. Ex- count; or
jspears on DSK121TN23PROD with CFR
cept as provided in paragraph (2) The range of the annual percent-
(b)(2)(i)(D)(2) and (b)(2)(i)(D)(3) of this age rates, if the disclosure includes a
22
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Consumer Financial Protection Bureau § 1026.6
statement that the annual percentage its option, disclose in the table min-
rate varies by state or will be deter- imum interest charges below this
mined based on the consumer’s credit- threshold.
worthiness and refers the consumer to (iv) Transaction charges. Any trans-
the account agreement or other disclo- action charge imposed by the creditor
sure provided with the account-opening for use of the open-end plan for pur-
table where the annual percentage rate chases.
applicable to the consumer’s account is (v) Grace period. The date by which or
disclosed. A creditor may not list an- the period within which any credit ex-
nual percentage rates for multiple tended may be repaid without incur-
states in the account-opening table. ring a finance charge due to a periodic
(F) Credit card accounts under an
interest rate and any conditions on the
open-end (not home-secured) consumer
availability of the grace period. If no
credit plan. Notwithstanding para-
grace period is provided, that fact must
graphs (b)(2)(i)(B) and (b)(2)(i)(C) of this
section, for credit card accounts under be disclosed. If the length of the grace
an open-end (not home-secured) plan, period varies, the creditor may disclose
issuers must disclose in the table: the range of days, the minimum num-
(1) Any introductory rate as that ber of days, or the average number of
term is defined in § 1026.16(g)(2)(ii) that the days in the grace period, if the dis-
would apply to the account, consistent closure is identified as a range, min-
with the requirements of paragraph imum, or average. In disclosing in the
(b)(2)(i)(B) of this section, and tabular format a grace period that ap-
(2) Any rate that would apply upon plies to all features on the account, the
the expiration of a premium initial phrase ‘‘How to Avoid Paying Interest’’
rate, consistent with the requirements shall be used as the heading for the row
of paragraph (b)(2)(i)(C) of this section. describing the grace period. If a grace
(ii) Fees for issuance or availability. (A) period is not offered on all features of
Any annual or other periodic fee that the account, in disclosing this fact in
may be imposed for the issuance or the tabular format, the phrase ‘‘Paying
availability of an open-end plan, in- Interest’’ shall be used as the heading
cluding any fee based on account activ- for the row describing this fact.
ity or inactivity; how frequently it will (vi) Balance computation method. The
be imposed; and the annualized amount name of the balance computation
of the fee. method listed in § 1026.60(g) that is used
(B) Any non-periodic fee that relates to determine the balance on which the
to opening the plan. A creditor must finance charge is computed for each
disclose that the fee is a one-time fee. feature, or an explanation of the meth-
(iii) Fixed finance charge; minimum in- od used if it is not listed, along with a
terest charge. Any fixed finance charge statement that an explanation of the
and a brief description of the charge. method(s) required by paragraph
Any minimum interest charge if it ex- (b)(4)(i)(D) of this section is provided
ceeds $1.00 that could be imposed dur- with the account-opening disclosures.
ing a billing cycle, and a brief descrip- In determining which balance com-
tion of the charge. The $1.00 threshold putation method to disclose, the cred-
amount shall be adjusted periodically
itor shall assume that credit extended
by the Bureau to reflect changes in the
will not be repaid within any grace pe-
Consumer Price Index. The Bureau
riod, if any.
shall calculate each year a price level
adjusted minimum interest charge (vii) Cash advance fee. Any fee im-
using the Consumer Price Index in ef- posed for an extension of credit in the
fect on the June 1 of that year. When form of cash or its equivalent.
the cumulative change in the adjusted (viii) Late payment fee. Any fee im-
minimum value derived from applying posed for a late payment.
the annual Consumer Price level to the (ix) Over-the-limit fee. Any fee im-
current minimum interest charge posed for exceeding a credit limit.
threshold has risen by a whole dollar, (x) Balance transfer fee. Any fee im-
jspears on DSK121TN23PROD with CFR
the minimum interest charge will be posed to transfer an outstanding bal-
increased by $1.00. The creditor may, at ance.
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§ 1026.6 12 CFR Ch. X (1–1–25 Edition)
(xi) Returned-payment fee. Any fee im- (xiv) Web site reference. For issuers of
posed by the creditor for a returned credit cards that are not charge cards,
payment. a reference to the Web site established
(xii) Required insurance, debt cancella- by the Bureau and a statement that
tion or debt suspension coverage. (A) A consumers may obtain on the Web site
fee for insurance described in information about shopping for and
§ 1026.4(b)(7) or debt cancellation or sus- using credit cards. Until January 1,
pension coverage described in 2013, issuers may substitute for this
§ 1026.4(b)(10), if the insurance, or debt reference a reference to the Web site
cancellation or suspension coverage is established by the Board of Governors
required as part of the plan; and of the Federal Reserve System.
(B) A cross reference to any addi- (xv) Billing error rights reference. A
tional information provided about the statement that information about con-
insurance or coverage, as applicable. sumers’ right to dispute transactions is
(xiii) Available credit. If a creditor re- included in the account-opening disclo-
quires fees for the issuance or avail- sures.
ability of credit described in paragraph (3) Disclosure of charges imposed as
(b)(2)(ii) of this section, or requires a part of open-end (not home-secured)
security deposit for such credit, and plans. A creditor shall disclose, to the
the total amount of those required fees extent applicable:
and/or security deposit that will be im- (i) For charges imposed as part of an
posed and charged to the account when open-end (not home-secured) plan, the
the account is opened is 15 percent or circumstances under which the charge
more of the minimum credit limit for may be imposed, including the amount
the plan, a creditor must disclose the of the charge or an explanation of how
available credit remaining after these the charge is determined. For finance
fees or security deposit are debited to charges, a statement of when the
the account. The determination wheth- charge begins to accrue and an expla-
er the 15 percent threshold is met must nation of whether or not any time pe-
be based on the minimum credit limit riod exists within which any credit
for the plan. However, the disclosure that has been extended may be repaid
provided under this paragraph must be without incurring the charge. If such a
based on the actual initial credit limit time period is provided, a creditor may,
provided on the account. In deter- at its option and without disclosure,
mining whether the 15 percent thresh- elect not to impose a finance charge
old test is met, the creditor must only when payment is received after the
consider fees for issuance or avail- time period expires.
ability of credit, or a security deposit, (ii) Charges imposed as part of the
that are required. If fees for issuance or plan are:
availability are optional, these fees (A) Finance charges identified under
should not be considered in deter- § 1026.4(a) and § 1026.4(b).
mining whether the disclosure must be (B) Charges resulting from the con-
given. Nonetheless, if the 15 percent sumer’s failure to use the plan as
threshold test is met, the creditor in agreed, except amounts payable for
providing the disclosure must disclose collection activity after default, attor-
the amount of available credit cal- ney’s fees whether or not automati-
culated by excluding those optional cally imposed, and post-judgment in-
fees, and the available credit including terest rates permitted by law.
those optional fees. The creditor shall (C) Taxes imposed on the credit
also disclose that the consumer has the transaction by a state or other govern-
right to reject the plan and not be obli- mental body, such as documentary
gated to pay those fees or any other fee stamp taxes on cash advances.
or charges until the consumer has used (D) Charges for which the payment,
the account or made a payment on the or nonpayment, affect the consumer’s
account after receiving a periodic access to the plan, the duration of the
statement. This paragraph does not plan, the amount of credit extended,
apply with respect to fees or security the period for which credit is extended,
jspears on DSK121TN23PROD with CFR
deposits that are not debited to the ac- or the timing or method of billing or
count. payment.
24
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Consumer Financial Protection Bureau § 1026.6
(E) Charges imposed for terminating (D) Balance computation method. An
a plan. explanation of the method used to de-
(F) Charges for voluntary credit in- termine the balance to which the rate
surance, debt cancellation or debt sus- is applied.
pension. (ii) Variable-rate accounts. For inter-
(iii) Charges that are not imposed as est rate changes that are tied to in-
part of the plan include: creases in an index or formula (vari-
(A) Charges imposed on a cardholder able-rate accounts) specifically set
by an institution other than the card forth in the account agreement:
issuer for the use of the other institu- (A) The fact that the annual percent-
tion’s ATM in a shared or interchange age rate may increase.
system. (B) How the rate is determined, in-
(B) A charge for a package of services cluding the margin.
that includes an open-end credit fea- (C) The circumstances under which
ture, if the fee is required whether or the rate may increase.
not the open-end credit feature is in- (D) The frequency with which the
cluded and the non-credit services are rate may increase.
not merely incidental to the credit fea- (E) Any limitation on the amount
ture. the rate may change.
(F) The effect(s) of an increase.
(C) Charges under § 1026.4(e) disclosed
(G) Except as specified in paragraph
as specified.
(b)(4)(ii)(H) of this section, a rate is ac-
(D) With regard to a covered separate
curate if it is a rate as of a specified
credit feature and an asset feature on a
date and this rate was in effect within
prepaid account that are both acces-
the last 30 days before the disclosures
sible by a hybrid prepaid-credit card as
are provided.
defined in § 1026.61, any fee or charge
(H) Creditors imposing annual per-
imposed on the asset feature of the pre-
centage rates that vary according to an
paid account to the extent that the
index that is not under the creditor’s
amount of the fee or charge does not
control that provide the disclosures re-
exceed comparable fees or charges im-
quired by paragraph (b) of this section
posed on prepaid accounts in the same
in person at the time the open-end (not
prepaid account program that do not
home-secured) plan is established in
have a covered separate credit feature
connection with financing the purchase
accessible by a hybrid prepaid-credit
of goods or services may disclose in the
card.
table a rate, or range of rates to the ex-
(E) With regard to a non-covered sep- tent permitted by § 1026.6(b)(2)(i)(E),
arate credit feature accessible by a pre- that was in effect within the last 90
paid card as defined in § 1026.61, any fee days before the disclosures are pro-
or charge imposed on the asset feature vided, along with a reference directing
of the prepaid account. the consumer to the account agree-
(4) Disclosure of rates for open-end (not ment or other disclosure provided with
home-secured) plans. A creditor shall the account-opening table where an an-
disclose, to the extent applicable: nual percentage rate applicable to the
(i) For each periodic rate that may be consumer’s account in effect within the
used to calculate interest: last 30 days before the disclosures are
(A) Rates. The rate, expressed as a provided is disclosed.
periodic rate and a corresponding an- (iii) Rate changes not due to index or
nual percentage rate. formula. For interest rate changes that
(B) Range of balances. The range of are specifically set forth in the account
balances to which the rate is applica- agreement and not tied to increases in
ble; however, a creditor is not required an index or formula:
to adjust the range of balances disclo- (A) The initial rate (expressed as a
sure to reflect the balance below which periodic rate and a corresponding an-
only a minimum charge applies. nual percentage rate) required under
(C) Type of transaction. The type of paragraph (b)(4)(i)(A) of this section.
transaction to which the rate applies, (B) How long the initial rate will re-
jspears on DSK121TN23PROD with CFR
if different rates apply to different main in effect and the specific events
types of transactions. that cause the initial rate to change.
25
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§ 1026.7 12 CFR Ch. X (1–1–25 Edition)
(C) The rate (expressed as a periodic (2) Identification of transactions. An
rate and a corresponding annual per- identification of each credit trans-
centage rate) that will apply when the action in accordance with § 1026.8.
initial rate is no longer in effect and (3) Credits. Any credit to the account
any limitation on the time period the during the billing cycle, including the
new rate will remain in effect. amount and the date of crediting. The
(D) The balances to which the new date need not be provided if a delay in
rate will apply. accounting does not result in any fi-
(E) The balances to which the cur- nance or other charge.
rent rate at the time of the change will (4) Periodic rates. (i) Except as pro-
apply. vided in paragraph (a)(4)(ii) of this sec-
tion, each periodic rate that may be
(5) Additional disclosures for open-end
used to compute the finance charge,
(not home-secured) plans. A creditor
the range of balances to which it is ap-
shall disclose, to the extent applicable:
plicable, and the corresponding annual
(i) Voluntary credit insurance, debt percentage rate. If no finance charge is
cancellation or debt suspension. The dis- imposed when the outstanding balance
closures in § 1026.4(d)(1)(i) and (d)(1)(ii) is less than a certain amount, the cred-
and (d)(3)(i) through (d)(3)(iii) if the itor is not required to disclose that
creditor offers optional credit insur- fact, or the balance below which no fi-
ance or debt cancellation or debt sus- nance charge will be imposed. If dif-
pension coverage that is identified in ferent periodic rates apply to different
§ 1026.4(b)(7) or (b)(10). types of transactions, the types of
(ii) Security interests. The fact that transactions to which the periodic
the creditor has or will acquire a secu- rates apply shall also be disclosed. For
rity interest in the property purchased variable-rate plans, the fact that the
under the plan, or in other property periodic rate(s) may vary.
identified by item or type. (ii) Exception. An annual percentage
(iii) Statement of billing rights. A rate that differs from the rate that
statement that outlines the consumer’s would otherwise apply and is offered
rights and the creditor’s responsibil- only for a promotional period need not
ities under §§ 1026.12(c) and 1026.13 and be disclosed except in periods in which
that is substantially similar to the the offered rate is actually applied.
statement found in Model Form G–3(A) (5) Balance on which finance charge
in appendix G to this part. computed. The amount of the balance to
which a periodic rate was applied and
[76 FR 79772, Dec. 22, 2011, as amended at 81
FR 84369, Nov. 22, 2016] an explanation of how that balance was
determined. When a balance is deter-
§ 1026.7 Periodic statement. mined without first deducting all cred-
its and payments made during the bill-
The creditor shall furnish the con- ing cycle, the fact and the amount of
sumer with a periodic statement that the credits and payments shall be dis-
discloses the following items, to the closed.
extent applicable: (6) Amount of finance charge and other
(a) Rules affecting home-equity plans. charges. Creditors may comply with
The requirements of paragraph (a) of paragraphs (a)(6) of this section, or
this section apply only to home-equity with paragraph (b)(6) of this section, at
plans subject to the requirements of their option.
§ 1026.40. Alternatively, a creditor sub- (i) Finance charges. The amount of
ject to this paragraph may, at its op- any finance charge debited or added to
tion, comply with any of the require- the account during the billing cycle,
ments of paragraph (b) of this section; using the term finance charge. The
however, any creditor that chooses not components of the finance charge shall
to provide a disclosure under paragraph be individually itemized and identified
(a)(7) of this section must comply with to show the amount(s) due to the appli-
paragraph (b)(6) of this section. cation of any periodic rates and the
(1) Previous balance. The account bal- amounts(s) of any other type of finance
jspears on DSK121TN23PROD with CFR
ance outstanding at the beginning of charge. If there is more than one peri-
the billing cycle. odic rate, the amount of the finance
26
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Consumer Financial Protection Bureau § 1026.7
charge attributable to each rate need standing balance is less than a certain
not be separately itemized and identi- amount, the creditor is not required to
fied. disclose that fact, or the balance below
(ii) Other charges. The amounts, which no interest charge will be im-
itemized and identified by type, of any posed. The types of transactions to
charges other than finance charges which the periodic rates apply shall
debited to the account during the bill- also be disclosed. For variable-rate
ing cycle. plans, the fact that the annual percent-
(7) Annual percentage rate. At a credi- age rate may vary.
tor’s option, when a finance charge is (ii) Exception. A promotional rate, as
imposed during the billing cycle, the that term is defined in § 1026.16(g)(2)(i),
annual percentage rate(s) determined is required to be disclosed only in peri-
under § 1026.14(c) using the term annual ods in which the offered rate is actu-
percentage rate. ally applied.
(8) Grace period. The date by which or (5) Balance on which finance charge
the time period within which the new computed. The amount of the balance to
balance or any portion of the new bal- which a periodic rate was applied and
ance must be paid to avoid additional an explanation of how that balance was
finance charges. If such a time period determined, using the term Balance
is provided, a creditor may, at its op- Subject to Interest Rate. When a balance
tion and without disclosure, impose no is determined without first deducting
finance charge if payment is received all credits and payments made during
after the time period’s expiration.
the billing cycle, the fact and the
(9) Address for notice of billing errors.
amount of the credits and payments
The address to be used for notice of
shall be disclosed. As an alternative to
billing errors. Alternatively, the ad-
providing an explanation of how the
dress may be provided on the billing
balance was determined, a creditor
rights statement permitted by
that uses a balance computation meth-
§ 1026.9(a)(2).
od identified in § 1026.60(g) may, at the
(10) Closing date of billing cycle; new
creditor’s option, identify the name of
balance. The closing date of the billing
the balance computation method and
cycle and the account balance out-
provide a toll-free telephone number
standing on that date.
(b) Rules affecting open-end (not home- where consumers may obtain from the
secured) plans. The requirements of creditor more information about the
paragraph (b) of this section apply only balance computation method and how
to plans other than home-equity plans resulting interest charges were deter-
subject to the requirements of § 1026.40. mined. If the method used is not identi-
(1) Previous balance. The account bal- fied in § 1026.60(g), the creditor shall
ance outstanding at the beginning of provide a brief explanation of the
the billing cycle. method used.
(2) Identification of transactions. An (6) Charges imposed. (i) The amounts
identification of each credit trans- of any charges imposed as part of a
action in accordance with § 1026.8. plan as stated in § 1026.6(b)(3), grouped
(3) Credits. Any credit to the account together, in proximity to transactions
during the billing cycle, including the identified under paragraph (b)(2) of this
amount and the date of crediting. The section, substantially similar to Sam-
date need not be provided if a delay in ple G–18(A) in appendix G to this part.
crediting does not result in any finance (ii) Interest. Finance charges attrib-
or other charge. utable to periodic interest rates, using
(4) Periodic rates. (i) Except as pro- the term Interest Charge, must be
vided in paragraph (b)(4)(ii) of this sec- grouped together under the heading In-
tion, each periodic rate that may be terest Charged, itemized and totaled by
used to compute the interest charge ex- type of transaction, and a total of fi-
pressed as an annual percentage rate nance charges attributable to periodic
and using the term Annual Percentage interest rates, using the term Total In-
Rate, along with the range of balances terest, must be disclosed for the state-
jspears on DSK121TN23PROD with CFR
to which it is applicable. If no interest ment period and calendar year to date,
charge is imposed when the out- using a format substantially similar to
27
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§ 1026.7 12 CFR Ch. X (1–1–25 Edition)
Sample G–18(A) in appendix G to this (A) The due date for a payment. The
part. due date disclosed pursuant to this
(iii) Fees. Charges imposed as part of paragraph shall be the same day of the
the plan other than charges attrib- month for each billing cycle.
utable to periodic interest rates must (B) The amount of any late payment
be grouped together under the heading fee and any increased periodic rate(s)
Fees, identified consistent with the fea- (expressed as an annual percentage
ture or type, and itemized, and a total rate(s)) that may be imposed on the ac-
of charges, using the term Fees, must count as a result of a late payment. If
be disclosed for the statement period a range of late payment fees may be as-
and calendar year to date, using a for- sessed, the card issuer may state the
mat substantially similar to Sample G– range of fees, or the highest fee and an
18(A) in appendix G to this part. indication that the fee imposed could
(7) Change-in-terms and increased pen- be lower. If the rate may be increased
alty rate summary for open-end (not for more than one feature or balance,
home-secured) plans. Creditors that pro- the card issuer may state the range of
vide a change-in-terms notice required rates or the highest rate that could
by § 1026.9(c), or a rate increase notice apply and at the issuer’s option an in-
required by § 1026.9(g), on or with the dication that the rate imposed could be
periodic statement, must disclose the lower.
information in § 1026.9(c)(2)(iv)(A) and (ii) Exception. The requirements of
(c)(2)(iv)(B) (if applicable) or paragraph (b)(11)(i) of this section do
§ 1026.9(g)(3)(i) on the periodic state- not apply to the following:
ment in accordance with the format re- (A) Periodic statements provided
quirements in § 1026.9(c)(2)(iv)(D), and solely for charge card accounts, other
§ 1026.9(g)(3)(ii). See Forms G–18(F) and than covered separate credit features
G–18(G) in appendix G to this part. that are charge card accounts acces-
sible by hybrid prepaid-credit cards as
(8) Grace period. The date by which or
defined in § 1026.61; and
the time period within which the new
(B) Periodic statements provided for
balance or any portion of the new bal-
a charged-off account where payment
ance must be paid to avoid additional of the entire account balance is due im-
finance charges. If such a time period mediately.
is provided, a creditor may, at its op- (12) Repayment disclosures—(i) In gen-
tion and without disclosure, impose no eral. Except as provided in paragraphs
finance charge if payment is received (b)(12)(ii) and (b)(12)(v) of this section,
after the time period’s expiration. for a credit card account under an
(9) Address for notice of billing errors. open-end (not home-secured) consumer
The address to be used for notice of credit plan, a card issuer must provide
billing errors. Alternatively, the ad- the following disclosures on each peri-
dress may be provided on the billing odic statement:
rights statement permitted by (A) The following statement with a
§ 1026.9(a)(2). bold heading: ‘‘Minimum Payment
(10) Closing date of billing cycle; new Warning: If you make only the min-
balance. The closing date of the billing imum payment each period, you will
cycle and the account balance out- pay more in interest and it will take
standing on that date. The new balance you longer to pay off your balance;’’
must be disclosed in accordance with (B) The minimum payment repay-
the format requirements of paragraph ment estimate, as described in appen-
(b)(13) of this section. dix M1 to this part. If the minimum
(11) Due date; late payment costs. (i) payment repayment estimate is less
Except as provided in paragraph than 2 years, the card issuer must dis-
(b)(11)(ii) of this section and in accord- close the estimate in months. Other-
ance with the format requirements in wise, the estimate must be disclosed in
paragraph (b)(13) of this section, for a years and rounded to the nearest whole
credit card account under an open-end year;
(not home-secured) consumer credit (C) The minimum payment total cost
jspears on DSK121TN23PROD with CFR
plan, a card issuer must provide on estimate, as described in appendix M1
each periodic statement: to this part. The minimum payment
28
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Consumer Financial Protection Bureau § 1026.7
total cost estimate must be rounded ei- odic statement pursuant to paragraph
ther to the nearest whole dollar or to (b)(12)(i)(B) of this section after round-
the nearest cent, at the card issuer’s ing is three years or less;
option; (ii) The estimated monthly payment
(D) A statement that the minimum for repayment in 36 months, as de-
payment repayment estimate and the scribed in appendix M1 to this part,
minimum payment total cost estimate after rounding as set forth in para-
are based on the current outstanding graph (b)(12)(i)(F)(1)(i) of this section
balance shown on the periodic state- that is calculated for a particular bill-
ment. A statement that the minimum ing cycle is less than the minimum
payment repayment estimate and the payment required for the plan for that
minimum payment total cost estimate billing cycle; and
are based on the assumption that only (iii) A billing cycle where an account
minimum payments are made and no has both a balance in a revolving fea-
other amounts are added to the bal- ture where the required minimum pay-
ance; ments for this feature will not amor-
(E) A toll-free telephone number tize that balance in a fixed amount of
where the consumer may obtain from time specified in the account agree-
the card issuer information about cred- ment and a balance in a fixed repay-
it counseling services consistent with ment feature where the required min-
paragraph (b)(12)(iv) of this section; imum payment for this fixed repay-
and ment feature will amortize that bal-
(F)(1) Except as provided in para- ance in a fixed amount of time speci-
graph (b)(12)(i)(F)(2) of this section, the fied in the account agreement which is
following disclosures: less than 36 months.
(i) The estimated monthly payment (ii) Negative or no amortization. If neg-
for repayment in 36 months, as de- ative or no amortization occurs when
scribed in appendix M1 to this part. calculating the minimum payment re-
The estimated monthly payment for payment estimate as described in ap-
repayment in 36 months must be pendix M1 of this part, a card issuer
rounded either to the nearest whole must provide the following disclosures
dollar or to the nearest cent, at the on the periodic statement instead of
card issuer’s option; the disclosures set forth in paragraph
(ii) A statement that the card issuer (b)(12)(i) of this section:
estimates that the consumer will repay (A) The following statement: ‘‘Min-
the outstanding balance shown on the imum Payment Warning: Even if you
periodic statement in 3 years if the make no more charges using this card,
consumer pays the estimated monthly if you make only the minimum pay-
payment each month for 3 years; ment each month we estimate you will
(iii) The total cost estimate for re- never pay off the balance shown on this
payment in 36 months, as described in statement because your payment will
appendix M1 to this part. The total be less than the interest charged each
cost estimate for repayment in 36 month’’;
months must be rounded either to the (B) The following statement: ‘‘If you
nearest whole dollar or to the nearest make more than the minimum pay-
cent, at the card issuer’s option; and ment each period, you will pay less in
(iv) The savings estimate for repay- interest and pay off your balance soon-
ment in 36 months, as described in ap- er’’;
pendix M1 to this part. The savings es- (C) The estimated monthly payment
timate for repayment in 36 months for repayment in 36 months, as de-
must be rounded either to the nearest scribed in appendix M1 to this part.
whole dollar or to the nearest cent, at The estimated monthly payment for
the card issuer’s option. repayment in 36 months must be
(2) The requirements of paragraph rounded either to the nearest whole
(b)(12)(i)(F)(1) of this section do not dollar or to the nearest cent, at the
apply to a periodic statement in any of issuer’s option;
the following circumstances: (D) A statement that the card issuer
jspears on DSK121TN23PROD with CFR
(i) The minimum payment repayment estimates that the consumer will repay
estimate that is disclosed on the peri- the outstanding balance shown on the
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§ 1026.8 12 CFR Ch. X (1–1–25 Edition)
periodic statement in 3 years if the balance on the account for that billing
consumer pays the estimated monthly cycle.
payment each month for 3 years; and (13) Format requirements. The due date
(E) A toll-free telephone number required by paragraph (b)(11) of this
where the consumer may obtain from section shall be disclosed on the front
the card issuer information about cred- of the first page of the periodic state-
it counseling services consistent with ment. The amount of the late payment
paragraph (b)(12)(iv) of this section. fee and the annual percentage rate(s)
(iii) Format requirements. A card required by paragraph (b)(11) of this
issuer must provide the disclosures re- section shall be stated in close prox-
quired by paragraph (b)(12)(i) or imity to the due date. The ending bal-
(b)(12)(ii) of this section in accordance ance required by paragraph (b)(10) of
with the format requirements of para- this section and the disclosures re-
graph (b)(13) of this section, and in a quired by paragraph (b)(12) of this sec-
format substantially similar to Sam- tion shall be disclosed closely proxi-
ples G–18(C)(1), G–18(C)(2) and G– mate to the minimum payment due.
18(C)(3) in appendix G to this part, as The due date, late payment fee and an-
applicable. nual percentage rate, ending balance,
(iv) Provision of information about minimum payment due, and disclosures
credit counseling services—(A) Required required by paragraph (b)(12) of this
information. To the extent available section shall be grouped together. Sam-
from the United States Trustee or a ple G–18(D) in appendix G to this part
bankruptcy administrator, a card sets forth an example of how these
issuer must provide through the toll- terms may be grouped.
free telephone number disclosed pursu- (14) Deferred interest or similar trans-
ant to paragraphs (b)(12)(i) or (b)(12)(ii) actions. For accounts with an out-
of this section the name, street ad- standing balance subject to a deferred
dress, telephone number, and Web site interest or similar program, the date
address for at least three organizations by which that outstanding balance
that have been approved by the United must be paid in full in order to avoid
States Trustee or a bankruptcy admin- the obligation to pay finance charges
istrator pursuant to 11 U.S.C. 111(a)(1) on such balance must be disclosed on
to provide credit counseling services the front of any page of each periodic
in, at the card issuer’s option, either statement issued during the deferred
the state in which the billing address interest period beginning with the first
for the account is located or the state periodic statement issued during the
specified by the consumer. deferred interest period that reflects
(B) Updating required information. At the deferred interest or similar trans-
least annually, a card issuer must up- action. The disclosure provided pursu-
date the information provided pursuant ant to this paragraph must be substan-
to paragraph (b)(12)(iv)(A) of this sec- tially similar to Sample G–18(H) in ap-
tion for consistency with the informa- pendix G to this part.
tion available from the United States [76 FR 79772, Dec. 22, 2011, as amended at 81
Trustee or a bankruptcy adminis- FR 84369, Nov. 22, 2016]
trator.
(v) Exemptions. Paragraph (b)(12) of § 1026.8 Identifying transactions on
this section does not apply to: periodic statements.
(A) Charge card accounts that re- The creditor shall identify credit
quire payment of outstanding balances transactions on or with the first peri-
in full at the end of each billing cycle; odic statement that reflects the trans-
(B) A billing cycle immediately fol- action by furnishing the following in-
lowing two consecutive billing cycles formation, as applicable:
in which the consumer paid the entire (a) Sale credit. (1) Except as provided
balance in full, had a zero outstanding in paragraph (a)(2) of this section, for
balance or had a credit balance; and each credit transaction involving the
(C) A billing cycle where paying the sale of property or services, the cred-
jspears on DSK121TN23PROD with CFR
minimum payment due for that billing itor must disclose the amount and date
cycle will pay the entire outstanding of the transaction, and either:
30
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Consumer Financial Protection Bureau § 1026.9
(i) A brief identification of the prop- procedures reasonably adapted to ob-
erty or services purchased, for credi- tain the required information.
tors and sellers that are the same or (2) As an alternative to the brief
related; or identification for sale or nonsale cred-
(ii) The seller’s name; and the city it, the creditor may disclose a number
and state or foreign country where the or symbol that also appears on the re-
transaction took place. The creditor ceipt or other credit document given to
may omit the address or provide any the consumer, if the number or symbol
suitable designation that helps the reasonably identifies that transaction
consumer to identify the transaction with that creditor.
when the transaction took place at a
location that is not fixed; took place in § 1026.9 Subsequent disclosure re-
the consumer’s home; or was a mail, quirements.
Internet, or telephone order. (a) Furnishing statement of billing
(2) Creditors need not comply with rights—(1) Annual statement. The cred-
paragraph (a)(1) of this section if an ac- itor shall mail or deliver the billing
tual copy of the receipt or other credit rights statement required by
document is provided with the first § 1026.6(a)(5) and (b)(5)(iii) at least once
periodic statement reflecting the per calendar year, at intervals of not
transaction, and the amount of the less than 6 months nor more than 18
transaction and either the date of the months, either to all consumers or to
transaction to the consumer’s account
each consumer entitled to receive a
or the date of debiting the transaction
periodic statement under § 1026.5(b)(2)
are disclosed on the copy or on the
for any one billing cycle.
periodic statement.
(b) Nonsale credit. For each credit (2) Alternative summary statement. As
transaction not involving the sale of an alternative to paragraph (a)(1) of
property or services, the creditor must this section, the creditor may mail or
disclose a brief identification of the deliver, on or with each periodic state-
transaction; the amount of the trans- ment, a statement substantially simi-
action; and at least one of the fol- lar to Model Form G–4 or Model Form
lowing dates: The date of the trans- G–4(A) in appendix G to this part, as
action, the date the transaction was applicable. Creditors offering home-eq-
debited to the consumer’s account, or, uity plans subject to the requirements
if the consumer signed the credit docu- of § 1026.40 may use either Model Form,
ment, the date appearing on the docu- at their option.
ment. If an actual copy of the receipt (b) Disclosures for supplemental credit
or other credit document is provided access devices and additional features. (1)
and that copy shows the amount and at If a creditor, within 30 days after mail-
least one of the specified dates, the ing or delivering the account-opening
brief identification may be omitted. disclosures under § 1026.6(a)(1) or
(c) Alternative creditor procedures; con- (b)(3)(ii)(A), as applicable, adds a credit
sumer inquiries for clarification or docu- feature to the consumer’s account or
mentation. The following procedures mails or delivers to the consumer a
apply to creditors that treat an inquiry credit access device, including but not
for clarification or documentation as a limited to checks that access a credit
notice of a billing error, including cor- card account, for which the finance
recting the account in accordance with charge terms are the same as those
§ 1026.13(e): previously disclosed, no additional dis-
(1) Failure to disclose the informa- closures are necessary. Except as pro-
tion required by paragraphs (a) and (b) vided in paragraph (b)(3) of this sec-
of this section is not a failure to com- tion, after 30 days, if the creditor adds
ply with the regulation, provided that a credit feature or furnishes a credit
the creditor also maintains procedures access device (other than as a renewal,
reasonably designed to obtain and pro- resupply, or the original issuance of a
vide the information. This applies to credit card) on the same finance charge
transactions that take place outside a terms, the creditor shall disclose, be-
jspears on DSK121TN23PROD with CFR
state, as defined in § 1026.2(a)(26), fore the consumer uses the feature or
whether or not the creditor maintains device for the first time, that it is for
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§ 1026.9 12 CFR Ch. X (1–1–25 Edition)
use in obtaining credit under the terms the consumer uses the checks after
previously disclosed. such date.
(2) Except as provided in paragraph (B) If no promotional rate applies to
(b)(3) of this section, whenever a credit the checks:
feature is added or a credit access de- (1) The type of rate that will apply to
vice is mailed or delivered to the con- the checks and the applicable annual
sumer, and the finance charge terms percentage rate. For a variable-rate ac-
for the feature or device differ from count, a creditor must disclose an an-
disclosures previously given, the dis- nual percentage rate based on the ap-
closures required by § 1026.6(a)(1) or plicable index or formula in accordance
(b)(3)(ii)(A), as applicable, that are ap- with the accuracy requirements set
plicable to the added feature or device forth in paragraph (b)(3)(ii) of this sec-
shall be given before the consumer uses tion.
the feature or device for the first time. (2) [Reserved]
(3) Checks that access a credit card ac- (C) Any transaction fees applicable to
count. (i) Disclosures. For open-end the checks disclosed under
plans not subject to the requirements § 1026.6(b)(2)(iv); and
of § 1026.40, if checks that can be used (D) Whether or not a grace period is
to access a credit card account are pro- given within which any credit extended
vided more than 30 days after account- by use of the checks may be repaid
opening disclosures under § 1026.6(b) are without incurring a finance charge due
mailed or delivered, or are provided to a periodic interest rate. When dis-
within 30 days of the account-opening closing whether there is a grace period,
disclosures and the finance charge the phrase ‘‘How to Avoid Paying In-
terms for the checks differ from the fi- terest on Check Transactions’’ shall be
nance charge terms previously dis- used as the row heading when a grace
closed, the creditor shall disclose on period applies to credit extended by the
the front of the page containing the use of the checks. When disclosing the
checks the following terms in the form fact that no grace period exists for
of a table with the headings, content, credit extended by use of the checks,
and form substantially similar to Sam- the phrase ‘‘Paying Interest’’ shall be
ple G–19 in appendix G to this part: used as the row heading.
(A) If a promotional rate, as that (ii) Accuracy. The disclosures in para-
term is defined in § 1026.16(g)(2)(i) ap- graph (b)(3)(i) of this section must be
plies to the checks: accurate as of the time the disclosures
(1) The promotional rate and the are mailed or delivered. A variable an-
time period during which the pro- nual percentage rate is accurate if it
motional rate will remain in effect; was in effect within 60 days of when the
(2) The type of rate that will apply disclosures are mailed or delivered.
(such as whether the purchase or cash (iii) Variable rates. If any annual per-
advance rate applies) after the pro- centage rate required to be disclosed
motional rate expires, and the annual pursuant to paragraph (b)(3)(i) of this
percentage rate that will apply after section is a variable rate, the card
the promotional rate expires. For a issuer shall also disclose the fact that
variable-rate account, a creditor must the rate may vary and how the rate is
disclose an annual percentage rate determined. In describing how the ap-
based on the applicable index or for- plicable rate will be determined, the
mula in accordance with the accuracy card issuer must identify the type of
requirements set forth in paragraph index or formula that is used in setting
(b)(3)(ii) of this section; and the rate. The value of the index and the
(3) The date, if any, by which the amount of the margin that are used to
consumer must use the checks in order calculate the variable rate shall not be
to qualify for the promotional rate. If disclosed in the table. A disclosure of
the creditor will honor checks used any applicable limitations on rate in-
after such date but will apply an an- creases shall not be included in the
nual percentage rate other than the table.
promotional rate, the creditor must (c) Change in terms—(1) Rules affecting
jspears on DSK121TN23PROD with CFR
disclose this fact and the type of an- home-equity plans—(i) Written notice re-
nual percentage rate that will apply if quired. For home-equity plans subject
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Consumer Financial Protection Bureau § 1026.9
to the requirements of § 1026.40, when- of the change to each consumer who
ever any term required to be disclosed may be affected. The 45-day timing re-
under § 1026.6(a) is changed or the re- quirement does not apply if the con-
quired minimum periodic payment is sumer has agreed to a particular
increased, the creditor shall mail or de- change as described in paragraph
liver written notice of the change to (c)(2)(i)(B) of this section; for such
each consumer who may be affected. changes, notice must be given in ac-
The notice shall be mailed or delivered cordance with the timing requirements
at least 15 days prior to the effective of paragraph (c)(2)(i)(B) of this section.
date of the change. The 15-day timing Increases in the rate applicable to a
requirement does not apply if the consumer’s account due to delin-
change has been agreed to by the con- quency, default or as a penalty de-
sumer; the notice shall be given, how- scribed in paragraph (g) of this section
ever, before the effective date of the that are not due to a change in the
change. contractual terms of the consumer’s
(ii) Notice not required. For home-eq- account must be disclosed pursuant to
uity plans subject to the requirements paragraph (g) of this section instead of
of § 1026.40, a creditor is not required to paragraph (c)(2) of this section.
provide notice under this section when
(B) Changes agreed to by the consumer.
the change involves a reduction of any
A notice of change in terms is required,
component of a finance or other charge
but it may be mailed or delivered as
(except that on or after October 1, 2022,
late as the effective date of the change
this provision on when the change in-
if the consumer agrees to the par-
volves a reduction of any component of
ticular change. This paragraph
a finance or other charge does not
(c)(2)(i)(B) applies only when a con-
apply to any change in the margin
when a LIBOR index is replaced, as per- sumer substitutes collateral or when
mitted by § 1026.40(f)(3)(ii)(A) or (B)) or the creditor can advance additional
when the change results from an agree- credit only if a change relatively
ment involving a court proceeding. unique to that consumer is made, such
(iii) Notice to restrict credit. For home- as the consumer’s providing additional
equity plans subject to the require- security or paying an increased min-
ments of § 1026.40, if the creditor pro- imum payment amount. The following
hibits additional extensions of credit or are not considered agreements between
reduces the credit limit pursuant to the consumer and the creditor for pur-
§ 1026.40(f)(3)(i) or (f)(3)(vi), the creditor poses of this paragraph (c)(2)(i)(B): The
shall mail or deliver written notice of consumer’s general acceptance of the
the action to each consumer who will creditor’s contract reservation of the
be affected. The notice must be pro- right to change terms; the consumer’s
vided not later than three business use of the account (which might imply
days after the action is taken and shall acceptance of its terms under state
contain specific reasons for the action. law); the consumer’s acceptance of a
If the creditor requires the consumer unilateral term change that is not par-
to request reinstatement of credit ticular to that consumer, but rather is
privileges, the notice also shall state of general applicability to consumers
that fact. with that type of account; and the con-
(2) Rules affecting open-end (not home- sumer’s request to reopen a closed ac-
secured) plans—(i) Changes where written count or to upgrade an existing ac-
advance notice is required—(A) General. count to another account offered by
For plans other than home-equity the creditor with different credit or
plans subject to the requirements of other features.
§ 1026.40, except as provided in para- (ii) Significant changes in account
graphs (c)(2)(i)(B), (c)(2)(iii) and terms. For purposes of this section, a
(c)(2)(v) of this section, when a signifi- ‘‘significant change in account terms’’
cant change in account terms as de- means a change to a term required to
scribed in paragraph (c)(2)(ii) of this be disclosed under § 1026.6(b)(1) and
section is made, a creditor must pro- (b)(2), an increase in the required min-
jspears on DSK121TN23PROD with CFR
vide a written notice of the change at imum periodic payment, a change to a
least 45 days prior to the effective date term required to be disclosed under
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§ 1026.9 12 CFR Ch. X (1–1–25 Edition)
§ 1026.6(b)(4), or the acquisition of a se- count, the new rate described in the
curity interest. notice will not apply to the consumer’s
(iii) Charges not covered by account until the consumer’s account
§ 1026.6(b)(1) and (b)(2). Except as pro- balances are no longer subject to the
vided in paragraph (c)(2)(vi) of this sec- penalty rate;
tion, if a creditor increases any compo- (7) If the change in terms being dis-
nent of a charge, or introduces a new closed is an increase in an annual per-
charge, required to be disclosed under centage rate, the balances to which the
§ 1026.6(b)(3) that is not a significant increased rate will be applied. If appli-
change in account terms as described cable, a statement identifying the bal-
in paragraph (c)(2)(ii) of this section, a ances to which the current rate will
creditor must either, at its option: continue to apply as of the effective
(A) Comply with the requirements of date of the change in terms; and
paragraph (c)(2)(i) of this section; or (8) If the change in terms being dis-
(B) Provide notice of the amount of closed is an increase in an annual per-
the charge before the consumer agrees centage rate for a credit card account
to or becomes obligated to pay the under an open-end (not home-secured)
charge, at a time and in a manner that consumer credit plan, a statement of
a consumer would be likely to notice no more than four principal reasons for
the disclosure of the charge. The notice the rate increase, listed in their order
may be provided orally or in writing. of importance.
(iv) Disclosure requirements—(A) Sig- (B) Right to reject for credit card ac-
nificant changes in account terms. If a counts under an open-end (not home-se-
creditor makes a significant change in cured) consumer credit plan. In addition
account terms as described in para- to the disclosures in paragraph
graph (c)(2)(ii) of this section, the no- (c)(2)(iv)(A) of this section, if a card
tice provided pursuant to paragraph issuer makes a significant change in
(c)(2)(i) of this section must provide account terms on a credit card account
the following information: under an open-end (not home-secured)
(1) A summary of the changes made consumer credit plan, the creditor
to terms required by § 1026.6(b)(1) and must generally provide the following
(b)(2) or § 1026.6(b)(4), a description of information on the notice provided
any increase in the required minimum pursuant to paragraph (c)(2)(i) of this
periodic payment, and a description of section. This information is not re-
any security interest being acquired by quired to be provided in the case of an
the creditor; increase in the required minimum peri-
(2) A statement that changes are odic payment, an increase in a fee as a
being made to the account; result of a reevaluation of a determina-
(3) For accounts other than credit tion made under § 1026.52(b)(1)(i) or an
card accounts under an open-end (not adjustment to the safe harbors in
home-secured) consumer credit plan § 1026.52(b)(1)(ii) to reflect changes in
subject to § 1026.9(c)(2)(iv)(B), a state- the Consumer Price Index, a change in
ment indicating the consumer has the an annual percentage rate applicable to
right to opt out of these changes, if ap- a consumer’s account, an increase in a
plicable, and a reference to additional fee previously reduced consistent with
information describing the opt-out 50 U.S.C. app. 527 or a similar Federal
right provided in the notice, if applica- or state statute or regulation if the
ble; amount of the increased fee does not
(4) The date the changes will become exceed the amount of that fee prior to
effective; the reduction, or when the change re-
(5) If applicable, a statement that the sults from the creditor not receiving
consumer may find additional informa- the consumer’s required minimum
tion about the summarized changes, periodic payment within 60 days after
and other changes to the account, in the due date for that payment:
the notice; (1) A statement that the consumer
(6) If the creditor is changing a rate has the right to reject the change or
on the account, other than a penalty changes prior to the effective date of
jspears on DSK121TN23PROD with CFR
rate, a statement that if a penalty rate the changes, unless the consumer fails
currently applies to the consumer’s ac- to make a required minimum periodic
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Consumer Financial Protection Bureau § 1026.9
payment within 60 days after the due § 1026.6(b)(4) that is not required to be
date for that payment; disclosed under § 1026.6(b)(1) and (b)(2),
(2) Instructions for rejecting the or a description of any security inter-
change or changes, and a toll-free tele- est being acquired by the creditor),
phone number that the consumer may with headings and format substantially
use to notify the creditor of the rejec- similar to any of the account-opening
tion; and tables found in G–17 in appendix G to
(3) If applicable, a statement that if this part. The table must disclose the
the consumer rejects the change or changed term and information relevant
changes, the consumer’s ability to use to the change, if that relevant informa-
the account for further advances will tion is required by § 1026.6(b)(1) and
be terminated or suspended. (b)(2). The new terms shall be described
(C) Changes resulting from failure to in the same level of detail as required
make minimum periodic payment within when disclosing the terms under
60 days from due date for credit card ac- § 1026.6(b)(2).
counts under an open-end (not home-se- (2) Notice included with periodic state-
cured) consumer credit plan. For a credit ment. If a notice required by paragraph
card account under an open-end (not (c)(2)(i) of this section is included on or
home-secured) consumer credit plan: with a periodic statement, the informa-
(1) If the significant change required tion described in paragraph
to be disclosed pursuant to paragraph (c)(2)(iv)(A)(1) of this section must be
(c)(2)(i) of this section is an increase in disclosed on the front of any page of
an annual percentage rate or a fee or the statement. The summary of
charge required to be disclosed under changes described in paragraph
§ 1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) (c)(2)(iv)(A)(1) of this section must im-
based on the consumer’s failure to mediately follow the information de-
make a minimum periodic payment scribed in paragraph (c)(2)(iv)(A)(2)
within 60 days from the due date for through (c)(2)(iv)(A)(7) and, if applica-
that payment, the notice provided pur- ble, paragraphs (c)(2)(iv)(A)(8),
suant to paragraph (c)(2)(i) of this sec- (c)(2)(iv)(B), and (c)(2)(iv)(C) of this sec-
tion must state that the increase will tion, and be substantially similar to
cease to apply to transactions that oc- the format shown in Sample G–20 or G–
curred prior to or within 14 days of pro- 21 in appendix G to this part.
vision of the notice, if the creditor re- (3) Notice provided separately from peri-
ceives six consecutive required min- odic statement. If a notice required by
imum periodic payments on or before paragraph (c)(2)(i) of this section is not
the payment due date, beginning with included on or with a periodic state-
the first payment due following the ef- ment, the information described in
fective date of the increase. paragraph (c)(2)(iv)(A)(1) of this section
(2) If the significant change required must, at the creditor’s option, be dis-
to be disclosed pursuant to paragraph closed on the front of the first page of
(c)(2)(i) of this section is an increase in the notice or segregated on a separate
a fee or charge required to be disclosed page from other information given
under § 1026.6(b)(2)(ii), (b)(2)(iii), or with the notice. The summary of
(b)(2)(xii) based on the consumer’s fail- changes required to be in a table pursu-
ure to make a minimum periodic pay- ant to paragraph (c)(2)(iv)(A)(1) of this
ment within 60 days from the due date section may be on more than one page,
for that payment, the notice provided and may use both the front and reverse
pursuant to paragraph (c)(2)(i) of this sides, so long as the table begins on the
section must also state the reason for front of the first page of the notice and
the increase. there is a reference on the first page in-
(D) Format requirements—(1) Tabular dicating that the table continues on
format. The summary of changes de- the following page. The summary of
scribed in paragraph (c)(2)(iv)(A)(1) of changes described in paragraph
this section must be in a tabular for- (c)(2)(iv)(A)(1) of this section must im-
mat (except for a summary of any in- mediately follow the information de-
crease in the required minimum peri- scribed in paragraph (c)(2)(iv)(A)(2)
jspears on DSK121TN23PROD with CFR
odic payment, a summary of a term re- through (c)(2)(iv)(A)(7) and, if applica-
quired to be disclosed under ble, paragraphs (c)(2)(iv)(A)(8),
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§ 1026.9 12 CFR Ch. X (1–1–25 Edition)
(c)(2)(iv)(B), and (c)(2)(iv)(C), of this variable rate determined by the same
section, substantially similar to the formula (index and margin) that was
format shown in Sample G–20 or G–21 used to calculate the variable rate dis-
in appendix G to this part. closed pursuant to paragraph
(v) Notice not required. For open-end (c)(2)(v)(B)(1);
plans (other than home equity plans (C) When the change is an increase in
subject to the requirements of § 1026.40) a variable annual percentage rate in
a creditor is not required to provide no- accordance with a credit card or other
tice under this section: account agreement that provides for
(A) When the change involves charges changes in the rate according to oper-
for documentary evidence; a reduction ation of an index that is not under the
of any component of a finance or other control of the creditor and is available
charge (except that on or after October
to the general public; or
1, 2022, this provision on when the
(D) When the change is an increase in
change involves a reduction of any
component of a finance or other charge an annual percentage rate, a fee or
does not apply to any change in the charge required to be disclosed under
margin when a LIBOR index is re- § 1026.6(b)(2)(ii), (b)(2)(iii), (b)(2)(viii),
placed, as permitted by § 1026.55(b)(7)(i) (b)(2)(ix), (b)(2)(ix) or (b)(2)(xii), or the
or (ii)); suspension of future credit required minimum periodic payment
privileges (except as provided in para- due to the completion of a workout or
graph (c)(2)(vi) of this section) or ter- temporary hardship arrangement by
mination of an account or plan; when the consumer or the consumer’s failure
the change results from an agreement to comply with the terms of such an
involving a court proceeding; when the arrangement, provided that:
change is an extension of the grace pe- (1) The annual percentage rate or fee
riod; or if the change is applicable only or charge applicable to a category of
to checks that access a credit card ac- transactions or the required minimum
count and the changed terms are dis- periodic payment following any such
closed on or with the checks in accord- increase does not exceed the rate or fee
ance with paragraph (b)(3) of this sec- or charge or required minimum peri-
tion; odic payment that applied to that cat-
(B) When the change is an increase in egory of transactions prior to com-
an annual percentage rate or fee upon mencement of the arrangement or, if
the expiration of a specified period of the rate that applied to a category of
time, provided that: transactions prior to the commence-
(1) Prior to commencement of that ment of the workout or temporary
period, the creditor disclosed in writing hardship arrangement was a variable
to the consumer, in a clear and con- rate, the rate following any such in-
spicuous manner, the length of the pe- crease is a variable rate determined by
riod and the annual percentage rate or
the same formula (index and margin)
fee that would apply after expiration of
that applied to the category of trans-
the period;
actions prior to commencement of the
(2) The disclosure of the length of the
period and the annual percentage rate workout or temporary hardship ar-
or fee that would apply after expiration rangement; and
of the period are set forth in close (2) The creditor has provided the con-
proximity and in equal prominence to sumer, prior to the commencement of
the first listing of the disclosure of the such arrangement, with a clear and
rate or fee that applies during the spec- conspicuous disclosure of the terms of
ified period of time; and the arrangement (including any in-
(3) The annual percentage rate or fee creases due to such completion or fail-
that applies after that period does not ure). This disclosure must generally be
exceed the rate or fee disclosed pursu- provided in writing. However, a cred-
ant to paragraph (c)(2)(v)(B)(1) of this itor may provide the disclosure of the
paragraph or, if the rate disclosed pur- terms of the arrangement orally by
suant to paragraph (c)(2)(v)(B)(1) of telephone, provided that the creditor
jspears on DSK121TN23PROD with CFR
this section was a variable rate, the mails or delivers a written disclosure
rate following any such increase is a of the terms of the arrangement to the
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Consumer Financial Protection Bureau § 1026.9
consumer as soon as reasonably prac- tice shall be provided at least 30 days
ticable after the oral disclosure is pro- prior to the scheduled renewal date of
vided. the consumer’s credit or charge card.
(vi) Reduction of the credit limit. For The notice shall contain the following
open-end plans that are not subject to information:
the requirements of § 1026.40, if a cred- (i) The disclosures contained in
itor decreases the credit limit on an ac- § 1026.60(b)(1) through (b)(7) that would
count, advance notice of the decrease apply if the account were renewed; and
must be provided before an over-the- (ii) How and when the cardholder
limit fee or a penalty rate can be im-
may terminate credit availability
posed solely as a result of the con-
under the account to avoid paying the
sumer exceeding the newly decreased
credit limit. Notice shall be provided in renewal fee, if applicable.
writing or orally at least 45 days prior (2) Notification on periodic statements.
to imposing the over-the-limit fee or The disclosures required by this para-
penalty rate and shall state that the graph may be made on or with a peri-
credit limit on the account has been or odic statement. If any of the disclo-
will be decreased. sures are provided on the back of a
(d) Finance charge imposed at time of periodic statement, the card issuer
transaction. (1) Any person, other than shall include a reference to those dis-
the card issuer, who imposes a finance closures on the front of the statement.
charge at the time of honoring a con- (f) Change in credit card account insur-
sumer’s credit card, shall disclose the ance provider—(1) Notice prior to change.
amount of that finance charge prior to If a credit card issuer plans to change
its imposition. the provider of insurance for repay-
(2) The card issuer, other than the ment of all or part of the outstanding
person honoring the consumer’s credit balance of an open-end credit card ac-
card, shall have no responsibility for count of the type subject to § 1026.60,
the disclosure required by paragraph the card issuer shall mail or deliver to
(d)(1) of this section, and shall not con- the cardholder written notice of the
sider any such charge for the purposes
change not less than 30 days before the
of §§ 1026.60, 1026.6 and 1026.7.
change in provider occurs. The notice
(e) Disclosures upon renewal of credit
shall also include the following items,
or charge card—(1) Notice prior to re-
newal. A card issuer that imposes any to the extent applicable:
annual or other periodic fee to renew a (i) Any increase in the rate that will
credit or charge card account of the result from the change;
type subject to § 1026.60, including any (ii) Any substantial decrease in cov-
fee based on account activity or inac- erage that will result from the change;
tivity or any card issuer that has and
changed or amended any term of a (iii) A statement that the cardholder
cardholder’s account required to be dis- may discontinue the insurance.
closed under § 1026.6(b)(1) and (b)(2) that (2) Notice when change in provider oc-
has not previously been disclosed to curs. If a change described in paragraph
the consumer, shall mail or deliver (f)(1) of this section occurs, the card
written notice of the renewal to the issuer shall provide the cardholder
cardholder. If the card issuer imposes with a written notice no later than 30
any annual or other periodic fee for re- days after the change, including the
newal, the notice shall be provided at following items, to the extent applica-
least 30 days or one billing cycle, ble:
whichever is less, before the mailing or
(i) The name and address of the new
the delivery of the periodic statement
on which any renewal fee is initially insurance provider;
charged to the account. If the card (ii) A copy of the new policy or group
issuer has changed or amended any certificate containing the basic terms
term required to be disclosed under of the insurance, including the rate to
§ 1026.6(b)(1) and (b)(2) and such changed be charged; and
jspears on DSK121TN23PROD with CFR
or amended term has not previously (iii) A statement that the cardholder
been disclosed to the consumer, the no- may discontinue the insurance.
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§ 1026.9 12 CFR Ch. X (1–1–25 Edition)
(3) Substantial decrease in coverage. (g)(1)(ii) of this section that trigger the
For purposes of this paragraph, a sub- imposition of the rate increase.
stantial decrease in coverage is a de- (3)(i) Disclosure requirements for rate
crease in a significant term of coverage increases—(A) General. If a creditor is
that might reasonably be expected to increasing the rate due to delinquency
affect the cardholder’s decision to con- or default or as a penalty, the creditor
tinue the insurance. Significant terms must provide the following information
of coverage include, for example, the on the notice sent pursuant to para-
following: graph (g)(1) of this section:
(i) Type of coverage provided; (1) A statement that the delinquency
(ii) Age at which coverage terminates or default rate or penalty rate, as ap-
or becomes more restrictive;
plicable, has been triggered;
(iii) Maximum insurable loan bal-
ance, maximum periodic benefit pay- (2) The date on which the delin-
ment, maximum number of payments, quency or default rate or penalty rate
or other term affecting the dollar will apply;
amount of coverage or benefits pro- (3) The circumstances under which
vided; the delinquency or default rate or pen-
(iv) Eligibility requirements and alty rate, as applicable, will cease to
number and identity of persons cov- apply to the consumer’s account, or
ered; that the delinquency or default rate or
(v) Definition of a key term of cov- penalty rate will remain in effect for a
erage such as disability; potentially indefinite time period;
(vi) Exclusions from or limitations (4) A statement indicating to which
on coverage; and balances the delinquency or default
(vii) Waiting periods and whether rate or penalty rate will be applied;
coverage is retroactive. (5) If applicable, a description of any
(4) Combined notification. The notices balances to which the current rate will
required by paragraph (f)(1) and (2) of continue to apply as of the effective
this section may be combined provided date of the rate increase, unless a con-
the timing requirement of paragraph sumer fails to make a minimum peri-
(f)(1) of this section is met. The notices odic payment within 60 days from the
may be provided on or with a periodic due date for that payment; and
statement. (6) For a credit card account under
(g) Increase in rates due to delinquency an open-end (not home-secured) con-
or default or as a penalty—(1) Increases
sumer credit plan, a statement of no
subject to this section. For plans other
more than four principal reasons for
than home-equity plans subject to the
the rate increase, listed in their order
requirements of § 1026.40, except as pro-
of importance.
vided in paragraph (g)(4) of this sec-
tion, a creditor must provide a written (B) Rate increases resulting from failure
notice to each consumer who may be to make minimum periodic payment with-
affected when: in 60 days from due date. For a credit
(i) A rate is increased due to the con- card account under an open-end (not
sumer’s delinquency or default; or home-secured) consumer credit plan, if
(ii) A rate is increased as a penalty the rate increase required to be dis-
for one or more events specified in the closed pursuant to paragraph (g)(1) of
account agreement, such as making a this section is an increase pursuant to
late payment or obtaining an extension § 1026.55(b)(4) based on the consumer’s
of credit that exceeds the credit limit. failure to make a minimum periodic
(2) Timing of written notice. Whenever payment within 60 days from the due
any notice is required to be given pur- date for that payment, the notice pro-
suant to paragraph (g)(1) of this sec- vided pursuant to paragraph (g)(1) of
tion, the creditor shall provide written this section must also state that the
notice of the increase in rates at least increase will cease to apply to trans-
45 days prior to the effective date of actions that occurred prior to or with-
the increase. The notice must be pro- in 14 days of provision of the notice, if
jspears on DSK121TN23PROD with CFR
vided after the occurrence of the events the creditor receives six consecutive
described in paragraphs (g)(1)(i) and required minimum periodic payments
38
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Consumer Financial Protection Bureau § 1026.9
on or before the payment due date, be- (E) A statement indicating to which
ginning with the first payment due fol- balances the penalty rate may be ap-
lowing the effective date of the in- plied; and
crease. (F) If applicable, a description of any
(ii) Format requirements. (A) If a no- balances to which the current rate will
tice required by paragraph (g)(1) of this continue to apply as of the effective
section is included on or with a peri- date of the rate increase, unless the
odic statement, the information de- consumer fails to make a minimum
scribed in paragraph (g)(3)(i) of this periodic payment within 60 days from
section must be in the form of a table the due date for that payment; and
and provided on the front of any page (ii) The creditor does not increase the
of the periodic statement, above the rate applicable to the consumer’s ac-
notice described in paragraph (c)(2)(iv) count to the penalty rate if the out-
of this section if that notice is provided standing balance does not exceed the
on the same statement. credit limit on the date set forth in the
(B) If a notice required by paragraph notice and described in paragraph
(g)(1) of this section is not included on (g)(4)(i)(B) of this section.
or with a periodic statement, the infor- (iii)(A) If a notice provided pursuant
mation described in paragraph (g)(3)(i) to paragraph (g)(4)(i) of this section is
of this section must be disclosed on the included on or with a periodic state-
front of the first page of the notice. ment, the information described in
Only information related to the in- paragraph (g)(4)(i) of this section must
crease in the rate to a penalty rate be in the form of a table and provided
may be included with the notice, ex- on the front of any page of the periodic
cept that this notice may be combined statement; or
with a notice described in paragraph (B) If a notice required by paragraph
(c)(2)(iv) or (g)(4) of this section. (g)(4)(i) of this section is not included
on or with a periodic statement, the in-
(4) Exception for decrease in credit
formation described in paragraph
limit. A creditor is not required to pro-
(g)(4)(i) of this section must be dis-
vide a notice pursuant to paragraph
closed on the front of the first page of
(g)(1) of this section prior to increasing
the notice. Only information related to
the rate for obtaining an extension of the reduction in credit limit may be in-
credit that exceeds the credit limit, cluded with the notice, except that this
provided that: notice may be combined with a notice
(i) The creditor provides at least 45 described in paragraph (c)(2)(iv) or
days in advance of imposing the pen- (g)(1) of this section.
alty rate a notice, in writing, that in- (h) Consumer rejection of certain sig-
cludes: nificant changes in terms—(1) Right to re-
(A) A statement that the credit limit ject. If paragraph (c)(2)(iv)(B) of this
on the account has been or will be de- section requires disclosure of the con-
creased. sumer’s right to reject a significant
(B) A statement indicating the date change to an account term, the con-
on which the penalty rate will apply, if sumer may reject that change by noti-
the outstanding balance exceeds the fying the creditor of the rejection be-
credit limit as of that date; fore the effective date of the change.
(C) A statement that the penalty rate (2) Effect of rejection. If a creditor is
will not be imposed on the date speci- notified of a rejection of a significant
fied in paragraph (g)(4)(i)(B) of this sec- change to an account term as provided
tion, if the outstanding balance does in paragraph (h)(1) of this section, the
not exceed the credit limit as of that creditor must not:
date; (i) Apply the change to the account;
(D) The circumstances under which (ii) Impose a fee or charge or treat
the penalty rate, if applied, will cease the account as in default solely as a re-
to apply to the account, or that the sult of the rejection; or
penalty rate, if applied, will remain in (iii) Require repayment of the bal-
jspears on DSK121TN23PROD with CFR
effect for a potentially indefinite time ance on the account using a method
period; that is less beneficial to the consumer
39
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§ 1026.10 12 CFR Ch. X (1–1–25 Edition)
than one of the methods listed in payments made in person at any
§ 1026.55(c)(2). branch or office of the card issuer at
(3) Exception. Section 1026.9(h) does which such payments are accepted.
not apply when the creditor has not re- Notwithstanding § 1026.10(b)(2)(ii), a
ceived the consumer’s required min- card issuer may impose a cut-off time
imum periodic payment within 60 days earlier than 5 p.m. for such payments,
after the due date for that payment. if the close of business of the branch or
[76 FR 79772, Dec. 22, 2011, as amended at 86 office is earlier than 5 p.m.
FR 69781, Dec. 8, 2021] (ii) Financial institution. For purposes
of paragraph (b)(3) of this section, ‘‘fi-
§ 1026.10 Payments. nancial institution’’ shall mean a
(a) General rule. A creditor shall cred- bank, savings association, or credit
it a payment to the consumer’s ac- union.
count as of the date of receipt, except (4) Nonconforming payments—(i) In
when a delay in crediting does not re- general. Except as provided in para-
sult in a finance or other charge or ex- graph (b)(4)(ii) of this section, if a cred-
cept as provided in paragraph (b) of itor specifies, on or with the periodic
this section. statement, requirements for the con-
(b) Specific requirements for payments— sumer to follow in making payments as
(1) General rule. A creditor may specify permitted under this § 1026.10, but ac-
reasonable requirements for payments cepts a payment that does not conform
that enable most consumers to make to the requirements, the creditor shall
conforming payments. credit the payment within five days of
(2) Examples of reasonable requirements receipt.
for payments. Reasonable requirements (ii) Payment methods promoted by cred-
for making payment may include: itor. If a creditor promotes a method
(i) Requiring that payments be ac- for making payments, such payments
companied by the account number or shall be considered conforming pay-
payment stub; ments in accordance with this para-
(ii) Setting reasonable cut-off times graph (b) and shall be credited to the
for payments to be received by mail, by consumer’s account as of the date of
electronic means, by telephone, and in receipt, except when a delay in cred-
person (except as provided in paragraph iting does not result in a finance or
(b)(3) of this section), provided that other charge.
such cut-off times shall be no earlier (c) Adjustment of account. If a creditor
than 5 p.m. on the payment due date at fails to credit a payment, as required
the location specified by the creditor by paragraphs (a) or (b) of this section,
for the receipt of such payments; in time to avoid the imposition of fi-
(iii) Specifying that only checks or nance or other charges, the creditor
money orders should be sent by mail; shall adjust the consumer’s account so
(iv) Specifying that payment is to be that the charges imposed are credited
made in U.S. dollars; or to the consumer’s account during the
(v) Specifying one particular address next billing cycle.
for receiving payments, such as a post (d) Crediting of payments when creditor
office box. does not receive or accept payments on
(3) In-person payments on credit card due date—(1) General. Except as pro-
accounts—(i) General. Notwithstanding vided in paragraph (d)(2) of this sec-
§ 1026.10(b), payments on a credit card tion, if a creditor does not receive or
account under an open-end (not home- accept payments by mail on the due
secured) consumer credit plan made in date for payments, the creditor may
person at a branch or office of a card generally not treat a payment received
issuer that is a financial institution the next business day as late for any
prior to the close of business of that purpose. For purposes of this paragraph
branch or office shall be considered re- (d), the ‘‘next business day’’ means the
ceived on the date on which the con- next day on which the creditor accepts
sumer makes the payment. A card or receives payments by mail.
issuer that is a financial institution (2) Payments accepted or received other
jspears on DSK121TN23PROD with CFR
shall not impose a cut-off time earlier than by mail. If a creditor accepts or re-
than the close of business for any such ceives payments made on the due date
40
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Consumer Financial Protection Bureau § 1026.11
by a method other than mail, such as credit balance remaining in the ac-
electronic or telephone payments, the count for more than six months. No
creditor is not required to treat a pay- further action is required if the con-
ment made by that method on the next sumer’s current location is not known
business day as timely, even if it does to the creditor and cannot be traced
not accept mailed payments on the due through the consumer’s last known ad-
date. dress or telephone number.
(e) Limitations on fees related to method (b) Account termination. (1) A creditor
of payment. For credit card accounts shall not terminate an account prior to
under an open-end (not home-secured) its expiration date solely because the
consumer credit plan, a creditor may consumer does not incur a finance
not impose a separate fee to allow con- charge.
sumers to make a payment by any (2) Nothing in paragraph (b)(1) of this
method, such as mail, electronic, or section prohibits a creditor from ter-
telephone payments, unless such pay- minating an account that is inactive
ment method involves an expedited for three or more consecutive months.
service by a customer service rep- An account is inactive for purposes of
resentative of the creditor. For pur- this paragraph if no credit has been ex-
poses of paragraph (e) of this section, tended (such as by purchase, cash ad-
the term ‘‘creditor’’ includes a third vance or balance transfer) and if the
party that collects, receives, or proc- account has no outstanding balance.
esses payments on behalf of a creditor. (c) Timely settlement of estate debts—(1)
(f) Changes by card issuer. If a card General rule. (i) Reasonable policies and
issuer makes a material change in the procedures required. For credit card ac-
address for receiving payments or pro- counts under an open-end (not home-
cedures for handling payments, and secured) consumer credit plan, card
such change causes a material delay in issuers must adopt reasonable written
the crediting of a payment to the con- policies and procedures designed to en-
sumer’s account during the 60-day pe- sure that an administrator of an estate
riod following the date on which such of a deceased accountholder can deter-
change took effect, the card issuer may mine the amount of and pay any bal-
not impose any late fee or finance ance on the account in a timely man-
charge for a late payment on the credit ner.
card account during the 60-day period (ii) Application to joint accounts. Para-
following the date on which the change graph (c) of this section does not apply
took effect. to the account of a deceased consumer
if a joint accountholder remains on the
§ 1026.11 Treatment of credit balances; account.
account termination. (2) Timely statement of balance—(i) Re-
(a) Credit balances. When a credit bal- quirement. Upon request by the admin-
ance in excess of $1 is created on a istrator of an estate, a card issuer
credit account (through transmittal of must provide the administrator with
funds to a creditor in excess of the the amount of the balance on a de-
total balance due on an account, ceased consumer’s account in a timely
through rebates of unearned finance manner.
charges or insurance premiums, or (ii) Safe harbor. For purposes of para-
through amounts otherwise owed to or graph (c)(2)(i) of this section, providing
held for the benefit of the consumer), the amount of the balance on the ac-
the creditor shall: count within 30 days of receiving the
(1) Credit the amount of the credit request is deemed to be timely.
balance to the consumer’s account; (3) Limitations after receipt of request
(2) Refund any part of the remaining from administrator—(i) Limitation on fees
credit balance within seven business and increases in annual percentage rates.
days from receipt of a written request After receiving a request from the ad-
from the consumer; ministrator of an estate for the
(3) Make a good faith effort to refund amount of the balance on a deceased
to the consumer by cash, check, or consumer’s account, a card issuer must
jspears on DSK121TN23PROD with CFR
money order, or credit to a deposit ac- not impose any fees on the account
count of the consumer, any part of the (such as a late fee, annual fee, or over-
41
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§ 1026.12 12 CFR Ch. X (1–1–25 Edition)
the-limit fee) or increase any annual (iii) The card issuer has provided a
percentage rate, except as provided by means to identify the cardholder on
§ 1026.55(b)(2). the account or the authorized user of
(ii) Limitation on trailing or residual the card.
interest. A card issuer must waive or re- (3) Notification to card issuer. Notifica-
bate any additional finance charge due tion to a card issuer is given when
to a periodic interest rate if payment steps have been taken as may be rea-
in full of the balance disclosed pursu- sonably required in the ordinary course
ant to paragraph (c)(2) of this section is of business to provide the card issuer
received within 30 days after disclo- with the pertinent information about
sure. the loss, theft, or possible unauthorized
use of a credit card, regardless of
§ 1026.12 Special credit card provi-
sions. whether any particular officer, em-
ployee, or agent of the card issuer does,
(a) Issuance of credit cards. Regardless in fact, receive the information. Notifi-
of the purpose for which a credit card cation may be given, at the option of
is to be used, including business, com- the person giving it, in person, by tele-
mercial, or agricultural use, no credit phone, or in writing. Notification in
card shall be issued to any person ex- writing is considered given at the time
cept: of receipt or, whether or not received,
(1) In response to an oral or written at the expiration of the time ordinarily
request or application for the card; or required for transmission, whichever is
(2) As a renewal of, or substitute for, earlier.
an accepted credit card.
(4) Effect of other applicable law or
(b) Liability of cardholder for unau-
agreement. If state law or an agreement
thorized use—(1)(i) Definition of unau-
between a cardholder and the card
thorized use. For purposes of this sec-
issuer imposes lesser liability than
tion, the term ‘‘unauthorized use’’
that provided in this paragraph, the
means the use of a credit card by a per-
lesser liability shall govern.
son, other than the cardholder, who
does not have actual, implied, or appar- (5) Business use of credit cards. If 10 or
ent authority for such use, and from more credit cards are issued by one
which the cardholder receives no ben- card issuer for use by the employees of
efit. an organization, this section does not
(ii) Limitation on amount. The liabil- prohibit the card issuer and the organi-
ity of a cardholder for unauthorized zation from agreeing to liability for
use of a credit card shall not exceed the unauthorized use without regard to
lesser of $50 or the amount of money, this section. However, liability for un-
property, labor, or services obtained by authorized use may be imposed on an
the unauthorized use before notifica- employee of the organization, by either
tion to the card issuer under paragraph the card issuer or the organization,
(b)(3) of this section. only in accordance with this section.
(2) Conditions of liability. A cardholder (c) Right of cardholder to assert claims
shall be liable for unauthorized use of a or defenses against card issuer—(1) Gen-
credit card only if: eral rule. When a person who honors a
(i) The credit card is an accepted credit card fails to resolve satisfac-
credit card; torily a dispute as to property or serv-
(ii) The card issuer has provided ade- ices purchased with the credit card in a
quate notice of the cardholder’s max- consumer credit transaction, the card-
imum potential liability and of means holder may assert against the card
by which the card issuer may be noti- issuer all claims (other than tort
fied of loss or theft of the card. The no- claims) and defenses arising out of the
tice shall state that the cardholder’s li- transaction and relating to the failure
ability shall not exceed $50 (or any to resolve the dispute. The cardholder
lesser amount) and that the cardholder may withhold payment up to the
may give oral or written notification, amount of credit outstanding for the
and shall describe a means of notifica- property or services that gave rise to
jspears on DSK121TN23PROD with CFR
tion (for example, a telephone number, the dispute and any finance or other
an address, or both); and charges imposed on that amount.
42
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Consumer Financial Protection Bureau § 1026.12
(2) Adverse credit reports prohibited. If, card issuer if the same procedure is
in accordance with paragraph (c)(1) of constitutionally available to creditors
this section, the cardholder withholds generally: Obtain or enforce a consen-
payment of the amount of credit out- sual security interest in the funds; at-
standing for the disputed transaction, tach or otherwise levy upon the funds;
the card issuer shall not report that or obtain or enforce a court order re-
amount as delinquent until the dispute lating to the funds.
is settled or judgment is rendered. (3) Periodic deductions. (i) This para-
(3) Limitations—(i) General. The rights graph (d) does not prohibit a plan, if
stated in paragraphs (c)(1) and (c)(2) of authorized in writing by the card-
this section apply only if: holder, under which the card issuer
(A) The cardholder has made a good may periodically deduct all or part of
faith attempt to resolve the dispute the cardholder’s credit card debt from
with the person honoring the credit a deposit account held with the card
card; and issuer (subject to the limitations in
(B) The amount of credit extended to § 1026.13(d)(1)).
obtain the property or services that re- (ii) With respect to a covered sepa-
sult in the assertion of the claim or de- rate credit feature accessible by a hy-
fense by the cardholder exceeds $50, brid prepaid-credit card as defined in
and the disputed transaction occurred § 1026.61, for purposes of this paragraph
in the same state as the cardholder’s (d)(3), ‘‘periodically’’ means no more
current designated address or, if not frequently than once per calendar
within the same state, within 100 miles month, such as on a monthly due date
from that address. disclosed on the applicable periodic
(ii) Exclusion. The limitations stated statement in accordance with the re-
in paragraph (c)(3)(i)(B) of this section quirements of § 1026.7(b)(11)(i)(A) or on
shall not apply when the person hon- an earlier date in each calendar month
oring the credit card: in accordance with a written author-
(A) Is the same person as the card ization signed by the consumer.
issuer; (e) Prompt notification of returns and
(B) Is controlled by the card issuer crediting of refunds. (1) When a creditor
directly or indirectly; other than the card issuer accepts the
(C) Is under the direct or indirect return of property or forgives a debt
control of a third person that also di- for services that is to be reflected as a
rectly or indirectly controls the card credit to the consumer’s credit card ac-
issuer; count, that creditor shall, within 7
(D) Controls the card issuer directly business days from accepting the re-
or indirectly; turn or forgiving the debt, transmit a
(E) Is a franchised dealer in the card credit statement to the card issuer
issuer’s products or services; or through the card issuer’s normal chan-
(F) Has obtained the order for the nels for credit statements.
disputed transaction through a mail (2) The card issuer shall, within 3
solicitation made or participated in by business days from receipt of a credit
the card issuer. statement, credit the consumer’s ac-
(d) Offsets by card issuer prohibited—(1) count with the amount of the refund.
General rule. A card issuer may not (3) If a creditor other than a card
take any action, either before or after issuer routinely gives cash refunds to
termination of credit card privileges, consumers paying in cash, the creditor
to offset a cardholder’s indebtedness shall also give credit or cash refunds to
arising from a consumer credit trans- consumers using credit cards, unless it
action under the relevant credit card discloses at the time the transaction is
plan against funds of the cardholder consummated that credit or cash re-
held on deposit with the card issuer. funds for returns are not given. This
(2) Rights of the card issuer. This para- section does not require refunds for re-
graph (d) does not alter or affect the turns nor does it prohibit refunds in
right of a card issuer acting under kind.
state or Federal law to do any of the (f) Discounts; tie-in arrangements. No
jspears on DSK121TN23PROD with CFR
following with regard to funds of a card issuer may, by contract or other-
cardholder held on deposit with the wise:
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§ 1026.13 12 CFR Ch. X (1–1–25 Edition)
(1) Prohibit any person who honors a (4) A reflection on a periodic state-
credit card from offering a discount to ment of the creditor’s failure to credit
a consumer to induce the consumer to properly a payment or other credit
pay by cash, check, or similar means issued to the consumer’s account.
rather than by use of a credit card or (5) A reflection on a periodic state-
its underlying account for the purchase ment of a computational or similar
of property or services; or error of an accounting nature that is
(2) Require any person who honors made by the creditor.
the card issuer’s credit card to open or
(6) A reflection on a periodic state-
maintain any account or obtain any
ment of an extension of credit for
other service not essential to the oper-
ation of the credit card plan from the which the consumer requests addi-
card issuer or any other person, as a tional clarification, including docu-
condition of participation in a credit mentary evidence.
card plan. If maintenance of an ac- (7) The creditor’s failure to mail or
count for clearing purposes is deter- deliver a periodic statement to the
mined to be essential to the operation consumer’s last known address if that
of the credit card plan, it may be re- address was received by the creditor, in
quired only if no service charges or writing, at least 20 days before the end
minimum balance requirements are of the billing cycle for which the state-
imposed. ment was required.
(g) Relation to Electronic Fund Trans- (b) Billing error notice. A billing error
fer Act and Regulation E. For guidance notice is a written notice from a con-
on whether Regulation Z (12 CFR part sumer that:
1026) or Regulation E (12 CFR part 1005) (1) Is received by a creditor at the ad-
applies in instances involving both dress disclosed under § 1026.7(a)(9) or
credit and electronic fund transfer as- (b)(9), as applicable, no later than 60
pects, refer to Regulation E, 12 CFR days after the creditor transmitted the
1005.12(a) regarding issuance and liabil- first periodic statement that reflects
ity for unauthorized use. On matters the alleged billing error;
other than issuance and liability, this (2) Enables the creditor to identify
section applies to the credit aspects of
the consumer’s name and account num-
combined credit/electronic fund trans-
ber; and
fer transactions, as applicable.
(3) To the extent possible, indicates
[76 FR 79772, Dec. 22, 2011, as amended at 81 the consumer’s belief and the reasons
FR 84369, Nov. 22, 2016] for the belief that a billing error exists,
§ 1026.13 Billing error resolution. and the type, date, and amount of the
error.
(a) Definition of billing error. For pur- (c) Time for resolution; general proce-
poses of this section, the term billing dures. (1) The creditor shall mail or de-
error means: liver written acknowledgment to the
(1) A reflection on or with a periodic
consumer within 30 days of receiving a
statement of an extension of credit
billing error notice, unless the creditor
that is not made to the consumer or to
has complied with the appropriate res-
a person who has actual, implied, or
olution procedures of paragraphs (e)
apparent authority to use the con-
sumer’s credit card or open-end credit and (f) of this section, as applicable,
plan. within the 30-day period; and
(2) A reflection on or with a periodic (2) The creditor shall comply with
statement of an extension of credit the appropriate resolution procedures
that is not identified in accordance of paragraphs (e) and (f) of this section,
with the requirements of §§ 1026.7(a)(2) as applicable, within 2 complete billing
or (b)(2), as applicable, and 1026.8. cycles (but in no event later than 90
(3) A reflection on or with a periodic days) after receiving a billing error no-
statement of an extension of credit for tice.
property or services not accepted by (d) Rules pending resolution. Until a
the consumer or the consumer’s des- billing error is resolved under para-
jspears on DSK121TN23PROD with CFR
ignee, or not delivered to the consumer graph (e) or (f) of this section, the fol-
or the consumer’s designee as agreed. lowing rules apply:
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Consumer Financial Protection Bureau § 1026.13
(1) Consumer’s right to withhold dis- serted, it shall within the time limits
puted amount; collection action prohib- in paragraph (c)(2) of this section:
ited. The consumer need not pay (and (1) Correct the billing error and cred-
the creditor may not try to collect) it the consumer’s account with any dis-
any portion of any required payment puted amount and related finance or
that the consumer believes is related other charges, as applicable; and
to the disputed amount (including re- (2) Mail or deliver a correction notice
lated finance or other charges). If the to the consumer.
cardholder has enrolled in an auto- (f) Procedures if different billing error
matic payment plan offered by the card or no billing error occurred. If, after con-
issuer and has agreed to pay the credit ducting a reasonable investigation, a
card indebtedness by periodic deduc- creditor determines that no billing
tions from the cardholder’s deposit ac- error occurred or that a different bill-
count, the card issuer shall not deduct ing error occurred from that asserted,
any part of the disputed amount or re- the creditor shall within the time lim-
lated finance or other charges if a bill- its in paragraph (c)(2) of this section:
ing error notice is received any time up (1) Mail or deliver to the consumer an
to 3 business days before the scheduled explanation that sets forth the reasons
payment date. for the creditor’s belief that the billing
(2) Adverse credit reports prohibited. error alleged by the consumer is incor-
The creditor or its agent shall not (di- rect in whole or in part;
rectly or indirectly) make or threaten (2) Furnish copies of documentary
to make an adverse report to any per- evidence of the consumer’s indebted-
son about the consumer’s credit stand- ness, if the consumer so requests; and
ing, or report that an amount or ac- (3) If a different billing error oc-
count is delinquent, because the con- curred, correct the billing error and
sumer failed to pay the disputed credit the consumer’s account with any
amount or related finance or other disputed amount and related finance or
charges. other charges, as applicable.
(3) Acceleration of debt and restriction (g) Creditor’s rights and duties after
of account prohibited. A creditor shall resolution. If a creditor, after com-
not accelerate any part of the con- plying with all of the requirements of
sumer’s indebtedness or restrict or this section, determines that a con-
close a consumer’s account solely be- sumer owes all or part of the disputed
cause the consumer has exercised in amount and related finance or other
good faith rights provided by this sec- charges, the creditor:
tion. A creditor may be subject to the (1) Shall promptly notify the con-
forfeiture penalty under 15 U.S.C. sumer in writing of the time when pay-
1666(e) for failure to comply with any ment is due and the portion of the dis-
of the requirements of this section. puted amount and related finance or
(4) Permitted creditor actions. A cred- other charges that the consumer still
itor is not prohibited from taking ac- owes;
tion to collect any undisputed portion (2) Shall allow any time period dis-
of the item or bill; from deducting any closed under § 1026.6(a)(1) or (b)(2)(v), as
disputed amount and related finance or applicable, and § 1026.7(a)(8) or (b)(8), as
other charges from the consumer’s applicable, during which the consumer
credit limit on the account; or from re- can pay the amount due under para-
flecting a disputed amount and related graph (g)(1) of this section without in-
finance or other charges on a periodic curring additional finance or other
statement, provided that the creditor charges;
indicates on or with the periodic state- (3) May report an account or amount
ment that payment of any disputed as delinquent because the amount due
amount and related finance or other under paragraph (g)(1) of this section
charges is not required pending the remains unpaid after the creditor has
creditor’s compliance with this section. allowed any time period disclosed
(e) Procedures if billing error occurred under § 1026.6(a)(1) or (b)(2)(v), as appli-
jspears on DSK121TN23PROD with CFR
as asserted. If a creditor determines cable, and § 1026.7(a)(8) or (b)(8), as ap-
that a billing error occurred as as- plicable or 10 days (whichever is
45
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§ 1026.14 12 CFR Ch. X (1–1–25 Edition)
longer) during which the consumer can credit feature with respect to a par-
pay the amount; but ticular transaction.
(4) May not report that an amount or [76 FR 79772, Dec. 22, 2011, as amended at 81
account is delinquent because the FR 84369, Nov. 22, 2016]
amount due under paragraph (g)(1) of
the section remains unpaid, if the cred- § 1026.14 Determination of annual per-
itor receives (within the time allowed centage rate.
for payment in paragraph (g)(3) of this (a) General rule. The annual percent-
section) further written notice from age rate is a measure of the cost of
the consumer that any portion of the credit, expressed as a yearly rate. An
billing error is still in dispute, unless annual percentage rate shall be consid-
the creditor also: ered accurate if it is not more than
(i) Promptly reports that the amount 1⁄8th of 1 percentage point above or
or account is in dispute; below the annual percentage rate de-
(ii) Mails or delivers to the consumer termined in accordance with this sec-
(at the same time the report is made) a tion. An error in disclosure of the an-
written notice of the name and address nual percentage rate or finance charge
of each person to whom the creditor shall not, in itself, be considered a vio-
makes a report; and lation of this part if:
(iii) Promptly reports any subsequent (1) The error resulted from a cor-
resolution of the reported delinquency responding error in a calculation tool
to all persons to whom the creditor has used in good faith by the creditor; and
made a report. (2) Upon discovery of the error, the
(h) Reassertion of billing error. A cred- creditor promptly discontinues use of
itor that has fully complied with the that calculation tool for disclosure
requirements of this section has no fur- purposes, and notifies the Bureau in
ther responsibilities under this section writing of the error in the calculation
(other than as provided in paragraph tool.
(g)(4) of this section) if a consumer re- (b) Annual percentage rate—in general.
asserts substantially the same billing Where one or more periodic rates may
error. be used to compute the finance charge,
(i) Relation to Electronic Fund Transfer the annual percentage rate(s) to be dis-
Act and Regulation E. A creditor shall closed for purposes of §§ 1026.60, 1026.40,
comply with the requirements of Regu- 1026.6, 1026.7(a)(4) or (b)(4), 1026.9,
lation E, 12 CFR 1005.11, and 1005.18(e) 1026.15, 1026.16, 1026.26, 1026.55, and
as applicable, governing error resolu- 1026.56 shall be computed by multi-
tion rather than those of paragraphs plying each periodic rate by the num-
(a), (b), (c), (e), (f), and (h) of this sec- ber of periods in a year.
tion if: (c) Optional effective annual percentage
(1) Except with respect to a prepaid rate for periodic statements for creditors
account as defined in § 1026.61, an ex- offering open-end credit plans secured by
tension of credit that is incident to an a consumer’s dwelling. A creditor offer-
electronic fund transfer occurs under ing an open-end plan subject to the re-
an agreement between the consumer quirements of § 1026.40 need not disclose
and a financial institution to extend an effective annual percentage rate.
credit when the consumer’s account is Such a creditor may, at its option, dis-
overdrawn or to maintain a specified close an effective annual percentage
minimum balance in the consumer’s rate(s) pursuant to § 1026.7(a)(7) and
account; or compute the effective annual percent-
(2) With regard to a covered separate age rate as follows:
credit feature and an asset feature of a (1) Solely periodic rates imposed. If the
prepaid account where both are acces- finance charge is determined solely by
sible by a hybrid prepaid-credit card as applying one or more periodic rates, at
defined in § 1026.61, an extension of the creditor’s option, either:
credit that is incident to an electronic (i) By multiplying each periodic rate
fund transfer occurs when the hybrid by the number of periods in a year; or
prepaid-credit card accesses both funds (ii) By dividing the total finance
jspears on DSK121TN23PROD with CFR
in the asset feature of the prepaid ac- charge for the billing cycle by the sum
count and a credit extension from the of the balances to which the periodic
46
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Consumer Financial Protection Bureau § 1026.15
rates were applied and multiplying the nominator of the fraction under this
quotient (expressed as a percentage) by paragraph.
the number of billing cycles in a year. (4) If the finance charge imposed dur-
(2) Minimum or fixed charge, but not ing the billing cycle is or includes a
transaction charge, imposed. If the fi- minimum, fixed, or other charge not
nance charge imposed during the bill- due to the application of a periodic
ing cycle is or includes a minimum, rate and the total finance charge im-
fixed, or other charge not due to the posed during the billing cycle does not
application of a periodic rate, other exceed 50 cents for a monthly or longer
than a charge with respect to any spe- billing cycle, or the pro rata part of 50
cific transaction during the billing cents for a billing cycle shorter than
cycle, by dividing the total finance monthly, at the creditor’s option, by
charge for the billing cycle by the multiplying each applicable periodic
amount of the balance(s) to which it is rate by the number of periods in a
applicable and multiplying the year, notwithstanding the provisions of
quotient (expressed as a percentage) by paragraphs (c)(2) and (c)(3) of this sec-
the number of billing cycles in a year. tion.
(d) Calculations where daily periodic
If there is no balance to which the fi-
rate applied. If the provisions of para-
nance charge is applicable, an annual
graph (c)(1)(ii) or (c)(2) of this section
percentage rate cannot be determined
apply and all or a portion of the fi-
under this section. Where the finance
nance charge is determined by the ap-
charge imposed during the billing cycle plication of one or more daily periodic
is or includes a loan fee, points, or rates, the annual percentage rate may
similar charge that relates to opening, be determined either:
renewing, or continuing an account, (1) By dividing the total finance
the amount of such charge shall not be charge by the average of the daily bal-
included in the calculation of the an- ances and multiplying the quotient by
nual percentage rate. the number of billing cycles in a year;
(3) Transaction charge imposed. If the or
finance charge imposed during the bill- (2) By dividing the total finance
ing cycle is or includes a charge relat- charge by the sum of the daily balances
ing to a specific transaction during the and multiplying the quotient by 365.
billing cycle (even if the total finance
charge also includes any other min- § 1026.15 Right of rescission.
imum, fixed, or other charge not due to (a) Consumer’s right to rescind. (1)(i)
the application of a periodic rate), by Except as provided in paragraph
dividing the total finance charge im- (a)(1)(ii) of this section, in a credit plan
posed during the billing cycle by the in which a security interest is or will
total of all balances and other amounts be retained or acquired in a consumer’s
on which a finance charge was imposed principal dwelling, each consumer
during the billing cycle without dupli- whose ownership interest is or will be
cation, and multiplying the quotient subject to the security interest shall
(expressed as a percentage) by the have the right to rescind: each credit
number of billing cycles in a year, ex- extension made under the plan; the
cept that the annual percentage rate plan when the plan is opened; a secu-
shall not be less than the largest rate rity interest when added or increased
determined by multiplying each peri- to secure an existing plan; and the in-
odic rate imposed during the billing crease when a credit limit on the plan
cycle by the number of periods in a is increased.
year. Where the finance charge im- (ii) As provided in section 125(e) of
posed during the billing cycle is or in- the Act, the consumer does not have
cludes a loan fee, points, or similar the right to rescind each credit exten-
charge that relates to the opening, re- sion made under the plan if such exten-
newing, or continuing an account, the sion is made in accordance with a pre-
amount of such charge shall not be in- viously established credit limit for the
cluded in the calculation of the annual
jspears on DSK121TN23PROD with CFR
plan.
percentage rate. See appendix F to this (2) To exercise the right to rescind,
part regarding determination of the de- the consumer shall notify the creditor
47
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§ 1026.15 12 CFR Ch. X (1–1–25 Edition)
of the rescission by mail, telegram, or (1) The retention or acquisition of a
other means of written communica- security interest in the consumer’s
tion. Notice is considered given when principal dwelling.
mailed, or when filed for telegraphic (2) The consumer’s right to rescind,
transmission, or, if sent by other as described in paragraph (a)(1) of this
means, when delivered to the creditor’s section.
designated place of business. (3) How to exercise the right to re-
(3) The consumer may exercise the scind, with a form for that purpose,
right to rescind until midnight of the designating the address of the credi-
third business day following the occur- tor’s place of business.
rence described in paragraph (a)(1) of (4) The effects of rescission, as de-
this section that gave rise to the right scribed in paragraph (d) of this section.
(5) The date the rescission period ex-
of rescission, delivery of the notice re-
pires.
quired by paragraph (b) of this section,
(c) Delay of creditor’s performance. Un-
or delivery of all material disclosures,
less a consumer waives the right to re-
whichever occurs last. If the required
scind under paragraph (e) of this sec-
notice and material disclosures are not tion, no money shall be disbursed other
delivered, the right to rescind shall ex- than in escrow, no services shall be
pire 3 years after the occurrence giving performed, and no materials delivered
rise to the right of rescission, or upon until after the rescission period has ex-
transfer of all of the consumer’s inter- pired and the creditor is reasonably
est in the property, or upon sale of the satisfied that the consumer has not re-
property, whichever occurs first. In the scinded. A creditor does not violate
case of certain administrative pro- this section if a third party with no
ceedings, the rescission period shall be knowledge of the event activating the
extended in accordance with section rescission right does not delay in pro-
125(f) of the Act. The term material dis- viding materials or services, as long as
closures means the information that the debt incurred for those materials
must be provided to satisfy the require- or services is not secured by the prop-
ments in § 1026.6 with regard to the erty subject to rescission.
method of determining the finance (d) Effects of rescission. (1) When a
charge and the balance upon which a fi- consumer rescinds a transaction, the
nance charge will be imposed, the an- security interest giving rise to the
nual percentage rate, the amount or right of rescission becomes void, and
method of determining the amount of the consumer shall not be liable for
any membership or participation fee any amount, including any finance
that may be imposed as part of the charge.
plan, and the payment information de- (2) Within 20 calendar days after re-
scribed in § 1026.40(d)(5)(i) and (ii) that ceipt of a notice of rescission, the cred-
is required under § 1026.6(e)(2). itor shall return any money or prop-
(4) When more than one consumer erty that has been given to anyone in
connection with the transaction and
has the right to rescind, the exercise of
shall take any action necessary to re-
the right by one consumer shall be ef-
flect the termination of the security
fective as to all consumers.
interest.
(b) Notice of right to rescind. In any (3) If the creditor has delivered any
transaction or occurrence subject to money or property, the consumer may
rescission, a creditor shall deliver two retain possession until the creditor has
copies of the notice of the right to re- met its obligation under paragraph
scind to each consumer entitled to re- (d)(2) of this section. When the creditor
scind (one copy to each if the notice is has complied with that paragraph, the
delivered in electronic form in accord- consumer shall tender the money or
ance with the consumer consent and property to the creditor or, where the
other applicable provisions of the E- latter would be impracticable or in-
Sign Act). The notice shall identify the equitable, tender its reasonable value.
transaction or occurrence and clearly At the consumer’s option, tender of
jspears on DSK121TN23PROD with CFR
and conspicuously disclose the fol- property may be made at the location
lowing: of the property or at the consumer’s
48
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Consumer Financial Protection Bureau § 1026.16
residence. Tender of money must be nance charge under § 1026.4 that could
made at the creditor’s designated place be imposed.
of business. If the creditor does not (ii) Any periodic rate that may be ap-
take possession of the money or prop- plied expressed as an annual percent-
erty within 20 calendar days after the age rate as determined under
consumer’s tender, the consumer may § 1026.14(b). If the plan provides for a
keep it without further obligation. variable periodic rate, that fact shall
(4) The procedures outlined in para- be disclosed.
graphs (d)(2) and (3) of this section may (iii) Any membership or participa-
be modified by court order. tion fee that could be imposed.
(e) Consumer’s waiver of right to re- (2) If an advertisement for credit to
scind. The consumer may modify or finance the purchase of goods or serv-
waive the right to rescind if the con- ices specified in the advertisement
sumer determines that the extension of states a periodic payment amount, the
credit is needed to meet a bona fide advertisement shall also state the total
personal financial emergency. To mod- of payments and the time period to
ify or waive the right, the consumer repay the obligation, assuming that
shall give the creditor a dated written the consumer pays only the periodic
statement that describes the emer- payment amount advertised. The dis-
gency, specifically modifies or waives closure of the total of payments and
the right to rescind, and bears the sig- the time period to repay the obligation
nature of all the consumers entitled to must be equally prominent to the
rescind. Printed forms for this purpose statement of the periodic payment
are prohibited. amount.
(f) Exempt transactions. The right to (c) Catalogs or other multiple-page ad-
rescind does not apply to the following: vertisements; electronic advertisements. (1)
(1) A residential mortgage trans- If a catalog or other multiple-page ad-
action. vertisement, or an electronic adver-
(2) A credit plan in which a state tisement (such as an advertisement ap-
agency is a creditor. pearing on an Internet Web site), gives
information in a table or schedule in
§ 1026.16 Advertising. sufficient detail to permit determina-
(a) Actually available terms. If an ad- tion of the disclosures required by
vertisement for credit states specific paragraph (b) of this section, it shall be
credit terms, it shall state only those considered a single advertisement if:
terms that actually are or will be ar- (i) The table or schedule is clearly
ranged or offered by the creditor. and conspicuously set forth; and
(b) Advertisement of terms that require (ii) Any statement of terms set forth
additional disclosures. (1) Any term re- in § 1026.6 appearing anywhere else in
quired to be disclosed under the catalog or advertisement clearly
§ 1026.6(b)(3) set forth affirmatively or refers to the page or location where the
negatively in an advertisement for an table or schedule begins.
open-end (not home-secured) credit (2) A catalog or other multiple-page
plan triggers additional disclosures advertisement or an electronic adver-
under this section. Any term required tisement (such as an advertisement ap-
to be disclosed under § 1026.6(a)(1) or pearing on an Internet Web site) com-
(a)(2) set forth affirmatively or nega- plies with this paragraph if the table or
tively in an advertisement for a home- schedule of terms includes all appro-
equity plan subject to the require- priate disclosures for a representative
ments of § 1026.40 triggers additional scale of amounts up to the level of the
disclosures under this section. If any of more commonly sold higher-priced
the terms that trigger additional dis- property or services offered.
closures under this paragraph is set (d) Additional requirements for home-
forth in an advertisement, the adver- equity plans—(1) Advertisement of terms
tisement shall also clearly and con- that require additional disclosures. If any
spicuously set forth the following: of the terms required to be disclosed
jspears on DSK121TN23PROD with CFR
(i) Any minimum, fixed, transaction, under § 1026.6(a)(1) or (a)(2) or the pay-
activity or similar charge that is a fi- ment terms of the plan are set forth,
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§ 1026.16 12 CFR Ch. X (1–1–25 Edition)
affirmatively or negatively, in an ad- (ii) The amount and timing of the
vertisement for a home-equity plan balloon payment that will result if the
subject to the requirements of § 1026.40, consumer makes only the minimum
the advertisement also shall clearly payments for the maximum period of
and conspicuously set forth the fol- time that the consumer is permitted to
lowing: make such payments.
(i) Any loan fee that is a percentage (4) Tax implications. An advertisement
of the credit limit under the plan and that states that any interest expense
an estimate of any other fees imposed incurred under the home-equity plan is
for opening the plan, stated as a single or may be tax deductible may not be
dollar amount or a reasonable range. misleading in this regard. If an adver-
(ii) Any periodic rate used to com- tisement distributed in paper form or
pute the finance charge, expressed as through the Internet (rather than by
an annual percentage rate as deter- radio or television) is for a home-eq-
mined under § 1026.14(b). uity plan secured by the consumer’s
(iii) The maximum annual percent- principal dwelling, and the advertise-
age rate that may be imposed in a vari- ment states that the advertised exten-
able-rate plan. sion of credit may exceed the fair mar-
(2) Discounted and premium rates. If an ket value of the dwelling, the adver-
advertisement states an initial annual tisement shall clearly and conspicu-
percentage rate that is not based on ously state that:
the index and margin used to make (i) The interest on the portion of the
later rate adjustments in a variable- credit extension that is greater than
rate plan, the advertisement also shall the fair market value of the dwelling is
state with equal prominence and in not tax deductible for Federal income
close proximity to the initial rate: tax purposes; and
(i) The period of time such initial (ii) The consumer should consult a
rate will be in effect; and tax adviser for further information re-
(ii) A reasonably current annual per- garding the deductibility of interest
centage rate that would have been in and charges.
effect using the index and margin. (5) Misleading terms. An advertise-
(3) Balloon payment. If an advertise- ment may not refer to a home-equity
ment contains a statement of any min- plan as ‘‘free money’’ or contain a
imum periodic payment and a balloon similarly misleading term.
payment may result if only the min- (6) Promotional rates and payments. (i)
imum periodic payments are made, Definitions. The following definitions
even if such a payment is uncertain or apply for purposes of paragraph (d)(6)
unlikely, the advertisement also shall of this section:
state with equal prominence and in (A) Promotional rate. The term ‘‘pro-
close proximity to the minimum peri- motional rate’’ means, in a variable-
odic payment statement that a balloon rate plan, any annual percentage rate
payment may result, if applicable. A that is not based on the index and mar-
balloon payment results if paying the gin that will be used to make rate ad-
minimum periodic payments does not justments under the plan, if that rate
fully amortize the outstanding balance is less than a reasonably current an-
by a specified date or time, and the nual percentage rate that would be in
consumer is required to repay the en- effect under the index and margin that
tire outstanding balance at such time. will be used to make rate adjustments
If a balloon payment will occur when under the plan.
the consumer makes only the min- (B) Promotional payment. The term
imum payments required under the ‘‘promotional payment’’ means:
plan, an advertisement for such a pro- (1) For a variable-rate plan, any min-
gram which contains any statement of imum payment applicable for a pro-
any minimum periodic payment shall motional period that:
also state with equal prominence and (i) Is not derived by applying the
in close proximity to the minimum index and margin to the outstanding
periodic payment statement: balance when such index and margin
jspears on DSK121TN23PROD with CFR
(i) That a balloon payment will re- will be used to determine other min-
sult; and imum payments under the plan; and
50
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Consumer Financial Protection Bureau § 1026.16
(ii) Is less than other minimum pay- ing any of the terms requiring addi-
ments under the plan derived by apply- tional disclosures under paragraphs
ing a reasonably current index and (b)(1) or (d)(1) of this section may alter-
margin that will be used to determine natively comply with paragraphs (b)(1)
the amount of such payments, given an or (d)(1) of this section by stating the
assumed balance. information required by paragraphs
(2) For a plan other than a variable- (b)(1)(ii) or (d)(1)(ii) of this section, as
rate plan, any minimum payment ap- applicable, and listing a toll-free tele-
plicable for a promotional period if phone number, or any telephone num-
that payment is less than other pay- ber that allows a consumer to reverse
ments required under the plan given an the phone charges when calling for in-
assumed balance. formation, along with a reference that
(C) Promotional period. A ‘‘pro- such number may be used by con-
motional period’’ means a period of sumers to obtain the additional cost
time, less than the full term of the information.
loan, that the promotional rate or pro- (f) Misleading terms. An advertisement
motional payment may be applicable. may not refer to an annual percentage
(ii) Stating the promotional period and rate as ‘‘fixed,’’ or use a similar term,
post-promotional rate or payments. If any unless the advertisement also specifies
annual percentage rate that may be ap- a time period that the rate will be fixed
plied to a plan is a promotional rate, or and the rate will not increase during
if any payment applicable to a plan is that period, or if no such time period is
a promotional payment, the following provided, the rate will not increase
must be disclosed in any advertise- while the plan is open.
ment, other than television or radio (g) Promotional rates and fees—(1)
advertisements, in a clear and con- Scope. The requirements of this para-
spicuous manner with equal promi- graph apply to any advertisement of an
nence and in close proximity to each
open-end (not home-secured) plan, in-
listing of the promotional rate or pay-
cluding promotional materials accom-
ment:
panying applications or solicitations
(A) The period of time during which
subject to § 1026.60(c) or accompanying
the promotional rate or promotional
applications or solicitations subject to
payment will apply;
§ 1026.60(e).
(B) In the case of a promotional rate,
any annual percentage rate that will (2) Definitions. (i) Promotional rate
apply under the plan. If such rate is means any annual percentage rate ap-
variable, the annual percentage rate plicable to one or more balances or
must be disclosed in accordance with transactions on an open-end (not home-
the accuracy standards in § 1026.40 or secured) plan for a specified period of
§ 1026.16(b)(1)(ii) as applicable; and time that is lower than the annual per-
(C) In the case of a promotional pay- centage rate that will be in effect at
ment, the amounts and time periods of the end of that period on such balances
any payments that will apply under or transactions.
the plan. In variable-rate transactions, (ii) Introductory rate means a pro-
payments that will be determined motional rate offered in connection
based on application of an index and with the opening of an account.
margin shall be disclosed based on a (iii) Promotional period means the
reasonably current index and margin. maximum time period for which a pro-
(iii) Envelope excluded. The require- motional rate or promotional fee may
ments in paragraph (d)(6)(ii) of this be applicable.
section do not apply to an envelope in (iv) Promotional fee means a fee re-
which an application or solicitation is quired to be disclosed under
mailed, or to a banner advertisement § 1026.6(b)(1) and (2) applicable to an
or pop-up advertisement linked to an open-end (not home-secured) plan, or to
application or solicitation provided one or more balances or transactions
electronically. on an open-end (not home-secured)
(e) Alternative disclosures—television or plan, for a specified period of time that
jspears on DSK121TN23PROD with CFR
radio advertisements. An advertisement is lower than the fee that will be in ef-
made through television or radio stat- fect at the end of that period for such
51
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§ 1026.16 12 CFR Ch. X (1–1–25 Edition)
plan or types of balances or trans- advertisement or pop-up advertise-
actions. ment, linked to an application or solic-
(v) Introductory fee means a pro- itation provided electronically.
motional fee offered in connection with (h) Deferred interest or similar offers—
the opening of an account. (1) Scope. The requirements of this
(3) Stating the term ‘‘introductory’’. If paragraph apply to any advertisement
any annual percentage rate or fee that of an open-end credit plan not subject
may be applied to the account is an in- to § 1026.40, including promotional ma-
troductory rate or introductory fee, terials accompanying applications or
the term introductory or intro must be solicitations subject to § 1026.60(c) or
in immediate proximity to each listing accompanying applications or solicita-
of the introductory rate or introduc- tions subject to § 1026.60(e).
tory fee in a written or electronic ad- (2) Definitions. ‘‘Deferred interest’’
vertisement. means finance charges, accrued on bal-
(4) Stating the promotional period and ances or transactions, that a consumer
post-promotional rate or fee. If any an- is not obligated to pay or that will be
nual percentage rate that may be ap- waived or refunded to a consumer if
plied to the account is a promotional those balances or transactions are paid
rate under paragraph (g)(2)(i) of this in full by a specified date. The max-
section or any fee that may be applied imum period from the date the con-
to the account is a promotional fee sumer becomes obligated for the bal-
under paragraph (g)(2)(iv) of this sec- ance or transaction until the specified
tion, the information in paragraphs date by which the consumer must pay
(g)(4)(i) and, as applicable, (g)(4)(ii) or the balance or transaction in full in
(iii) of this section must be stated in a order to avoid finance charges, or re-
clear and conspicuous manner in the ceive a waiver or refund of finance
advertisement. If the rate or fee is charges, is the ‘‘deferred interest pe-
stated in a written or electronic adver- riod.’’ ‘‘Deferred interest’’ does not in-
tisement, the information in para- clude any finance charges the con-
graphs (g)(4)(i) and, as applicable, sumer avoids paying in connection
(g)(4)(ii) or (iii) of this section must with any recurring grace period.
also be stated in a prominent location (3) Stating the deferred interest period.
closely proximate to the first listing of If a deferred interest offer is adver-
the promotional rate or promotional tised, the deferred interest period must
fee. be stated in a clear and conspicuous
(i) When the promotional rate or pro- manner in the advertisement. If the
motional fee will end; phrase ‘‘no interest’’ or similar term
(ii) The annual percentage rate that regarding the possible avoidance of in-
will apply after the end of the pro- terest obligations under the deferred
motional period. If such rate is vari- interest program is stated, the term ‘‘if
able, the annual percentage rate must paid in full’’ must also be stated in a
comply with the accuracy standards in clear and conspicuous manner pre-
§ 1026.60(c)(2), § 1026.60(d)(3), ceding the disclosure of the deferred in-
§ 1026.60(e)(4), or § 1026.16(b)(1)(ii), as ap- terest period in the advertisement. If
plicable. If such rate cannot be deter- the deferred interest offer is included
mined at the time disclosures are given in a written or electronic advertise-
because the rate depends at least in ment, the deferred interest period and,
part on a later determination of the if applicable, the term ‘‘if paid in full’’
consumer’s creditworthiness, the ad- must also be stated in immediate prox-
vertisement must disclose the specific imity to each statement of ‘‘no inter-
rates or the range of rates that might est,’’ ‘‘no payments,’’ ‘‘deferred inter-
apply; and est,’’ ‘‘same as cash,’’ or similar term
(iii) The fee that will apply after the regarding interest or payments during
end of the promotional period. the deferred interest period.
(5) Envelope excluded. The require- (4) Stating the terms of the deferred in-
ments in paragraph (g)(4) of this sec- terest or similar offer. If any deferred in-
tion do not apply to an envelope or terest offer is advertised, the informa-
jspears on DSK121TN23PROD with CFR
other enclosure in which an application tion in paragraphs (h)(4)(i) and (h)(4)(ii)
or solicitation is mailed, or to a banner of this section must be stated in the
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Consumer Financial Protection Bureau § 1026.17
advertisement, in language similar to the E-Sign Act in the circumstances
Sample G–24 in appendix G to this part. set forth in those sections. The disclo-
If the deferred interest offer is included sures shall be grouped together, shall
in a written or electronic advertise- be segregated from everything else, and
ment, the information in paragraphs shall not contain any information not
(h)(4)(i) and (h)(4)(ii) of this section directly related to the disclosures re-
must also be stated in a prominent lo- quired under § 1026.18, § 1026.20(c) and
cation closely proximate to the first (d), or § 1026.47. The disclosures re-
statement of ‘‘no interest,’’ ‘‘no pay- quired by § 1026.20(d) shall be provided
ments,’’ ‘‘deferred interest,’’ ‘‘same as as a separate document from all other
cash,’’ or similar term regarding inter- written materials. The disclosures may
est or payments during the deferred in- include an acknowledgment of receipt,
terest period. the date of the transaction, and the
(i) A statement that interest will be consumer’s name, address, and account
charged from the date the consumer number. The following disclosures may
becomes obligated for the balance or be made together with or separately
transaction subject to the deferred in- from other required disclosures: The
terest offer if the balance or trans- creditor’s identity under § 1026.18(a),
action is not paid in full within the de- the variable rate example under
ferred interest period; and § 1026.18(f)(1)(iv), insurance or debt can-
(ii) A statement, if applicable, that cellation under § 1026.18(n), and certain
interest will be charged from the date security interest charges under
the consumer incurs the balance or § 1026.18(o). The itemization of the
transaction subject to the deferred in- amount financed under § 1026.18(c)(1)
terest offer if the account is in default must be separate from the other disclo-
before the end of the deferred interest sures under § 1026.18, except for private
period. education loan disclosures made in
(5) Envelope excluded. The require- compliance with § 1026.47.
ments in paragraph (h)(4) of this sec- (2) Except for private education loan
tion do not apply to an envelope or disclosures made in compliance with
other enclosure in which an application § 1026.47, the terms ‘‘finance charge’’
or solicitation is mailed, or to a banner and ‘‘annual percentage rate,’’ when re-
advertisement or pop-up advertisement quired to be disclosed under § 1026.18(d)
linked to an application or solicitation and (e) together with a corresponding
provided electronically. amount or percentage rate, shall be
more conspicuous than any other dis-
Subpart C—Closed-End Credit closure, except the creditor’s identity
under § 1026.18(a). For private education
§ 1026.17 General disclosure require- loan disclosures made in compliance
ments. with § 1026.47, the term ‘‘annual per-
(a) Form of disclosures. Except for the centage rate,’’ and the corresponding
disclosures required by § 1026.19(e), (f), percentage rate must be less con-
and (g): spicuous than the term ‘‘finance
(1) The creditor shall make the dis- charge’’ and corresponding amount
closures required by this subpart clear- under § 1026.18(d), the interest rate
ly and conspicuously in writing, in a under §§ 1026.47(b)(1)(i) and (c)(1), and
form that the consumer may keep. The the notice of the right to cancel under
disclosures required by this subpart § 1026.47(c)(4).
may be provided to the consumer in (b) Time of disclosures. The creditor
electronic form, subject to compliance shall make disclosures before con-
with the consumer consent and other summation of the transaction. In cer-
applicable provisions of the Electronic tain residential mortgage transactions,
Signatures in Global and National special timing requirements are set
Commerce Act (E-Sign Act) (15 U.S.C. forth in § 1026.19(a). In certain variable-
7001 et seq.). The disclosures required by rate transactions, special timing re-
§§ 1026.17(g), 1026.19(b), and 1026.24 may quirements for variable-rate disclo-
be provided to the consumer in elec- sures are set forth in §§ 1026.19(b) and
jspears on DSK121TN23PROD with CFR
tronic form without regard to the con- 1026.20(c) and (d). For private education
sumer consent or other provisions of loan disclosures made in compliance
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§ 1026.17 12 CFR Ch. X (1–1–25 Edition)
with § 1026.47, special timing require- days shorter or 21 days longer than a
ments are set forth in § 1026.46(d). In regular period; and
certain transactions involving mail or (iii) For transactions in which the
telephone orders or a series of sales, term is at least 10 years, a first period
the timing of disclosures may be de- shorter than or not more than 32 days
layed in accordance with paragraphs longer than a regular period.
(g) and (h) of this section. This para- (5) If an obligation is payable on de-
graph (b) does not apply to the disclo- mand, the creditor shall make the dis-
sures required by §§ 1026.19(e), (f), and closures based on an assumed maturity
(g) and 1026.20(e). of 1 year. If an alternate maturity date
(c) Basis of disclosures and use of esti- is stated in the legal obligation be-
mates. (1) The disclosures shall reflect tween the parties, the disclosures shall
the terms of the legal obligation be- be based on that date.
tween the parties. (6)(i) A series of advances under an
(2)(i) If any information necessary for agreement to extend credit up to a cer-
an accurate disclosure is unknown to tain amount may be considered as one
the creditor, the creditor shall make transaction.
the disclosure based on the best infor- (ii) When a multiple-advance loan to
mation reasonably available at the finance the construction of a dwelling
time the disclosure is provided to the may be permanently financed by the
consumer, and shall state clearly that same creditor, the construction phase
the disclosure is an estimate. and the permanent phase may be treat-
(ii) For a transaction in which a por- ed as either one transaction or more
tion of the interest is determined on a than one transaction.
per-diem basis and collected at con- (d) Multiple creditors; multiple con-
summation, any disclosure affected by sumers. If a transaction involves more
the per-diem interest shall be consid- than one creditor, only one set of dis-
ered accurate if the disclosure is based closures shall be given and the credi-
on the information known to the cred- tors shall agree among themselves
itor at the time that the disclosure which creditor must comply with the
documents are prepared for consumma- requirements that this part imposes on
tion of the transaction.
any or all of them. If there is more
(3) The creditor may disregard the ef- than one consumer, the disclosures
fects of the following in making cal- may be made to any consumer who is
culations and disclosures. primarily liable on the obligation. If
(i) That payments must be collected the transaction is rescindable under
in whole cents. § 1026.23, however, the disclosures shall
(ii) That dates of scheduled payments be made to each consumer who has the
and advances may be changed because right to rescind.
the scheduled date is not a business (e) Effect of subsequent events. If a dis-
day. closure becomes inaccurate because of
(iii) That months have different num- an event that occurs after the creditor
bers of days. delivers the required disclosures, the
(iv) The occurrence of leap year. inaccuracy is not a violation of this
(4) In making calculations and disclo- part, although new disclosures may be
sures, the creditor may disregard any required under paragraph (f) of this
irregularity in the first period that section, § 1026.19, § 1026.20, or
falls within the limits described below § 1026.48(c)(4).
and any payment schedule irregularity (f) Early disclosures. Except for pri-
that results from the irregular first pe- vate education loan disclosures made
riod: in compliance with § 1026.47, if disclo-
(i) For transactions in which the sures required by this subpart are
term is less than 1 year, a first period given before the date of consummation
not more than 6 days shorter or 13 days of a transaction and a subsequent
longer than a regular period; event makes them inaccurate, the
(ii) For transactions in which the creditor shall disclose before con-
jspears on DSK121TN23PROD with CFR
term is at least 1 year and less than 10 summation (subject to the provisions
years, a first period not more than 11 of § 1026.19(a)(2), (e), and (f)):
54
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Consumer Financial Protection Bureau § 1026.18
(1) Any changed term unless the term any unearned finance charge on an ex-
was based on an estimate in accordance isting balance.
with § 1026.17(c)(2) and was labeled an (2) The creditor retains no security
estimate; interest in any property after the cred-
(2) All changed terms, if the annual itor has received payments equal to the
percentage rate at the time of con- cash price and any finance charge at-
summation varies from the annual per- tributable to the sale of that property.
centage rate disclosed earlier by more For purposes of this provision, in the
than 1⁄8 of 1 percentage point in a reg- case of items purchased on different
ular transaction, or more than 1⁄4 of 1 dates, the first purchased is deemed the
percentage point in an irregular trans- first item paid for; in the case of items
action, as defined in § 1026.22(a). purchased on the same date, the lowest
(g) Mail or telephone orders—delay in priced is deemed the first item paid for.
disclosures. Except for private edu- (i) Interim student credit extensions.
cation loan disclosures made in compli- For transactions involving an interim
ance with § 1026.47 and mortgage disclo- credit extension under a student credit
sures made in compliance with program for which an application is re-
§ 1026.19(a) or (e), (f), and (g), if a cred- ceived prior to the mandatory compli-
itor receives a purchase order or a re- ance date of §§ 1026.46, 47, and 48, the
quest for an extension of credit by creditor need not make the following
mail, telephone, or facsimile machine disclosures: the finance charge under
without face-to-face or direct tele- § 1026.18(d), the payment schedule under
phone solicitation, the creditor may § 1026.18(g), the total of payments under
delay the disclosures until the due date § 1026.18(h), or the total sale price under
of the first payment, if the following § 1026.18(j) at the time the credit is ac-
information for representative tually extended. The creditor must
amounts or ranges of credit is made make complete disclosures at the time
available in written form or in elec- the creditor and consumer agree upon
tronic form to the consumer or to the the repayment schedule for the total
public before the actual purchase order obligation. At that time, a new set of
or request: disclosures must be made of all appli-
(1) The cash price or the principal cable items under § 1026.18.
loan amount. [76 FR 79772, Dec. 22, 2011, as amended at 78
(2) The total sale price. FR 11004, Feb. 14, 2013; 78 FR 80107, Dec. 31,
(3) The finance charge. 2013]
(4) The annual percentage rate, and if § 1026.18 Content of disclosures.
the rate may increase after consumma-
tion, the following disclosures: For each transaction other than a
mortgage transaction subject to
(i) The circumstances under which
§ 1026.19(e) and (f), the creditor shall
the rate may increase.
disclose the following information as
(ii) Any limitations on the increase. applicable:
(iii) The effect of an increase. (a) Creditor. The identity of the cred-
(5) The terms of repayment. itor making the disclosures.
(h) Series of sales—delay in disclosures. (b) Amount financed. The amount fi-
Except for mortgage disclosures made nanced, using that term, and a brief de-
in compliance with § 1026.19(a) or (e), scription such as the amount of credit
(f), and (g), if a credit sale is one of a provided to you or on your behalf. The
series made under an agreement pro- amount financed is calculated by:
viding that subsequent sales may be (1) Determining the principal loan
added to an outstanding balance, the amount or the cash price (subtracting
creditor may delay the required disclo- any downpayment);
sures until the due date of the first (2) Adding any other amounts that
payment for the current sale, if the fol- are financed by the creditor and are
lowing two conditions are met: not part of the finance charge; and
(1) The consumer has approved in (3) Subtracting any prepaid finance
writing the annual percentage rate or
jspears on DSK121TN23PROD with CFR
charge.
rates, the range of balances to which (c) Itemization of amount financed. (1)
they apply, and the method of treating Except as provided in paragraphs (c)(2)
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§ 1026.18 12 CFR Ch. X (1–1–25 Edition)
and (c)(3) of this section, a separate nanced of more than $1,000, it is not
written itemization of the amount fi- more than $10 above or below the
nanced, including: amount required to be disclosed.
(i) The amount of any proceeds dis- (e) Annual percentage rate. The annual
tributed directly to the consumer. percentage rate, using that term, and a
(ii) The amount credited to the con- brief description such as ‘‘the cost of
sumer’s account with the creditor. your credit as a yearly rate.’’ For any
(iii) Any amounts paid to other per- transaction involving a finance charge
sons by the creditor on the consumer’s of $5 or less on an amount financed of
behalf. The creditor shall identify $75 or less, or a finance charge of $7.50
those persons. The following payees or less on an amount financed of more
may be described using generic or than $75, the creditor need not disclose
other general terms and need not be the annual percentage rate.
further identified: public officials or (f) Variable rate. (1) Except as pro-
government agencies, credit reporting vided in paragraph (f)(3) of this section,
agencies, appraisers, and insurance if the annual percentage rate may in-
companies. crease after consummation in a trans-
(iv) The prepaid finance charge. action not secured by the consumer’s
(2) The creditor need not comply with principal dwelling or in a transaction
paragraph (c)(1) of this section if the secured by the consumer’s principal
creditor provides a statement that the dwelling with a term of one year or
consumer has the right to receive a less, the following disclosures:
written itemization of the amount fi- (i) The circumstances under which
nanced, together with a space for the the rate may increase.
consumer to indicate whether it is de- (ii) Any limitations on the increase.
sired, and the consumer does not re- (iii) The effect of an increase.
quest it. (iv) An example of the payment
(3) Good faith estimates of settle- terms that would result from an in-
ment costs provided for transactions crease.
subject to the Real Estate Settlement (2) If the annual percentage rate may
Procedures Act (12 U.S.C. 2601 et seq.) increase after consummation in a
may be substituted for the disclosures transaction secured by the consumer’s
required by paragraph (c)(1) of this sec- principal dwelling with a term greater
tion. than one year, the following disclo-
(d) Finance charge. The finance sures:
charge, using that term, and a brief de- (i) The fact that the transaction con-
scription such as ‘‘the dollar amount tains a variable-rate feature.
the credit will cost you.’’ (ii) A statement that variable-rate
(1) Mortgage loans. In a transaction disclosures have been provided earlier.
secured by real property or a dwelling, (3) Information provided in accord-
the disclosed finance charge and other ance with §§ 1026.18(f)(2) and 1026.19(b)
disclosures affected by the disclosed fi- may be substituted for the disclosures
nance charge (including the amount fi- required by paragraph (f)(1) of this sec-
nanced and the annual percentage rate) tion.
shall be treated as accurate if the (g) Payment schedule. Other than for a
amount disclosed as the finance transaction that is subject to para-
charge: graph (s) of this section, the number,
(i) Is understated by no more than amounts, and timing of payments
$100; or scheduled to repay the obligation.
(ii) Is greater than the amount re- (1) In a demand obligation with no al-
quired to be disclosed. ternate maturity date, the creditor
(2) Other credit. In any other trans- may comply with this paragraph by
action, the amount disclosed as the fi- disclosing the due dates or payment pe-
nance charge shall be treated as accu- riods of any scheduled interest pay-
rate if, in a transaction involving an ments for the first year.
amount financed of $1,000 or less, it is (2) In a transaction in which a series
not more than $5 above or below the of payments varies because a finance
jspears on DSK121TN23PROD with CFR
amount required to be disclosed; or, in charge is applied to the unpaid prin-
a transaction involving an amount fi- cipal balance, the creditor may comply
56
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Consumer Financial Protection Bureau § 1026.18
with this paragraph by disclosing the (n) Insurance and debt cancellation.
following information: The items required by § 1026.4(d) in
(i) The dollar amounts of the largest order to exclude certain insurance pre-
and smallest payments in the series. miums and debt cancellation fees from
(ii) A reference to the variations in the finance charge.
the other payments in the series. (o) Certain security interest charges.
(h) Total of payments. The total of pay- The disclosures required by § 1026.4(e)
ments, using that term, and a descrip- in order to exclude from the finance
tive explanation such as ‘‘the amount charge certain fees prescribed by law or
you will have paid when you have made certain premiums for insurance in lieu
all scheduled payments.’’ In any trans- of perfecting a security interest.
action involving a single payment, the (p) Contract reference. A statement
creditor need not disclose the total of that the consumer should refer to the
payments. appropriate contract document for in-
formation about nonpayment, default,
(i) Demand feature. If the obligation
the right to accelerate the maturity of
has a demand feature, that fact shall
the obligation, and prepayment rebates
be disclosed. When the disclosures are
and penalties. At the creditor’s option,
based on an assumed maturity of 1 year
the statement may also include a ref-
as provided in § 1026.17(c)(5), that fact
erence to the contract for further in-
shall also be disclosed.
formation about security interests and,
(j) Total sale price. In a credit sale, in a residential mortgage transaction,
the total sale price, using that term, and about the creditor’s policy regarding
a descriptive explanation (including assumption of the obligation.
the amount of any downpayment) such (q) Assumption policy. In a residential
as ‘‘the total price of your purchase on mortgage transaction, a statement
credit, including your downpayment of whether or not a subsequent purchaser
$____.’’ The total sale price is the sum of the dwelling from the consumer may
of the cash price, the items described be permitted to assume the remaining
in paragraph (b)(2), and the finance obligation on its original terms.
charge disclosed under paragraph (d) of (r) Required deposit. If the creditor re-
this section. quires the consumer to maintain a de-
(k) Prepayment. (1) When an obliga- posit as a condition of the specific
tion includes a finance charge com- transaction, a statement that the an-
puted from time to time by application nual percentage rate does not reflect
of a rate to the unpaid principal bal- the effect of the required deposit. A re-
ance, a statement indicating whether quired deposit need not include, for ex-
or not a charge may be imposed for ample:
paying all or part of a loan’s principal (1) An escrow account for items such
balance before the date on which the as taxes, insurance or repairs;
principal is due. (2) A deposit that earns not less than
(2) When an obligation includes a fi- 5 percent per year; or
nance charge other than the finance (3) Payments under a Morris Plan.
charge described in paragraph (k)(1) of (s) Interest rate and payment summary
this section, a statement indicating for mortgage transactions. For a closed-
whether or not the consumer is enti- end transaction secured by real prop-
tled to a rebate of any finance charge if erty or a dwelling, other than a trans-
the obligation is prepaid in full or in action that is subject to § 1026.19(e) and
part. (f), the creditor shall disclose the fol-
(l) Late payment. Any dollar or per- lowing information about the interest
centage charge that may be imposed rate and payments:
before maturity due to a late payment, (1) Form of disclosures. The informa-
other than a deferral or extension tion in paragraphs (s)(2)–(4) of this sec-
charge. tion shall be in the form of a table,
(m) Security interest. The fact that the with no more than five columns, with
creditor has or will acquire a security headings and format substantially
interest in the property purchased as similar to Model Clause H–4(E), H–4(F),
jspears on DSK121TN23PROD with CFR
part of the transaction, or in other H–4(G), or H–4(H) in appendix H to this
property identified by item or type. part. The table shall contain only the
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§ 1026.18 12 CFR Ch. X (1–1–25 Edition)
information required in paragraphs terest rate that could apply at the time
(s)(2)–(4) of this section, shall be placed of the second payment increase and the
in a prominent location, and shall be in date the increase is scheduled to occur.
a minimum 10-point font. (iii) Introductory rate disclosure for
(2) Interest rates—(i) Amortizing loans. amortizing adjustable-rate mortgages. For
(A) For a fixed-rate mortgage, the in- an amortizing adjustable-rate mort-
terest rate at consummation. gage, if the interest rate at consumma-
(B) For an adjustable-rate or step- tion is less than the fully-indexed rate,
rate mortgage: placed in a box directly beneath the
(1) The interest rate at consumma- table required by paragraph (s)(1) of
tion and the period of time until the this section, in a format substantially
first interest rate adjustment may similar to Model Clause H–4(I) in ap-
occur, labeled as the ‘‘introductory pendix H to this part:
rate and monthly payment’’; (A) The interest rate that applies at
(2) The maximum interest rate that consummation and the period of time
may apply during the first five years for which it applies;
after the date on which the first reg- (B) A statement that, even if market
ular periodic payment will be due and rates do not change, the interest rate
the earliest date on which that rate will increase at the first adjustment
may apply, labeled as ‘‘maximum dur- and a designation of the place in se-
ing first five years’’; and quence of the month or year, as appli-
(3) The maximum interest rate that cable, of such rate adjustment; and
may apply during the life of the loan (C) The fully-indexed rate.
and the earliest date on which that
(3) Payments for amortizing loans—(i)
rate may apply, labeled as ‘‘maximum
Principal and interest payments. If all
ever.’’
periodic payments will be applied to
(C) If the loan provides for payment
accrued interest and principal, for each
increases as described in paragraph
interest rate disclosed under paragraph
(s)(3)(i)(B) of this section, the interest
(s)(2)(i) of this section:
rate in effect at the time the first such
payment increase is scheduled to occur (A) The corresponding periodic prin-
and the date on which the increase will cipal and interest payment, labeled as
occur, labeled as ‘‘first adjustment’’ if ‘‘principal and interest;’’
the loan is an adjustable-rate mortgage (B) If the periodic payment may in-
or, otherwise, labeled as ‘‘first in- crease without regard to an interest
crease.’’ rate adjustment, the payment that cor-
(ii) Negative amortization loans. For a responds to the first such increase and
negative amortization loan: the earliest date on which the increase
(A) The interest rate at consumma- could occur;
tion and, if it will adjust after con- (C) If an escrow account will be es-
summation, the length of time until it tablished, an estimate of the amount of
will adjust, and the label ‘‘introduc- taxes and insurance, including any
tory’’ or ‘‘intro’’; mortgage insurance or any functional
(B) The maximum interest rate that equivalent, payable with each periodic
could apply when the consumer must payment; and
begin making fully amortizing pay- (D) The sum of the amounts disclosed
ments under the terms of the legal ob- under paragraphs (s)(3)(i)(A) and (C) of
ligation; this section or (s)(3)(i)(B) and (C) of
(C) If the minimum required payment this section, as applicable, labeled as
will increase before the consumer must ‘‘total estimated monthly payment.’’
begin making fully amortizing pay- (ii) Interest-only payments. If the loan
ments, the maximum interest rate that is an interest-only loan, for each inter-
could apply at the time of the first est rate disclosed under paragraph
payment increase and the date the in- (s)(2)(i) of this section, the cor-
crease is scheduled to occur; and(D) If responding periodic payment and:
a second increase in the minimum re- (A) If the payment will be applied to
quired payment may occur before the only accrued interest, the amount ap-
jspears on DSK121TN23PROD with CFR
consumer must begin making fully am- plied to interest, labeled as ‘‘interest
ortizing payments, the maximum in- payment,’’ and a statement that none
58
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Consumer Financial Protection Bureau § 1026.18
of the payment is being applied to prin- in the table under this paragraph (s),
cipal; outside the table and in a manner sub-
(B) If the payment will be applied to stantially similar to Model Clause H–
accrued interest and principal, an 4(J) in appendix H to this part.
itemization of the amount of the first (ii) If the balloon payment is sched-
such payment applied to accrued inter- uled to occur at the same time as an-
est and to principal, labeled as ‘‘inter- other payment required to be disclosed
est payment’’ and ‘‘principal pay- in the table pursuant to paragraph
ment,’’ respectively; (s)(3) or (s)(4) of this section, then the
(C) The escrow information described balloon payment must be disclosed in
in paragraph (s)(3)(i)(C) of this section; the table.
and
(6) Special disclosures for loans with
(D) The sum of all amounts required
negative amortization. For a negative
to be disclosed under paragraphs
amortization loan, the following infor-
(s)(3)(ii)(A) and (C) of this section or
(s)(3)(ii)(B) and (C) of this section, as mation, in close proximity to the table
applicable, labeled as ‘‘total estimated required in paragraph (s)(1) of this sec-
monthly payment.’’ tion, with headings, content, and for-
(4) Payments for negative amortization mat substantially similar to Model
loans. For negative amortization loans: Clause H–4(G) in appendix H to this
(i)(A) The minimum periodic pay- part:
ment required until the first payment (i) The maximum interest rate, the
increase or interest rate increase, cor- shortest period of time in which such
responding to the interest rate dis- interest rate could be reached, the
closed under paragraph (s)(2)(ii)(A) of amount of estimated taxes and insur-
this section; ance included in each payment dis-
(B) The minimum periodic payment closed, and a statement that the loan
that would be due at the first payment offers payment options, two of which
increase and the second, if any, cor- are shown.
responding to the interest rates de- (ii) The dollar amount of the increase
scribed in paragraphs (s)(2)(ii)(C) and in the loan’s principal balance if the
(D) of this section; and consumer makes only the minimum re-
(C) A statement that the minimum quired payments for the maximum pos-
payment pays only some interest, does sible time and the earliest date on
not repay any principal, and will cause which the consumer must begin mak-
the loan amount to increase; ing fully amortizing payments, assum-
(ii) The fully amortizing periodic ing that the maximum interest rate is
payment amount at the earliest time reached at the earliest possible time.
when such a payment must be made, (7) Definitions. For purposes of this
corresponding to the interest rate dis- § 1026.18(s):
closed under paragraph (s)(2)(ii)(B) of
(i) The term ‘‘adjustable-rate mort-
this section; and
gage’’ means a transaction secured by
(iii) If applicable, in addition to the
real property or a dwelling for which
payments in paragraphs (s)(4)(i) and (ii)
the annual percentage rate may in-
of this section, for each interest rate
disclosed under paragraph (s)(2)(ii) of crease after consummation.
this section, the amount of the fully (ii) The term ‘‘step-rate mortgage’’
amortizing periodic payment, labeled means a transaction secured by real
as the ‘‘full payment option,’’ and a property or a dwelling for which the in-
statement that these payments pay all terest rate will change after con-
principal and all accrued interest. summation, and the rates that will
(5) Balloon payments. (i) Except as apply and the periods for which they
provided in paragraph (s)(5)(ii) of this will apply are known at consumma-
section, if the transaction will require tion.
a balloon payment, defined as a pay- (iii) The term ‘‘fixed-rate mortgage’’
ment that is more than two times a means a transaction secured by real
regular periodic payment, the balloon property or a dwelling that is not an
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payment shall be disclosed separately adjustable-rate mortgage or a step-rate
from other periodic payments disclosed mortgage.
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§ 1026.19 12 CFR Ch. X (1–1–25 Edition)
(iv) The term ‘‘interest-only’’ means ceives the consumer’s written applica-
that, under the terms of the legal obli- tion.
gation, one or more of the periodic pay- (ii) Imposition of fees. Except as pro-
ments may be applied solely to accrued vided in paragraph (a)(1)(iii) of this sec-
interest and not to loan principal; an tion, neither a creditor nor any other
‘‘interest-only loan’’ is a loan that per- person may impose a fee on a consumer
mits interest-only payments. in connection with the consumer’s ap-
(v) The term ‘‘amortizing loan’’ plication for a reverse mortgage trans-
means a loan in which payment of the action subject to paragraph (a)(1)(i) of
periodic payments does not result in an this section before the consumer has
increase in the principal balance under received the disclosures required by
the terms of the legal obligation; the paragraph (a)(1)(i) of this section. If the
term ‘‘negative amortization’’ means disclosures are mailed to the consumer,
payment of periodic payments that will the consumer is considered to have re-
result in an increase in the principal ceived them three business days after
balance under the terms of the legal they are mailed.
obligation; the term ‘‘negative amorti- (iii) Exception to fee restriction. A
zation loan’’ means a loan, other than creditor or other person may impose a
a reverse mortgage subject to § 1026.33, fee for obtaining the consumer’s credit
that provides for a minimum periodic history before the consumer has re-
payment that covers only a portion of ceived the disclosures required by para-
the accrued interest, resulting in nega- graph (a)(1)(i) of this section, provided
tive amortization. the fee is bona fide and reasonable in
(vi) The term ‘‘fully-indexed rate’’ amount.
means the interest rate calculated (2) Waiting periods for early disclosures
using the index value and margin at and corrected disclosures. (i) The cred-
the time of consummation. itor shall deliver or place in the mail
(t) ‘‘No-guarantee-to-refinance’’ state- the good faith estimates required by
ment—(1) Disclosure. For a closed-end paragraph (a)(1)(i) of this section not
transaction secured by real property or later than the seventh business day be-
a dwelling, other than a transaction fore consummation of the transaction.
that is subject to § 1026.19(e) and (f), the (ii) If the annual percentage rate dis-
creditor shall disclose a statement that closed under paragraph (a)(1)(i) of this
there is no guarantee the consumer can section becomes inaccurate, as defined
refinance the transaction to lower the in § 1026.22, the creditor shall provide
interest rate or periodic payments. corrected disclosures with all changed
(2) Format. The statement required by terms. The consumer must receive the
paragraph (t)(1) of this section must be corrected disclosures no later than
in a form substantially similar to three business days before consumma-
Model Clause H–4(K) in appendix H to tion. If the corrected disclosures are
this part. mailed to the consumer or delivered to
the consumer by means other than de-
[76 FR 79772, Dec. 22, 2011, as amended at 78 livery in person, the consumer is
FR 80108, Dec. 31, 2013] deemed to have received the corrected
disclosures three business days after
§ 1026.19 Certain mortgage and vari- they are mailed or delivered.
able-rate transactions. (3) Consumer’s waiver of waiting period
(a) Mortgage transactions subject to before consummation. If the consumer
RESPA—(1)(i) Time of disclosures. In a determines that the extension of credit
reverse mortgage transaction subject is needed to meet a bona fide personal
to both § 1026.33 and the Real Estate financial emergency, the consumer
Settlement Procedures Act (12 U.S.C. may modify or waive the seven-busi-
2601 et seq.) that is secured by the con- ness-day waiting period or the three-
sumer’s dwelling, the creditor shall business-day waiting period required
provide the consumer with good faith by paragraph (a)(2) of this section,
estimates of the disclosures required after receiving the disclosures required
by § 1026.18 and shall deliver or place by § 1026.18. To modify or waive a wait-
jspears on DSK121TN23PROD with CFR
them in the mail not later than the ing period, the consumer shall give the
third business day after the creditor re- creditor a dated written statement
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Consumer Financial Protection Bureau § 1026.19
that describes the emergency, specifi- (v) The fact that the interest rate
cally modifies or waives the waiting will be discounted, and a statement
period, and bears the signature of all that the consumer should ask about
the consumers who are primarily liable the amount of the interest rate dis-
on the legal obligation. Printed forms count.
for this purpose are prohibited. (vi) The frequency of interest rate
(4) Notice. Disclosures made pursuant and payment changes.
to paragraph (a)(1) or paragraph (a)(2) (vii) Any rules relating to changes in
of this section shall contain the fol- the index, interest rate, payment
lowing statement: ‘‘You are not re- amount, and outstanding loan balance
quired to complete this agreement including, for example, an explanation
merely because you have received of interest rate or payment limita-
these disclosures or signed a loan appli- tions, negative amortization, and in-
cation.’’ The disclosure required by terest rate carryover.
this paragraph shall be grouped to- (viii) At the option of the creditor,
gether with the disclosures required by either of the following:
paragraphs (a)(1) or (a)(2) of this sec-
(A) A historical example, based on a
tion.
$10,000 loan amount, illustrating how
(b) Certain variable-rate transactions.
payments and the loan balance would
Except as provided in paragraph (d) of
have been affected by interest rate
this section, if the annual percentage
changes implemented according to the
rate may increase after consummation
terms of the loan program disclosure.
in a transaction secured by the con-
The example shall reflect the most re-
sumer’s principal dwelling with a term
cent 15 years of index values. The ex-
greater than one year, the following
ample shall reflect all significant loan
disclosures must be provided at the
program terms, such as negative amor-
time an application form is provided or
tization, interest rate carryover, inter-
before the consumer pays a non-refund-
est rate discounts, and interest rate
able fee, whichever is earlier (except
and payment limitations, that would
that the disclosures may be delivered
have been affected by the index move-
or placed in the mail not later than
ment during the period.
three business days following receipt of
a consumer’s application when the ap- (B) The maximum interest rate and
plication reaches the creditor by tele- payment for a $10,000 loan originated at
phone, or through an intermediary the initial interest rate (index value
agent or broker): plus margin, adjusted by the amount of
(1) The booklet titled Consumer Hand- any discount or premium) in effect as
book on Adjustable Rate Mortgages, or a of an identified month and year for the
suitable substitute. loan program disclosure assuming the
(2) A loan program disclosure for maximum periodic increases in rates
each variable-rate program in which and payments under the program; and
the consumer expresses an interest. the initial interest rate and payment
The following disclosures, as applica- for that loan and a statement that the
ble, shall be provided: periodic payment may increase or de-
(i) The fact that the interest rate, crease substantially depending on
payment, or term of the loan can changes in the rate.
change. (ix) An explanation of how the con-
(ii) The index or formula used in sumer may calculate the payments for
making adjustments, and a source of the loan amount to be borrowed based
information about the index or for- on either:
mula. (A) The most recent payment shown
(iii) An explanation of how the inter- in the historical example in paragraph
est rate and payment will be deter- (b)(2)(viii)(A) of this section; or
mined, including an explanation of how (B) The initial interest rate used to
the index is adjusted, such as by the calculate the maximum interest rate
addition of a margin. and payment in paragraph
(iv) A statement that the consumer (b)(2)(viii)(B) of this section.
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should ask about the current margin (x) The fact that the loan program
value and current interest rate. contains a demand feature.
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§ 1026.19 12 CFR Ch. X (1–1–25 Edition)
(xi) The type of information that will shall deliver or place in the mail the
be provided in notices of adjustments disclosures required under paragraph
and the timing of such notices. (e)(1)(i) of this section not later than
(xii) A statement that disclosure the seventh business day before con-
forms are available for the creditor’s summation of the transaction.
other variable-rate loan programs. (C) For a transaction secured by a
(c) Electronic disclosures. For an appli- consumer’s interest in a timeshare
cation that is accessed by the con- plan described in 11 U.S.C. 101(53D),
sumer in electronic form, the disclo- paragraph (e)(1)(iii)(B) of this section
sures required by paragraph (b) of this does not apply.
section may be provided to the con- (iv) Receipt of early disclosures. If any
sumer in electronic form on or with the disclosures required under paragraph
application. (e)(1)(i) of this section are not provided
(d) Information provided in accord- to the consumer in person, the con-
ance with variable-rate regulations of sumer is considered to have received
other Federal agencies may be sub- the disclosures three business days
stituted for the disclosures required by after they are delivered or placed in
paragraph (b) of this section. the mail.
(e) Mortgage loans—early disclosures— (v) Consumer’s waiver of waiting period
(1) Provision of disclosures—(i) Creditor. before consummation. If the consumer
In a closed-end consumer credit trans- determines that the extension of credit
action secured by real property or a co- is needed to meet a bona fide personal
operative unit, other than a reverse financial emergency, the consumer
mortgage subject to § 1026.33, the cred- may modify or waive the seven-busi-
itor shall provide the consumer with ness-day waiting period for early dis-
good faith estimates of the disclosures closures required under paragraph
in § 1026.37. (e)(1)(iii)(B) of this section, after re-
(ii) Mortgage broker. (A) If a mortgage ceiving the disclosures required under
broker receives a consumer’s applica- paragraph (e)(1)(i) of this section. To
tion, either the creditor or the mort- modify or waive the waiting period, the
gage broker shall provide a consumer consumer shall give the creditor a
with the disclosures required under dated written statement that describes
paragraph (e)(1)(i) of this section in ac- the emergency, specifically modifies or
cordance with paragraph (e)(1)(iii) of waives the waiting period, and bears
this section. If the mortgage broker the signature of all the consumers who
provides the required disclosures, the are primarily liable on the legal obliga-
mortgage broker shall comply with all tion. Printed forms for this purpose are
relevant requirements of this para- prohibited.
graph (e). The creditor shall ensure (vi) Shopping for settlement service pro-
that such disclosures are provided in viders—(A) Shopping permitted. A cred-
accordance with all requirements of itor permits a consumer to shop for a
this paragraph (e). Disclosures provided settlement service if the creditor per-
by a mortgage broker in accordance mits the consumer to select the pro-
with the requirements of this para- vider of that service, subject to reason-
graph (e) satisfy the creditor’s obliga- able requirements.
tion under this paragraph (e). (B) Disclosure of services. The creditor
(B) If a mortgage broker provides any shall identify the settlement services
disclosure under § 1026.19(e), the mort- for which the consumer is permitted to
gage broker shall also comply with the shop in the disclosures required under
requirements of § 1026.25(c). paragraph (e)(1)(i) of this section.
(iii) Timing. (A) The creditor shall de- (C) Written list of providers. If the con-
liver or place in the mail the disclo- sumer is permitted to shop for a settle-
sures required under paragraph (e)(1)(i) ment service, the creditor shall provide
of this section not later than the third the consumer with a written list iden-
business day after the creditor receives tifying available providers of that set-
the consumer’s application, as defined tlement service and stating that the
in § 1026.2(a)(3). consumer may choose a different pro-
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(B) Except as set forth in paragraph vider for that service. The creditor
(e)(1)(iii)(C) of this section, the creditor must identify at least one available
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Consumer Financial Protection Bureau § 1026.19
provider for each settlement service for quire a consumer to submit documents
which the consumer is permitted to verifying information related to the
shop. The creditor shall provide this consumer’s application before pro-
written list of settlement service pro- viding the disclosures required by para-
viders separately from the disclosures graph (e)(1)(i) of this section.
required by paragraph (e)(1)(i) of this (3) Good faith determination for esti-
section but in accordance with the tim- mates of closing costs—(i) General rule.
ing requirements in paragraph An estimated closing cost disclosed
(e)(1)(iii) of this section. pursuant to paragraph (e) of this sec-
(2) Predisclosure activity—(i) Imposition tion is in good faith if the charge paid
of fees on consumer—(A) Fee restriction. by or imposed on the consumer does
Except as provided in paragraph not exceed the amount originally dis-
(e)(2)(i)(B) of this section, neither a closed under paragraph (e)(1)(i) of this
creditor nor any other person may im- section, except as otherwise provided
pose a fee on a consumer in connection in paragraphs (e)(3)(ii) through (iv) of
with the consumer’s application for a this section.
mortgage transaction subject to para- (ii) Limited increases permitted for cer-
graph (e)(1)(i) of this section before the tain charges. An estimate of a charge
consumer has received the disclosures for a third-party service or a recording
required under paragraph (e)(1)(i) of fee is in good faith if:
this section and indicated to the cred- (A) The aggregate amount of charges
itor an intent to proceed with the for third-party services and recording
transaction described by those disclo- fees paid by or imposed on the con-
sures. A consumer may indicate an in- sumer does not exceed the aggregate
tent to proceed with a transaction in amount of such charges disclosed under
any manner the consumer chooses, un- paragraph (e)(1)(i) of this section by
less a particular manner of commu- more than 10 percent;
nication is required by the creditor.
(B) The charge for the third-party
The creditor must document this com-
service is not paid to the creditor or an
munication to satisfy the requirements
affiliate of the creditor; and
of § 1026.25.
(C) The creditor permits the con-
(B) Exception to fee restriction. A cred-
sumer to shop for the third-party serv-
itor or other person may impose a bona
ice, consistent with paragraph (e)(1)(vi)
fide and reasonable fee for obtaining
of this section.
the consumer’s credit report before the
consumer has received the disclosures (iii) Variations permitted for certain
required under paragraph (e)(1)(i) of charges. An estimate of any of the
this section. charges specified in this paragraph
(ii) Written information provided to (e)(3)(iii) is in good faith if it is con-
consumer. If a creditor or other person sistent with the best information rea-
provides a consumer with a written es- sonably available to the creditor at the
timate of terms or costs specific to time it is disclosed, regardless of
that consumer before the consumer re- whether the amount paid by the con-
ceives the disclosures required under sumer exceeds the amount disclosed
paragraph (e)(1)(i) of this section, the under paragraph (e)(1)(i) of this sec-
creditor or such person shall clearly tion. For purposes of paragraph (e)(1)(i)
and conspicuously state at the top of of this section, good faith is deter-
the front of the first page of the esti- mined under this paragraph (e)(3)(iii)
mate in a font size that is no smaller even if such charges are paid to the
than 12-point font: ‘‘Your actual rate, creditor or affiliates of the creditor, so
payment, and costs could be higher. long as the charges are bona fide:
Get an official Loan Estimate before (A) Prepaid interest;
choosing a loan.’’ The written estimate (B) Property insurance premiums;
of terms or costs may not be made with (C) Amounts placed into an escrow,
headings, content, and format substan- impound, reserve, or similar account;
tially similar to form H–24 or H–25 of (D) Charges paid to third-party serv-
appendix H to this part. ice providers selected by the consumer
jspears on DSK121TN23PROD with CFR
(iii) Verification of information. The consistent with paragraph (e)(1)(vi)(A)
creditor or other person shall not re- of this section that are not on the list
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§ 1026.19 12 CFR Ch. X (1–1–25 Edition)
provided under paragraph (e)(1)(vi)(C) days after the date the interest rate is
of this section; and locked, the creditor shall provide a re-
(E) Property taxes and other charges vised version of the disclosures re-
paid for third-party services not re- quired under paragraph (e)(1)(i) of this
quired by the creditor. section to the consumer with the re-
(iv) Revised estimates. For the purpose vised interest rate, the points disclosed
of determining good faith under para- pursuant to § 1026.37(f)(1), lender cred-
graph (e)(3)(i) and (ii) of this section, a its, and any other interest rate depend-
creditor may use a revised estimate of ent charges and terms.
a charge instead of the estimate of the (E) Expiration. The consumer indi-
charge originally disclosed under para- cates an intent to proceed with the
graph (e)(1)(i) of this section if the re- transaction more than 10 business
vision is due to any of the following days, or more than any additional
reasons: number of days specified by the cred-
(A) Changed circumstance affecting set- itor before the offer expires, after the
tlement charges. Changed circumstances disclosures required under paragraph
cause the estimated charges to in- (e)(1)(i) of this section are provided
crease or, in the case of estimated pursuant to paragraph (e)(1)(iii) of this
charges identified in paragraph section.
(e)(3)(ii) of this section, cause the ag-
(F) Delayed settlement date on a con-
gregate amount of such charges to in-
struction loan. In transactions involving
crease by more than 10 percent. For
new construction, where the creditor
purposes of this paragraph, ‘‘changed
reasonably expects that settlement
circumstance’’ means:
will occur more than 60 days after the
(1) An extraordinary event beyond
disclosures required under paragraph
the control of any interested party or
other unexpected event specific to the (e)(1)(i) of this section are provided
consumer or transaction; pursuant to paragraph (e)(1)(iii) of this
(2) Information specific to the con- section, the creditor may provide re-
sumer or transaction that the creditor vised disclosures to the consumer if the
relied upon when providing the disclo- original disclosures required under
sures required under paragraph (e)(1)(i) paragraph (e)(1)(i) of this section state
of this section and that was inaccurate clearly and conspicuously that at any
or changed after the disclosures were time prior to 60 days before consumma-
provided; or tion, the creditor may issue revised
(3) New information specific to the disclosures. If no such statement is
consumer or transaction that the cred- provided, the creditor may not issue re-
itor did not rely on when providing the vised disclosures, except as otherwise
original disclosures required under provided in paragraph (e)(3)(iv) of this
paragraph (e)(1)(i) of this section. section.
(B) Changed circumstance affecting eli- (4) Provision and receipt of revised dis-
gibility. The consumer is ineligible for closures—(i) General rule. Subject to the
an estimated charge previously dis- requirements of paragraph (e)(4)(ii) of
closed because a changed cir- this section, if a creditor uses a revised
cumstance, as defined under paragraph estimate pursuant to paragraph
(e)(3)(iv)(A) of this section, affected the (e)(3)(iv) of this section for the purpose
consumer’s creditworthiness or the of determining good faith under para-
value of the security for the loan. graphs (e)(3)(i) and (ii) of this section,
(C) Revisions requested by the con- the creditor shall provide a revised
sumer. The consumer requests revisions version of the disclosures required
to the credit terms or the settlement under paragraph (e)(1)(i) of this section
that cause an estimated charge to in- or the disclosures required under para-
crease. graph (f)(1)(i) of this section (including
(D) Interest rate dependent charges. any corrected disclosures provided
The points or lender credits change be- under paragraph (f)(2)(i) or (ii) of this
cause the interest rate was not locked section) reflecting the revised estimate
when the disclosures required under within three business days of receiving
jspears on DSK121TN23PROD with CFR
paragraph (e)(1)(i) of this section were information sufficient to establish that
provided. No later than three business one of the reasons for revision provided
64
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Consumer Financial Protection Bureau § 1026.19
under paragraphs (e)(3)(iv)(A) through personal financial emergency, the con-
(F) of this section applies. sumer may modify or waive the three-
(ii) Relationship between revised Loan business-day waiting period under
Estimates and Closing Disclosures. The paragraph (f)(1)(ii)(A) or (f)(2)(ii) of this
creditor shall not provide a revised section, after receiving the disclosures
version of the disclosures required required under paragraph (f)(1)(i) of
under paragraph (e)(1)(i) of this section this section. To modify or waive the
on or after the date on which the cred- waiting period, the consumer shall give
itor provides the disclosures required the creditor a dated written statement
under paragraph (f)(1)(i) of this section. that describes the emergency, specifi-
The consumer must receive any revised cally modifies or waives the waiting
version of the disclosures required period, and bears the signature of all
under paragraph (e)(1)(i) of this section consumers who are primarily liable on
not later than four business days prior the legal obligation. Printed forms for
to consummation. If the revised this purpose are prohibited.
version of the disclosures required (v) Settlement agent. A settlement
under paragraph (e)(1)(i) of this section agent may provide a consumer with the
is not provided to the consumer in per- disclosures required under paragraph
son, the consumer is considered to have (f)(1)(i) of this section, provided the
received such version three business settlement agent complies with all rel-
days after the creditor delivers or evant requirements of this paragraph
places such version in the mail. (f). The creditor shall ensure that such
(f) Mortgage loans—final disclosures—
disclosures are provided in accordance
(1) Provision of disclosures—(i) Scope. In
with all requirements of this paragraph
a transaction subject to paragraph
(f). Disclosures provided by a settle-
(e)(1)(i) of this section, the creditor
ment agent in accordance with the re-
shall provide the consumer with the
quirements of this paragraph (f) satisfy
disclosures required under § 1026.38 re-
the creditor’s obligation under this
flecting the actual terms of the trans-
paragraph (f).
action.
(ii) Timing—(A) In general. Except as (2) Subsequent changes—(i) Changes be-
provided in paragraphs (f)(1)(ii)(B), fore consummation not requiring a new
(f)(2)(i), (f)(2)(iii), (f)(2)(iv), and (f)(2)(v) waiting period. Except as provided in
of this section, the creditor shall en- paragraph (f)(2)(ii), if the disclosures
sure that the consumer receives the provided under paragraph (f)(1)(i) of
disclosures required under paragraph this section become inaccurate before
(f)(1)(i) of this section no later than consummation, the creditor shall pro-
three business days before consumma- vide corrected disclosures reflecting
tion. any changed terms to the consumer so
(B) Timeshares. For transactions se- that the consumer receives the cor-
cured by a consumer’s interest in a rected disclosures at or before con-
timeshare plan described in 11 U.S.C. summation. Notwithstanding the re-
101(53D), the creditor shall ensure that quirement to provide corrected disclo-
the consumer receives the disclosures sures at or before consummation, the
required under paragraph (f)(1)(i) of creditor shall permit the consumer to
this section no later than consumma- inspect the disclosures provided under
tion. this paragraph, completed to set forth
(iii) Receipt of disclosures. If any dis- those items that are known to the
closures required under paragraph creditor at the time of inspection, dur-
(f)(1)(i) of this section are not provided ing the business day immediately pre-
to the consumer in person, the con- ceding consummation, but the creditor
sumer is considered to have received may omit from inspection items re-
the disclosures three business days lated only to the seller’s transaction.
after they are delivered or placed in (ii) Changes before consummation re-
the mail. quiring a new waiting period. If one of
(iv) Consumer’s waiver of waiting pe- the following disclosures provided
riod before consummation. If the con- under paragraph (f)(1)(i) of this section
jspears on DSK121TN23PROD with CFR
sumer determines that the extension of becomes inaccurate in the following
credit is needed to meet a bona fide manner before consummation, the
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§ 1026.19 12 CFR Ch. X (1–1–25 Edition)
creditor shall ensure that the con- received by the settlement service pro-
sumer receives corrected disclosures vider for that service, except as other-
containing all changed terms in ac- wise provided in paragraph (f)(3)(ii) of
cordance with the requirements of this section.
paragraph (f)(1)(ii)(A) of this section: (ii) Average charge. A creditor or set-
(A) The annual percentage rate dis- tlement service provider may charge a
closed under § 1026.38(o)(4) becomes in- consumer or seller the average charge
accurate, as defined in § 1026.22. for a settlement service if the fol-
(B) The loan product is changed, lowing conditions are satisfied:
causing the information disclosed (A) The average charge is no more
under § 1026.38(a)(5)(iii) to become inac- than the average amount paid for that
curate. service by or on behalf of all consumers
(C) A prepayment penalty is added, and sellers for a class of transactions;
causing the statement regarding a pre- (B) The creditor or settlement serv-
payment penalty required under ice provider defines the class of trans-
§ 1026.38(b) to become inaccurate. actions based on an appropriate period
(iii) Changes due to events occurring of time, geographic area, and type of
after consummation. If during the 30-day loan;
period following consummation, an
(C) The creditor or settlement serv-
event in connection with the settle-
ice provider uses the same average
ment of the transaction occurs that
charge for every transaction within the
causes the disclosures required under
defined class; and
paragraph (f)(1)(i) of this section to be-
(D) The creditor or settlement serv-
come inaccurate, and such inaccuracy
ice provider does not use an average
results in a change to an amount actu-
charge:
ally paid by the consumer from that
amount disclosed under paragraph (1) For any type of insurance;
(f)(1)(i) of this section, the creditor (2) For any charge based on the loan
shall deliver or place in the mail cor- amount or property value; or
rected disclosures not later than 30 (3) If doing so is otherwise prohibited
days after receiving information suffi- by law.
cient to establish that such event has (4) Transactions involving a seller—(i)
occurred. Provision to seller. In a transaction sub-
(iv) Changes due to clerical errors. A ject to paragraph (e)(1)(i) of this sec-
creditor does not violate paragraph tion that involves a seller, the settle-
(f)(1)(i) of this section if the disclosures ment agent shall provide the seller
provided under paragraph (f)(1)(i) con- with the disclosures in § 1026.38 that re-
tain non-numeric clerical errors, pro- late to the seller’s transaction reflect-
vided the creditor delivers or places in ing the actual terms of the seller’s
the mail corrected disclosures no later transaction.
than 60 days after consummation. (ii) Timing. The settlement agent
(v) Refunds related to the good faith shall provide the disclosures required
analysis. If amounts paid by the con- under paragraph (f)(4)(i) of this section
sumer exceed the amounts specified no later than the day of consumma-
under paragraph (e)(3)(i) or (ii) of this tion. If during the 30-day period fol-
section, the creditor complies with lowing consummation, an event in con-
paragraph (e)(1)(i) of this section if the nection with the settlement of the
creditor refunds the excess to the con- transaction occurs that causes disclo-
sumer no later than 60 days after con- sures required under paragraph (f)(4)(i)
summation, and the creditor complies of this section to become inaccurate,
with paragraph (f)(1)(i) of this section and such inaccuracy results in a
if the creditor delivers or places in the change to the amount actually paid by
mail corrected disclosures that reflect the seller from that amount disclosed
such refund no later than 60 days after under paragraph (f)(4)(i) of this section,
consummation. the settlement agent shall deliver or
(3) Charges disclosed—(i) Actual place in the mail corrected disclosures
charge. The amount imposed upon the not later than 30 days after receiving
jspears on DSK121TN23PROD with CFR
consumer for any settlement service information sufficient to establish that
shall not exceed the amount actually such event has occurred.
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Consumer Financial Protection Bureau § 1026.19
(iii) Charges disclosed. The amount Home Equity Lines of Credit,’’ or any
imposed on the seller for any settle- successor brochure issued by the Bu-
ment service shall not exceed the reau, is deemed to be in compliance
amount actually received by the serv- with this section.
ice provider for that service, except as (iii) The creditor or mortgage broker
otherwise provided in paragraph need not provide the booklet to the
(f)(3)(ii) of this section. consumer for a transaction, the pur-
(iv) Creditor’s copy. When the con- pose of which is not the purchase of a
sumer’s and seller’s disclosures under one-to-four family residential prop-
this paragraph (f) are provided on sepa- erty, including, but not limited to, the
rate documents, as permitted under following:
§ 1026.38(t)(5), the settlement agent (A) Refinancing transactions;
shall provide to the creditor (if the (B) Closed-end loans secured by a
creditor is not the settlement agent) a subordinate lien; and
copy of the disclosures provided to the (C) Reverse mortgages.
seller under paragraph (f)(4)(i) of this (2) Permissible changes. Creditors may
section. not make changes to, deletions from,
(5) No fee. No fee may be imposed on or additions to the special information
any person, as a part of settlement booklet other than the changes speci-
costs or otherwise, by a creditor or by fied in paragraphs (g)(2)(i) through (iv)
a servicer (as that term is defined of this section.
under 12 U.S.C. 2605(i)(2)) for the prepa- (i) In the ‘‘Complaints’’ section of the
ration or delivery of the disclosures re- booklet, ‘‘the Bureau of Consumer Fi-
quired under paragraph (f)(1)(i) of this nancial Protection’’ may be sub-
section. stituted for ‘‘HUD’s Office of RESPA’’
(g) Special information booklet at time and ‘‘the RESPA office.’’
of application—(1) Creditor to provide (ii) In the ‘‘Avoiding Foreclosure’’
special information booklet. Except as section of the booklet, it is permissible
provided in paragraphs (g)(1)(ii) and to inform homeowners that they may
(iii) of this section, the creditor shall find information on and assistance in
provide a copy of the special informa- avoiding foreclosures at http://
tion booklet (required pursuant to sec- www.consumerfinance.gov. The ref-
tion 5 of the Real Estate Settlement erence to the HUD Web site, http://
Procedures Act (12 U.S.C. 2604) to help www.hud.gov/foreclosure/, in the
consumers applying for federally re- ‘‘Avoiding Foreclosure’’ section of the
lated mortgage loans understand the booklet shall not be deleted.
nature and cost of real estate settle- (iii) In the ‘‘No Discrimination’’ sec-
ment services) to a consumer who ap- tion of the appendix to the booklet,
plies for a consumer credit transaction ‘‘the Bureau of Consumer Financial
secured by real property or a coopera- Protection’’ may be substituted for the
tive unit. reference to the ‘‘Board of Governors of
(i) The creditor shall deliver or place the Federal Reserve System.’’ In the
in the mail the special information Contact Information section of the ap-
booklet not later than three business pendix to the booklet, the following
days after the consumer’s application contact information for the Bureau
is received. However, if the creditor de- may be added: ‘‘Bureau of Consumer
nies the consumer’s application before Financial Protection, 1700 G Street
the end of the three-business-day pe- NW., Washington, DC 20552;
riod, the creditor need not provide the www.consumerfinance.gov/learnmore.’’
booklet. If a consumer uses a mortgage The contact information for HUD’s Of-
broker, the mortgage broker shall pro- fice of RESPA and Interstate Land
vide the special information booklet Sales may be removed from the ‘‘Con-
and the creditor need not do so. tact Information’’ section of the appen-
(ii) In the case of a home equity line dix to the booklet.
of credit subject to § 1026.40, a creditor (iv) The cover of the booklet may be
or mortgage broker that provides the in any form and may contain any draw-
consumer with a copy of the brochure ings, pictures or artwork, provided
jspears on DSK121TN23PROD with CFR
entitled ‘‘When Your Home is On the that the title appearing on the cover
Line: What You Should Know About shall not be changed. Names, addresses,
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§ 1026.20 12 CFR Ch. X (1–1–25 Edition)
and telephone numbers of the creditor tion. If the finance charge originally
or others and similar information may imposed on the existing obligation was
appear on the cover, but no discussion an add-on or discount finance charge,
of the matters covered in the booklet the creditor need only disclose:
shall appear on the cover. References (1) The unpaid balance of the obliga-
to HUD on the cover of the booklet tion assumed.
may be changed to references to the (2) The total charges imposed by the
Bureau. creditor in connection with the as-
[76 FR 79772, Dec. 22, 2011, as amended at 78
sumption.
FR 80108, Dec. 31, 2013; 80 FR 8776, Feb. 19, (3) The information required to be
2015; 82 FR 37768, Aug. 11, 2017; 83 FR 19174, disclosed under § 1026.18(k), (l), (m), and
May 2, 2018] (n).
(4) The annual percentage rate origi-
§ 1026.20 Disclosure requirements re- nally imposed on the obligation.
garding post-consummation events. (5) The payment schedule under
(a) Refinancings. A refinancing occurs § 1026.18(g) and the total of payments
when an existing obligation that was under § 1026.18(h) based on the remain-
subject to this subpart is satisfied and ing obligation.
replaced by a new obligation under- (c) Rate adjustments with a cor-
taken by the same consumer. A refi- responding change in payment. The cred-
nancing is a new transaction requiring itor, assignee, or servicer of an adjust-
new disclosures to the consumer. The able-rate mortgage shall provide con-
new finance charge shall include any sumers with disclosures, as described
unearned portion of the old finance in this paragraph (c), in connection
charge that is not credited to the exist- with the adjustment of interest rates
ing obligation. The following shall not pursuant to the loan contract that re-
be treated as a refinancing: sults in a corresponding adjustment to
(1) A renewal of a single payment ob- the payment. To the extent that other
ligation with no change in the original provisions of this subpart C govern the
terms. disclosures required by this paragraph
(2) A reduction in the annual percent- (c), those provisions apply to assignees
age rate with a corresponding change and servicers as well as to creditors.
in the payment schedule. The disclosures required by this para-
(3) An agreement involving a court graph (c) also shall be provided for an
proceeding. interest rate adjustment resulting
(4) A change in the payment schedule from the conversion of an adjustable-
or a change in collateral requirements rate mortgage to a fixed-rate trans-
as a result of the consumer’s default or action, if that interest rate adjustment
delinquency, unless the rate is in- results in a corresponding payment
creased, or the new amount financed change.
exceeds the unpaid balance plus earned (1) Coverage—(i) In general. For pur-
finance charge and premiums for con- poses of this paragraph (c), an adjust-
tinuation of insurance of the types de- able-rate mortgage or ‘‘ARM’’ is a
scribed in § 1026.4(d). closed-end consumer credit transaction
(5) The renewal of optional insurance secured by the consumer’s principal
purchased by the consumer and added dwelling in which the annual percent-
to an existing transaction, if disclo- age rate may increase after consumma-
sures relating to the initial purchase tion.
were provided as required by this sub- (ii) Exemptions. The requirements of
part. this paragraph (c) do not apply to:
(b) Assumptions. An assumption oc- (A) ARMs with terms of one year or
curs when a creditor expressly agrees less;
in writing with a subsequent consumer (B) The first interest rate adjustment
to accept that consumer as a primary to an ARM if the first payment at the
obligor on an existing residential mort- adjusted level is due within 210 days
gage transaction. Before the assump- after consummation and the new inter-
tion occurs, the creditor shall make est rate disclosed at consummation
jspears on DSK121TN23PROD with CFR
new disclosures to the subsequent con- pursuant to § 1026.20(d) was not an esti-
sumer, based on the remaining obliga- mate; or
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Consumer Financial Protection Bureau § 1026.20
(C) The creditor, assignee or servicer (A) The current and new interest
of an adjustable-rate mortgage when rates;
the servicer on the loan is subject to (B) The current and new payments
the Fair Debt Collections Practices Act and the date the first new payment is
(FDCPA) (15 U.S.C. 1692 et seq.) with re- due; and
gard to the loan and the consumer has (C) For interest-only or negatively-
sent a notification pursuant to FDCPA amortizing payments, the amount of
section 805(c) (15 U.S.C. 1692c(c)). the current and new payment allocated
(2) Timing and content. Except as oth- to principal, interest, and taxes and in-
erwise provided in paragraph (c)(2) of surance in escrow, as applicable. The
this section, the disclosures required current payment allocation disclosed
by this paragraph (c) shall be provided shall be the payment allocation for the
to consumers at least 60, but no more last payment prior to the date of the
than 120, days before the first payment disclosure. The new payment alloca-
at the adjusted level is due. The disclo- tion disclosed shall be the expected
sures shall be provided to consumers at payment allocation for the first pay-
least 25, but no more than 120, days be- ment for which the new interest rate
fore the first payment at the adjusted will apply.
level is due for ARMs with uniformly (iii) An explanation of how the inter-
scheduled interest rate adjustments oc- est rate is determined, including:
curring every 60 days or more fre- (A) The specific index or formula
quently and for ARMs originated prior used in making interest rate adjust-
to January 10, 2015 in which the loan ments and a source of information
contract requires the adjusted interest about the index or formula; and
rate and payment to be calculated (B) The type and amount of any ad-
based on the index figure available as justment to the index, including any
of a date that is less than 45 days prior margin and an explanation that the
to the adjustment date. The disclosures margin is the addition of a certain
shall be provided to consumers as soon number of percentage points to the
as practicable, but not less than 25 index, and any application of pre-
days before the first payment at the viously foregone interest rate increases
adjusted level is due, for the first ad- from past interest rate adjustments.
justment to an ARM if it occurs within (iv) Any limits on the interest rate or
60 days of consummation and the new payment increases at each interest
rate adjustment and over the life of the
interest rate disclosed at consumma-
loan, as applicable, including the ex-
tion pursuant to § 1026.20(d) was an esti-
tent to which such limits result in the
mate. The disclosures required by this
creditor, assignee, or servicer foregoing
paragraph (c) shall include:
any increase in the interest rate and
(i) A statement providing: the earliest date that such foregone in-
(A) An explanation that under the terest rate increases may apply to fu-
terms of the consumer’s adjustable- ture interest rate adjustments, subject
rate mortgage, the specific time period to those limits.
in which the current interest rate has (v) An explanation of how the new
been in effect is ending and the interest payment is determined, including:
rate and mortgage payment will (A) The index or formula used;
change; (B) Any adjustment to the index or
(B) The effective date of the interest formula, such as the addition of a mar-
rate adjustment and when additional gin or the application of any previously
future interest rate adjustments are foregone interest rate increases from
scheduled to occur; and past interest rate adjustments;
(C) Any other changes to loan terms, (C) The loan balance expected on the
features, or options taking effect on date of the interest rate adjustment;
the same date as the interest rate ad- and
justment, such as the expiration of in- (D) The length of the remaining loan
terest-only or payment-option fea- term expected on the date of the inter-
tures. est rate adjustment and any change in
jspears on DSK121TN23PROD with CFR
(ii) A table containing the following the term of the loan caused by the ad-
information: justment.
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§ 1026.20 12 CFR Ch. X (1–1–25 Edition)
(vi) If applicable, a statement that other documents provided by the cred-
the new payment will not be allocated itor, assignee, or servicer. The disclo-
to pay loan principal and will not re- sures shall be provided to consumers at
duce the loan balance. If the new pay- least 210, but no more than 240, days
ment will result in negative amortiza- before the first payment at the ad-
tion, a statement that the new pay- justed level is due. If the first payment
ment will not be allocated to pay loan at the adjusted level is due within the
principal and will pay only part of the first 210 days after consummation, the
loan interest, thereby adding to the disclosures shall be provided at con-
balance of the loan. If the new payment summation.
will result in negative amortization as (1) Coverage—(i) In general. For pur-
a result of the interest rate adjust- poses of this paragraph (d), an adjust-
ment, the statement shall set forth the able-rate mortgage or ‘‘ARM’’ is a
payment required to amortize fully the closed-end consumer credit transaction
remaining balance at the new interest
secured by the consumer’s principal
rate over the remainder of the loan
dwelling in which the annual percent-
term.
age rate may increase after consumma-
(vii) The circumstances under which
tion.
any prepayment penalty, as defined in
§ 1026.32(b)(6)(i), may be imposed, such (ii) Exemptions. The requirements of
as when paying the loan in full or sell- this paragraph (d) do not apply to
ing or refinancing the principal dwell- ARMs with terms of one year or less.
ing; the time period during which such (2) Content. If the new interest rate
a penalty may be imposed; and a state- (or the new payment calculated from
ment that the consumer may contact the new interest rate) is not known as
the servicer for additional information, of the date of the disclosure, an esti-
including the maximum amount of the mate shall be disclosed and labeled as
penalty. such. This estimate shall be based on
(3) Format. (i) The disclosures re- the calculation of the index reported in
quired by this paragraph (c) shall be the source of information described in
provided in the form of a table and in paragraph (d)(2)(iv)(A) of this section
the same order as, and with headings within fifteen business days prior to
and format substantially similar to, the date of the disclosure. The disclo-
forms H–4(D)(1) and (2) in appendix H to sures required by this paragraph (d)
this part; and shall include:
(ii) The disclosures required by para- (i) The date of the disclosure.
graph (c)(2)(ii) of this section shall be (ii) A statement providing:
in the form of a table located within (A) An explanation that under the
the table described in paragraph terms of the consumer’s adjustable-
(c)(3)(i) of this section. These disclo- rate mortgage, the specific time period
sures shall appear in the same order as, in which the current interest rate has
and with headings and format substan- been in effect is ending and that any
tially similar to, the table inside the change in the interest rate may result
larger table in forms H–4(D)(1) and (2) in a change in the mortgage payment;
in appendix H to this part.
(B) The effective date of the interest
(d) Initial rate adjustment. The cred-
rate adjustment and when additional
itor, assignee, or servicer of an adjust-
future interest rate adjustments are
able-rate mortgage shall provide con-
sumers with disclosures, as described scheduled to occur; and
in this paragraph (d), in connection (C) Any other changes to loan terms,
with the initial interest rate adjust- features, or options taking effect on
ment pursuant to the loan contract. To the same date as the interest rate ad-
the extent that other provisions of this justment, such as the expiration of in-
subpart C govern the disclosures re- terest-only or payment-option fea-
quired by this paragraph (d), those pro- tures.
visions apply to assignees and servicers (iii) A table containing the following
as well as to creditors. The disclosures information:
jspears on DSK121TN23PROD with CFR
required by this paragraph (d) shall be (A) The current and new interest
provided as a separate document from rates;
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Consumer Financial Protection Bureau § 1026.20
(B) The current and new payments adjusted level is due for interest rate
and the date the first new payment is adjustments that result in a cor-
due; and responding payment change.
(C) For interest-only or negatively- (vii) If applicable, a statement that
amortizing payments, the amount of the new payment will not be allocated
the current and new payment allocated to pay loan principal and will not re-
to principal, interest, and taxes and in- duce the loan balance. If the new pay-
surance in escrow, as applicable. The ment will result in negative amortiza-
current payment allocation disclosed tion, a statement that the new pay-
shall be the payment allocation for the ment will not be allocated to pay loan
last payment prior to the date of the principal and will pay only part of the
disclosure. The new payment alloca- loan interest, thereby adding to the
tion disclosed shall be the expected balance of the loan. If the new payment
payment allocation for the first pay- will result in negative amortization as
ment for which the new interest rate a result of the interest rate adjust-
will apply. ment, the statement shall set forth the
(iv) An explanation of how the inter- payment required to amortize fully the
est rate is determined, including: remaining balance at the new interest
(A) The specific index or formula rate over the remainder of the loan
used in making interest rate adjust- term.
ments and a source of information (viii) The circumstances under which
about the index or formula; and any prepayment penalty, as defined in
(B) The type and amount of any ad- § 1026.32(b)(6)(i), may be imposed, such
justment to the index, including any as when paying the loan in full or sell-
margin and an explanation that the ing or refinancing the principal dwell-
margin is the addition of a certain ing; the time period during which such
number of percentage points to the a penalty may be imposed; and a state-
index. ment that the consumer may contact
(v) Any limits on the interest rate or the servicer for additional information,
payment increases at each interest including the maximum amount of the
rate adjustment and over the life of the penalty.
loan, as applicable, including the ex- (ix) The telephone number of the
tent to which such limits result in the creditor, assignee, or servicer for con-
creditor, assignee, or servicer foregoing sumers to call if they anticipate not
any increase in the interest rate and being able to make their new pay-
the earliest date that such foregone in- ments.
terest rate increases may apply to fu- (x) The following alternatives to pay-
ture interest rate adjustments, subject ing at the new rate that consumers
to those limits. may be able to pursue and a brief ex-
(vi) An explanation of how the new planation of each alternative, ex-
payment is determined, including: pressed in simple and clear terms:
(A) The index or formula used; (A) Refinancing the loan with the
(B) Any adjustment to the index or current or another creditor or assignee;
formula, such as the addition of a mar- (B) Selling the property and using
gin; the proceeds to pay the loan in full;
(C) The loan balance expected on the (C) Modifying the terms of the loan
date of the interest rate adjustment; with the creditor, assignee, or servicer;
(D) The length of the remaining loan and
term expected on the date of the inter- (D) Arranging payment forbearance
est rate adjustment and any change in with the creditor, assignee, or servicer.
the term of the loan caused by the ad- (xi) The Web site to access either the
justment; and Bureau list or the HUD list of home-
(E) If the new interest rate or new ownership counselors and counseling
payment provided is an estimate, a organizations, the HUD toll-free tele-
statement that another disclosure con- phone number to access the HUD list of
taining the actual new interest rate homeownership counselors and coun-
and new payment will be provided to seling organizations, and the Bureau
jspears on DSK121TN23PROD with CFR
the consumer between two and four Web site to access contact information
months before the first payment at the for State housing finance authorities
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§ 1026.20 12 CFR Ch. X (1–1–25 Edition)
(as defined in § 1301 of the Financial In- account; a statement that an escrow
stitutions Reform, Recovery, and En- account may also be called an impound
forcement Act of 1989). or trust account; a statement of the
(3) Format. (i) Except for the disclo- reason why the escrow account will be
sures required by paragraph (d)(2)(i) of closed; a statement that without an es-
this section, the disclosures required crow account, the consumer must pay
by this paragraph (d) shall be provided all property costs, such as taxes and
in the form of a table and in the same homeowner’s insurance, directly, pos-
order as, and with headings and format sibly in one or two large payments a
substantially similar to, forms H– year; and a table, titled ‘‘Cost to you,’’
4(D)(3) and (4) in appendix H to this that contains an itemization of the
part; amount of any fee the creditor or
(ii) The disclosures required by para- servicer imposes on the consumer in
graph (d)(2)(i) of this section shall ap- connection with the closure of the con-
pear outside of and above the table re- sumer’s escrow account, labeled ‘‘Es-
quired in paragraph (d)(3)(i) of this sec- crow Closing Fee,’’ and a statement
tion; and that the fee is for closing the escrow
(iii) The disclosures required by para- account.
graph (d)(2)(iii) of this section shall be (ii) Under the reference ‘‘In the fu-
in the form of a table located within ture’’:
the table described in paragraph (A) A statement of the consequences
(d)(3)(i) of this section. These disclo- if the consumer fails to pay property
sures shall appear in the same order as, costs, including the actions that a
and with headings and format substan- State or local government may take if
tially similar to, the table inside the property taxes are not paid and the ac-
larger table in forms H–4(D)(3) and (4) tions the creditor or servicer may take
in appendix H to this part. if the consumer does not pay some or
(e) Escrow account cancellation notice all property costs, such as adding
for certain mortgage transactions—(1) amounts to the loan balance, adding an
Scope. In a closed-end consumer credit escrow account to the loan, or pur-
transaction secured by a first lien on chasing a property insurance policy on
real property or a dwelling, other than the consumer’s behalf that may be
a reverse mortgage subject to § 1026.33, more expensive and provide fewer bene-
for which an escrow account was estab- fits than a policy that the consumer
lished in connection with the trans- could obtain directly;
action and will be cancelled, the cred- (B) A statement with a telephone
itor or servicer shall disclose the infor- number that the consumer can use to
mation specified in paragraph (e)(2) of request additional information about
this section in accordance with the the cancellation of the escrow account;
form requirements in paragraph (e)(4) (C) A statement of whether the cred-
of this section, and the timing require- itor or servicer offers the option of
ments in paragraph (e)(5) of this sec- keeping the escrow account open and,
tion. For purposes of this paragraph as applicable, a telephone number the
(e), the term ‘‘escrow account’’ has the consumer can use to request that the
same meaning as under 12 CFR account be kept open; and
1024.17(b), and the term ‘‘servicer’’ has (D) A statement of whether there is a
the same meaning as under 12 CFR cut-off date by which the consumer can
1024.2(b). request that the account be kept open.
(2) Content requirements. If an escrow (3) Optional information. The creditor
account was established in connection or servicer may, at its option, include
with a transaction subject to this para- its name or logo, the consumer’s name,
graph (e) and the escrow account will phone number, mailing address and
be cancelled, the creditor or servicer property address, the issue date of the
shall clearly and conspicuously dis- notice, the loan number, or the con-
close, under the heading ‘‘Escrow Clos- sumer’s account number on the notice
ing Notice,’’ the following information: required by this paragraph (e). Except
(i) A statement informing the con- for the name and logo of the creditor or
jspears on DSK121TN23PROD with CFR
sumer of the date on which the con- servicer, the information described in
sumer will no longer have an escrow this paragraph may be placed between
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Consumer Financial Protection Bureau § 1026.22
the heading required by paragraph the mortgage loan obligation under
(e)(2) of this section and the disclosures State law or has provided the servicer
required by paragraphs (e)(2)(i) and (ii) an executed acknowledgment in ac-
of this section. The name and logo may cordance with Regulation X,
be placed above the heading required § 1024.32(c)(1)(iv) of this chapter, that
by paragraph (e)(2) of this section. the confirmed successor in interest has
(4) Form of disclosures. The disclosures not revoked.
required by paragraph (e)(2) of this sec-
[76 FR 79772, Dec. 22, 2011, as amended at 78
tion shall be provided in a minimum 10-
FR 11004, Feb. 14, 2013; 78 FR 63005, Oct. 23,
point font, grouped together on the 2013; 78 FR 80111, Dec. 31, 2013; 81 FR 72388,
front side of a one-page document, sep- Oct. 19, 2016]
arate from all other materials, with
the headings, content, order, and for- § 1026.21 Treatment of credit balances.
mat substantially similar to model
When a credit balance in excess of $1
form H–29 in appendix H to this part.
is created in connection with a trans-
The disclosure of the heading required
action (through transmittal of funds to
by paragraph (e)(2) of this section shall
a creditor in excess of the total balance
be more conspicuous than, and shall
due on an account, through rebates of
precede, the other disclosures required
unearned finance charges or insurance
by paragraph (e)(2) of this section.
premiums, or through amounts other-
(5) Timing—(i) Cancellation upon con-
wise owed to or held for the benefit of
sumer’s request. If the creditor or
a consumer), the creditor shall:
servicer cancels the escrow account at
the consumer’s request, the creditor or (a) Credit the amount of the credit
servicer shall ensure that the consumer balance to the consumer’s account;
receives the disclosures required by (b) Refund any part of the remaining
paragraph (e)(2) of this section no later credit balance, upon the written re-
than three business days before the clo- quest of the consumer; and
sure of the consumer’s escrow account. (c) Make a good faith effort to refund
(ii) Cancellations other than upon the to the consumer by cash, check, or
consumer’s request. If the creditor or money order, or credit to a deposit ac-
servicer cancels the escrow account count of the consumer, any part of the
and the cancellation is not at the con- credit balance remaining in the ac-
sumer’s request, the creditor or count for more than 6 months, except
servicer shall ensure that the consumer that no further action is required if the
receives the disclosures required by consumer’s current location is not
paragraph (e)(2) of this section no later known to the creditor and cannot be
than 30 business days before the clo- traced through the consumer’s last
sure of the consumer’s escrow account. known address or telephone number.
(iii) Receipt of disclosure. If the disclo-
sures required by paragraph (e)(2) of § 1026.22 Determination of annual per-
this section are not provided to the centage rate.
consumer in person, the consumer is (a) Accuracy of annual percentage rate.
considered to have received the disclo- (1) The annual percentage rate is a
sures three business days after they are measure of the cost of credit, expressed
delivered or placed in the mail. as a yearly rate, that relates the
(f) Successor in interest. If, upon con- amount and timing of value received
firmation, a servicer provides a con- by the consumer to the amount and
firmed successor in interest who is not timing of payments made. The annual
liable on the mortgage loan obligation percentage rate shall be determined in
with a written notice and acknowledg- accordance with either the actuarial
ment form in accordance with Regula- method or the United States Rule
tion X, § 1024.32(c)(1) of this chapter, method. Explanations, equations and
the servicer is not required to provide instructions for determining the an-
to the confirmed successor in interest nual percentage rate in accordance
any written disclosure required by with the actuarial method are set forth
paragraphs (c), (d), and (e) of this sec- in appendix J to this part. An error in
jspears on DSK121TN23PROD with CFR
tion unless and until the confirmed disclosure of the annual percentage
successor in interest either assumes rate or finance charge shall not, in
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§ 1026.22 12 CFR Ch. X (1–1–25 Edition)
itself, be considered a violation of this accurate under § 1026.18(d)(1) or
part if: § 1026.38(o)(2), as applicable, or
(i) The error resulted from a cor- § 1026.23(g) or (h), the disclosed annual
responding error in a calculation tool percentage rate shall be considered ac-
used in good faith by the creditor; and curate:
(ii) Upon discovery of the error, the (i) If the disclosed finance charge is
creditor promptly discontinues use of understated, and the disclosed annual
that calculation tool for disclosure percentage rate is also understated but
purposes and notifies the Bureau in it is closer to the actual annual per-
writing of the error in the calculation centage rate than the rate that would
tool.
be considered accurate under para-
(2) As a general rule, the annual per-
graph (a)(4) of this section;
centage rate shall be considered accu-
rate if it is not more than 1⁄8 of 1 per- (ii) If the disclosed finance charge is
centage point above or below the an- overstated, and the disclosed annual
nual percentage rate determined in ac- percentage rate is also overstated but
cordance with paragraph (a)(1) of this it is closer to the actual annual per-
section. centage rate than the rate that would
(3) In an irregular transaction, the be considered accurate under para-
annual percentage rate shall be consid- graph (a)(4) of this section.
ered accurate if it is not more than 1⁄4 (b) Computation tools. (1) The Regula-
of 1 percentage point above or below tion Z Annual Percentage Rate Tables
the annual percentage rate determined produced by the Bureau may be used to
in accordance with paragraph (a)(1) of determine the annual percentage rate,
this section. For purposes of this para- and any rate determined from those ta-
graph (a)(3), an irregular transaction is bles in accordance with the accom-
one that includes one or more of the panying instructions complies with the
following features: multiple advances, requirements of this section. Volume I
irregular payment periods, or irregular of the tables applies to single advance
payment amounts (other than an irreg- transactions involving up to 480
ular first period or an irregular first or monthly payments or 104 weekly pay-
final payment).
ments. It may be used for regular
(4) Mortgage loans. If the annual per-
transactions and for transactions with
centage rate disclosed in a transaction
secured by real property or a dwelling any of the following irregularities: an
varies from the actual rate determined irregular first period, an irregular first
in accordance with paragraph (a)(1) of payment, and an irregular final pay-
this section, in addition to the toler- ment. Volume II of the tables applies
ances applicable under paragraphs to transactions involving multiple ad-
(a)(2) and (3) of this section, the dis- vances and any type of payment or pe-
closed annual percentage rate shall riod irregularity.
also be considered accurate if: (2) Creditors may use any other com-
(i) The rate results from the disclosed putation tool in determining the an-
finance charge; and nual percentage rate if the rate so de-
(ii)(A) The disclosed finance charge termined equals the rate determined in
would be considered accurate under accordance with appendix J to this
§ 1026.18(d)(1) or § 1026.38(o)(2), as appli- part, within the degree of accuracy set
cable; or forth in paragraph (a) of this section.
(B) For purposes of rescission, if the (c) Single add-on rate transactions. If a
disclosed finance charge would be con- single add-on rate is applied to all
sidered accurate under § 1026.23(g) or transactions with maturities up to 60
(h), whichever applies. months and if all payments are equal
(5) Additional tolerance for mortgage
in amount and period, a single annual
loans. In a transaction secured by real
percentage rate may be disclosed for
property or a dwelling, in addition to
all those transactions, so long as it is
the tolerances applicable under para-
graphs (a)(2) and (3) of this section, if the highest annual percentage rate for
jspears on DSK121TN23PROD with CFR
the disclosed finance charge is cal- any such transaction.
culated incorrectly but is considered
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Consumer Financial Protection Bureau § 1026.23
(d) Certain transactions involving (3)(i) The consumer may exercise the
ranges of balances. For purposes of dis- right to rescind until midnight of the
closing the annual percentage rate re- third business day following con-
ferred to in § 1026.17(g)(4) (Mail or tele- summation, delivery of the notice re-
phone orders—delay in disclosures) and quired by paragraph (b) of this section,
(h) (Series of sales—delay in disclo- or delivery of all material disclosures,
sures), if the same finance charge is whichever occurs last. If the required
imposed on all balances within a speci- notice or material disclosures are not
fied range of balances, the annual per- delivered, the right to rescind shall ex-
centage rate computed for the median pire 3 years after consummation, upon
balance may be disclosed for all the transfer of all of the consumer’s inter-
balances. However, if the annual per- est in the property, or upon sale of the
centage rate computed for the median property, whichever occurs first. In the
balance understates the annual per- case of certain administrative pro-
centage rate computed for the lowest ceedings, the rescission period shall be
balance by more than 8 percent of the extended in accordance with section
latter rate, the annual percentage rate 125(f) of the Act.
shall be computed on whatever lower (ii) For purposes of this paragraph
balance will produce an annual per-
(a)(3), the term ‘‘material disclosures’’
centage rate that does not result in an
means the required disclosures of the
understatement of more than 8 percent
annual percentage rate, the finance
of the rate determined on the lowest
charge, the amount financed, the total
balance.
of payments, the payment schedule,
[76 FR 79772, Dec. 22, 2011, as amended at 78 and the disclosures and limitations re-
FR 80112, Dec. 31, 2013; 80 FR 80229, Dec. 24, ferred to in §§ 1026.32(c) and (d) and
2015] 1026.43(g).
(4) When more than one consumer in
§ 1026.23 Right of rescission.
a transaction has the right to rescind,
(a) Consumer’s right to rescind. (1) In a the exercise of the right by one con-
credit transaction in which a security sumer shall be effective as to all con-
interest is or will be retained or ac- sumers.
quired in a consumer’s principal dwell- (b)(1) Notice of right to rescind. In a
ing, each consumer whose ownership transaction subject to rescission, a
interest is or will be subject to the se- creditor shall deliver two copies of the
curity interest shall have the right to notice of the right to rescind to each
rescind the transaction, except for consumer entitled to rescind (one copy
transactions described in paragraph (f) to each if the notice is delivered in
of this section. For purposes of this electronic form in accordance with the
section, the addition to an existing ob- consumer consent and other applicable
ligation of a security interest in a con- provisions of the E-Sign Act). The no-
sumer’s principal dwelling is a trans- tice shall be on a separate document
action. The right of rescission applies that identifies the transaction and
only to the addition of the security in-
shall clearly and conspicuously dis-
terest and not the existing obligation.
close the following:
The creditor shall deliver the notice re-
quired by paragraph (b) of this section (i) The retention or acquisition of a
but need not deliver new material dis- security interest in the consumer’s
closures. Delivery of the required no- principal dwelling.
tice shall begin the rescission period. (ii) The consumer’s right to rescind
(2) To exercise the right to rescind, the transaction.
the consumer shall notify the creditor (iii) How to exercise the right to re-
of the rescission by mail, telegram or scind, with a form for that purpose,
other means of written communica- designating the address of the credi-
tion. Notice is considered given when tor’s place of business.
mailed, when filed for telegraphic (iv) The effects of rescission, as de-
transmission or, if sent by other scribed in paragraph (d) of this section.
jspears on DSK121TN23PROD with CFR
means, when delivered to the creditor’s (v) The date the rescission period ex-
designated place of business. pires.
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§ 1026.23 12 CFR Ch. X (1–1–25 Edition)
(2) Proper form of notice. To satisfy ify or waive the right, the consumer
the disclosure requirements of para- shall give the creditor a dated written
graph (b)(1) of this section, the creditor statement that describes the emer-
shall provide the appropriate model gency, specifically modifies or waives
form in appendix H of this part or a the right to rescind, and bears the sig-
substantially similar notice. nature of all the consumers entitled to
(c) Delay of creditor’s performance. Un- rescind. Printed forms for this purpose
less a consumer waives the right of re- are prohibited.
scission under paragraph (e) of this sec- (f) Exempt transactions. The right to
tion, no money shall be disbursed other rescind does not apply to the following:
than in escrow, no services shall be (1) A residential mortgage trans-
performed and no materials delivered action.
until the rescission period has expired (2) A refinancing or consolidation by
and the creditor is reasonably satisfied the same creditor of an extension of
that the consumer has not rescinded. credit already secured by the con-
(d) Effects of rescission. (1) When a sumer’s principal dwelling. The right of
consumer rescinds a transaction, the rescission shall apply, however, to the
security interest giving rise to the extent the new amount financed ex-
right of rescission becomes void and ceeds the unpaid principal balance, any
the consumer shall not be liable for earned unpaid finance charge on the
any amount, including any finance existing debt, and amounts attributed
charge. solely to the costs of the refinancing or
(2) Within 20 calendar days after re- consolidation.
ceipt of a notice of rescission, the cred- (3) A transaction in which a state
itor shall return any money or prop- agency is a creditor.
erty that has been given to anyone in (4) An advance, other than an initial
connection with the transaction and advance, in a series of advances or in a
shall take any action necessary to re- series of single-payment obligations
flect the termination of the security that is treated as a single transaction
interest. under § 1026.17(c)(6), if the notice re-
(3) If the creditor has delivered any quired by paragraph (b) of this section
money or property, the consumer may and all material disclosures have been
retain possession until the creditor has given to the consumer.
met its obligation under paragraph (5) A renewal of optional insurance
(d)(2) of this section. When the creditor premiums that is not considered a refi-
has complied with that paragraph, the nancing under § 1026.20(a)(5).
consumer shall tender the money or (g) Tolerances for accuracy—(1) One-
property to the creditor or, where the half of 1 percent tolerance. Except as
latter would be impracticable or in- provided in paragraphs (g)(2) and (h)(2)
equitable, tender its reasonable value. of this section:
At the consumer’s option, tender of (i) The finance charge and other dis-
property may be made at the location closures affected by the finance charge
of the property or at the consumer’s (such as the amount financed and the
residence. Tender of money must be annual percentage rate) shall be con-
made at the creditor’s designated place sidered accurate for purposes of this
of business. If the creditor does not section if the disclosed finance charge:
take possession of the money or prop- (A) Is understated by no more than 1⁄2
erty within 20 calendar days after the of 1 percent of the face amount of the
consumer’s tender, the consumer may note or $100, whichever is greater; or
keep it without further obligation. (B) Is greater than the amount re-
(4) The procedures outlined in para- quired to be disclosed.
graphs (d)(2) and (3) of this section may (ii) The total of payments for each
be modified by court order. transaction subject to § 1026.19(e) and
(e) Consumer’s waiver of right to re- (f) shall be considered accurate for pur-
scind. The consumer may modify or poses of this section if the disclosed
waive the right to rescind if the con- total of payments:
sumer determines that the extension of (A) Is understated by no more than 1⁄2
jspears on DSK121TN23PROD with CFR
credit is needed to meet a bona fide of 1 percent of the face amount of the
personal financial emergency. To mod- note or $100, whichever is greater; or
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Consumer Financial Protection Bureau § 1026.24
(B) Is greater than the amount re- (f) shall be considered accurate for pur-
quired to be disclosed. poses of this section if the disclosed
(2) One percent tolerance. In a refi- total of payments:
nancing of a residential mortgage (A) Is understated by no more than
transaction with a new creditor (other $35; or
than a transaction covered by § 1026.32), (B) Is greater than the amount re-
if there is no new advance and no con- quired to be disclosed.
solidation of existing loans:
[76 FR 79772, Dec. 22, 2011, as amended at 78
(i) The finance charge and other dis-
FR 30745, May 23, 2013; 78 FR 60440, Oct. 1,
closures affected by the finance charge 2013; 82 FR 37769, Aug. 11, 2017]
(such as the amount financed and the
annual percentage rate) shall be con- § 1026.24 Advertising.
sidered accurate for purposes of this
section if the disclosed finance charge: (a) Actually available terms. If an ad-
(A) Is understated by no more than 1 vertisement for credit states specific
percent of the face amount of the note credit terms, it shall state only those
or $100, whichever is greater; or terms that actually are or will be ar-
(B) Is greater than the amount re- ranged or offered by the creditor.
quired to be disclosed. (b) Clear and conspicuous standard.
(ii) The total of payments for each Disclosures required by this section
transaction subject to § 1026.19(e) and shall be made clearly and conspicu-
(f) shall be considered accurate for pur- ously.
poses of this section if the disclosed (c) Advertisement of rate of finance
total of payments: charge. If an advertisement states a
(A) Is understated by no more than 1 rate of finance charge, it shall state
percent of the face amount of the note the rate as an ‘‘annual percentage
or $100, whichever is greater; or rate,’’ using that term. If the annual
(B) Is greater than the amount re- percentage rate may be increased after
quired to be disclosed. consummation, the advertisement
(h) Special rules for foreclosures—(1) shall state that fact. If an advertise-
Right to rescind. After the initiation of ment is for credit not secured by a
foreclosure on the consumer’s principal dwelling, the advertisement shall not
dwelling that secures the credit obliga- state any other rate, except that a sim-
tion, the consumer shall have the right ple annual rate or periodic rate that is
to rescind the transaction if: applied to an unpaid balance may be
(i) A mortgage broker fee that should stated in conjunction with, but not
have been included in the finance more conspicuously than, the annual
charge was not included; or percentage rate. If an advertisement is
(ii) The creditor did not provide the for credit secured by a dwelling, the ad-
properly completed appropriate model vertisement shall not state any other
form in appendix H of this part, or a rate, except that a simple annual rate
substantially similar notice of rescis- that is applied to an unpaid balance
sion. may be stated in conjunction with, but
(2) Tolerance for disclosures. After the not more conspicuously than, the an-
initiation of foreclosure on the con- nual percentage rate.
sumer’s principal dwelling that secures (d) Advertisement of terms that require
the credit obligation: additional disclosures—(1) Triggering
(i) The finance charge and other dis- terms. If any of the following terms is
closures affected by the finance charge set forth in an advertisement, the ad-
(such as the amount financed and the vertisement shall meet the require-
annual percentage rate) shall be con- ments of paragraph (d)(2) of this sec-
sidered accurate for purposes of this tion:
section if the disclosed finance charge: (i) The amount or percentage of any
(A) Is understated by no more than downpayment.
$35; or (ii) The number of payments or pe-
(B) Is greater than the amount re- riod of repayment.
quired to be disclosed. (iii) The amount of any payment.
jspears on DSK121TN23PROD with CFR
(ii) The total of payments for each (iv) The amount of any finance
transaction subject to § 1026.19(e) and charge.
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§ 1026.24 12 CFR Ch. X (1–1–25 Edition)
(2) Additional terms. An advertisement annual rate of interest will apply over
stating any of the terms in paragraph the term of the advertised loan, the ad-
(d)(1) of this section shall state the fol- vertisement shall disclose in a clear
lowing terms, as applicable (an exam- and conspicuous manner:
ple of one or more typical extensions of (A) Each simple annual rate of inter-
credit with a statement of all the est that will apply. In variable-rate
terms applicable to each may be used): transactions, a rate determined by add-
(i) The amount or percentage of the ing an index and margin shall be dis-
downpayment. closed based on a reasonably current
(ii) The terms of repayment, which index and margin;
reflect the repayment obligations over (B) The period of time during which
the full term of the loan, including any each simple annual rate of interest will
balloon payment. apply; and
(iii) The ‘‘annual percentage rate,’’ (C) The annual percentage rate for
using that term, and, if the rate may the loan. If such rate is variable, the
be increased after consummation, that annual percentage rate shall comply
fact. with the accuracy standards in
(e) Catalogs or other multiple-page ad- §§ 1026.17(c) and 1026.22.
vertisements; electronic advertisements. (1)
(ii) Clear and conspicuous requirement.
If a catalog or other multiple-page ad-
For purposes of paragraph (f)(2)(i) of
vertisement, or an electronic adver-
this section, clearly and conspicuously
tisement (such as an advertisement ap-
disclosed means that the required in-
pearing on an Internet Web site), gives
formation in paragraphs (f)(2)(i)(A)
information in a table or schedule in
through (C) shall be disclosed with
sufficient detail to permit determina-
equal prominence and in close prox-
tion of the disclosures required by
imity to any advertised rate that trig-
paragraph (d)(2) of this section, it shall
gered the required disclosures. The re-
be considered a single advertisement if:
quired information in paragraph
(i) The table or schedule is clearly
(f)(2)(i)(C) may be disclosed with great-
and conspicuously set forth; and
er prominence than the other informa-
(ii) Any statement of the credit
tion.
terms in paragraph (d)(1) of this sec-
tion appearing anywhere else in the (3) Disclosure of payments—(i) In gen-
catalog or advertisement clearly refers eral. In addition to the requirements of
to the page or location where the table paragraph (c) of this section, if an ad-
or schedule begins. vertisement for credit secured by a
(2) A catalog or other multiple-page dwelling states the amount of any pay-
advertisement or an electronic adver- ment, the advertisement shall disclose
tisement (such as an advertisement ap- in a clear and conspicuous manner:
pearing on an Internet Web site) com- (A) The amount of each payment
plies with paragraph (d)(2) of this sec- that will apply over the term of the
tion if the table or schedule of terms loan, including any balloon payment.
includes all appropriate disclosures for In variable-rate transactions, pay-
a representative scale of amounts up to ments that will be determined based on
the level of the more commonly sold the application of the sum of an index
higher-priced property or services of- and margin shall be disclosed based on
fered. a reasonably current index and margin;
(f) Disclosure of rates and payments in (B) The period of time during which
advertisements for credit secured by a each payment will apply; and
dwelling—(1) Scope. The requirements of (C) In an advertisement for credit se-
this paragraph apply to any advertise- cured by a first lien on a dwelling, the
ment for credit secured by a dwelling, fact that the payments do not include
other than television or radio adver- amounts for taxes and insurance pre-
tisements, including promotional ma- miums, if applicable, and that the ac-
terials accompanying applications. tual payment obligation will be great-
(2) Disclosure of rates—(i) In general. If er.
an advertisement for credit secured by (ii) Clear and conspicuous requirement.
jspears on DSK121TN23PROD with CFR
a dwelling states a simple annual rate For purposes of paragraph (f)(3)(i) of
of interest and more than one simple this section, a clear and conspicuous
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Consumer Financial Protection Bureau § 1026.24
disclosure means that the required in- (i) Prohibited acts or practices in adver-
formation in paragraphs (f)(3)(i)(A) and tisements for credit secured by a dwelling.
(B) shall be disclosed with equal promi- The following acts or practices are pro-
nence and in close proximity to any ad- hibited in advertisements for credit se-
vertised payment that triggered the re- cured by a dwelling:
quired disclosures, and that the re- (1) Misleading advertising of ‘‘fixed’’
quired information in paragraph rates and payments. Using the word
(f)(3)(i)(C) shall be disclosed with prom- ‘‘fixed’’ to refer to rates, payments, or
inence and in close proximity to the the credit transaction in an advertise-
advertised payments. ment for variable-rate transactions or
(4) Envelope excluded. The require- other transactions where the payment
ments in paragraphs (f)(2) and (f)(3) of will increase, unless:
this section do not apply to an enve- (i) In the case of an advertisement
lope in which an application or solici- solely for one or more variable-rate
tation is mailed, or to a banner adver- transactions,
tisement or pop-up advertisement (A) The phrase ‘‘Adjustable-Rate
linked to an application or solicitation Mortgage,’’ ‘‘Variable-Rate Mortgage,’’
provided electronically. or ‘‘ARM’’ appears in the advertise-
(g) Alternative disclosures—television or ment before the first use of the word
radio advertisements. An advertisement ‘‘fixed’’ and is at least as conspicuous
made through television or radio stat-
as any use of the word ‘‘fixed’’ in the
ing any of the terms requiring addi-
advertisement; and
tional disclosures under paragraph
(B) Each use of the word ‘‘fixed’’ to
(d)(2) of this section may comply with
paragraph (d)(2) of this section either refer to a rate or payment is accom-
by: panied by an equally prominent and
(1) Stating clearly and conspicuously closely proximate statement of the
each of the additional disclosures re- time period for which the rate or pay-
quired under paragraph (d)(2) of this ment is fixed, and the fact that the
section; or rate may vary or the payment may in-
(2) Stating clearly and conspicuously crease after that period;
the information required by paragraph (ii) In the case of an advertisement
(d)(2)(iii) of this section and listing a solely for non-variable-rate trans-
toll-free telephone number, or any tele- actions where the payment will in-
phone number that allows a consumer crease (e.g., a stepped-rate mortgage
to reverse the phone charges when call- transaction with an initial lower pay-
ing for information, along with a ref- ment), each use of the word ‘‘fixed’’ to
erence that such number may be used refer to the payment is accompanied by
by consumers to obtain additional cost an equally prominent and closely prox-
information. imate statement of the time period for
(h) Tax implications. If an advertise- which the payment is fixed, and the
ment distributed in paper form or fact that the payment will increase
through the Internet (rather than by after that period; or
radio or television) is for a loan se- (iii) In the case of an advertisement
cured by the consumer’s principal for both variable-rate transactions and
dwelling, and the advertisement states non-variable-rate transactions,
that the advertised extension of credit (A) The phrase ‘‘Adjustable-Rate
may exceed the fair market value of Mortgage,’’ ‘‘Variable-Rate Mortgage,’’
the dwelling, the advertisement shall or ‘‘ARM’’ appears in the advertise-
clearly and conspicuously state that: ment with equal prominence as any use
(1) The interest on the portion of the of the term ‘‘fixed,’’ ‘‘Fixed-Rate Mort-
credit extension that is greater than gage,’’ or similar terms; and
the fair market value of the dwelling is (B) Each use of the word ‘‘fixed’’ to
not tax deductible for Federal income refer to a rate, payment, or the credit
tax purposes; and transaction either refers solely to the
(2) The consumer should consult a transactions for which rates are fixed
tax adviser for further information re- and complies with paragraph (i)(1)(ii)
jspears on DSK121TN23PROD with CFR
garding the deductibility of interest of this section, if applicable, or, if it re-
and charges. fers to the variable-rate transactions,
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§ 1026.25 12 CFR Ch. X (1–1–25 Edition)
is accompanied by an equally promi- (5) Misleading claims of debt elimi-
nent and closely proximate statement nation. Making any misleading claim
of the time period for which the rate or in an advertisement that the mortgage
payment is fixed, and the fact that the product offered will eliminate debt or
rate may vary or the payment may in- result in a waiver or forgiveness of a
crease after that period. consumer’s existing loan terms with,
(2) Misleading comparisons in advertise- or obligations to, another creditor.
ments. Making any comparison in an (6) Misleading use of the term ‘‘coun-
advertisement between actual or hypo- selor’’. Using the term ‘‘counselor’’ in
thetical credit payments or rates and an advertisement to refer to a for-prof-
any payment or simple annual rate it mortgage broker or mortgage cred-
that will be available under the adver- itor, its employees, or persons working
tised product for a period less than the for the broker or creditor that are in-
full term of the loan, unless: volved in offering, originating or sell-
ing mortgages.
(i) In general. The advertisement in-
(7) Misleading foreign-language adver-
cludes a clear and conspicuous com-
tisements. Providing information about
parison to the information required to
some trigger terms or required disclo-
be disclosed under § 1026.24(f)(2) and (3); sures, such as an initial rate or pay-
and ment, only in a foreign language in an
(ii) Application to variable-rate trans- advertisement, but providing informa-
actions. If the advertisement is for a tion about other trigger terms or re-
variable-rate transaction, and the ad- quired disclosures, such as information
vertised payment or simple annual rate about the fully-indexed rate or fully
is based on the index and margin that amortizing payment, only in English in
will be used to make subsequent rate the same advertisement.
or payment adjustments over the term
of the loan, the advertisement includes
Subpart D—Miscellaneous
an equally prominent statement in
close proximity to the payment or rate § 1026.25 Record retention.
that the payment or rate is subject to
(a) General rule. A creditor shall re-
adjustment and the time period when
tain evidence of compliance with this
the first adjustment will occur.
part (other than advertising require-
(3) Misrepresentations about govern- ments under §§ 1026.16 and 1026.24, and
ment endorsement. Making any state- other than the requirements under
ment in an advertisement that the § 1026.19(e) and (f)) for two years after
product offered is a ‘‘government loan the date disclosures are required to be
program’’, ‘‘government-supported made or action is required to be taken.
loan’’, or is otherwise endorsed or spon- The administrative agencies respon-
sored by any Federal, state, or local sible for enforcing the regulation may
government entity, unless the adver- require creditors under their jurisdic-
tisement is for an FHA loan, VA loan, tions to retain records for a longer pe-
or similar loan program that is, in fact, riod if necessary to carry out their en-
endorsed or sponsored by a Federal, forcement responsibilities under sec-
state, or local government entity. tion 108 of the Act.
(4) Misleading use of the current lend- (b) Inspection of records. A creditor
er’s name. Using the name of the con- shall permit the agency responsible for
sumer’s current lender in an advertise- enforcing this part with respect to that
ment that is not sent by or on behalf of creditor to inspect its relevant records
the consumer’s current lender, unless for compliance.
the advertisement: (c) Records related to certain require-
(i) Discloses with equal prominence ments for mortgage loans—(1) Records re-
the name of the person or creditor lated to requirements for loans secured by
making the advertisement; and real property or a cooperative unit—(i)
(ii) Includes a clear and conspicuous General rule. Except as provided under
statement that the person making the paragraph (c)(1)(ii) of this section, a
advertisement is not associated with, creditor shall retain evidence of com-
jspears on DSK121TN23PROD with CFR
or acting on behalf of, the consumer’s pliance with the requirements of
current lender. § 1026.19(e) and (f) for three years after
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Consumer Financial Protection Bureau § 1026.28
the later of the date of consummation, consummation of a transaction covered
the date disclosures are required to be by that section.
made, or the date the action is required
[76 FR 79772, Dec. 22, 2011, as amended at 78
to be taken. FR 6583, Jan. 30, 2013; 78 FR 11410, Feb. 15,
(ii) Closing disclosures. (A) A creditor 2013; 78 FR 60382, Oct. 1, 2013; 78 FR 80112,
shall retain each completed disclosure Dec. 31, 2013; 82 FR 37769, Aug. 11, 2017]
required under § 1026.19(f)(1)(i) or
(f)(4)(i), and all documents related to § 1026.26 Use of annual percentage
such disclosures, for five years after rate in oral disclosures.
consummation, notwithstanding para- (a) Open-end credit. In an oral re-
graph (c)(1)(ii)(B) of this section. sponse to a consumer’s inquiry about
(B) If a creditor sells, transfers, or the cost of open-end credit, only the
otherwise disposes of its interest in a annual percentage rate or rates shall
mortgage loan subject to § 1026.19(f) and be stated, except that the periodic rate
does not service the mortgage loan, the or rates also may be stated. If the an-
creditor shall provide a copy of the dis- nual percentage rate cannot be deter-
closures required under § 1026.19(f)(1)(i) mined in advance because there are fi-
or (f)(4)(i) to the owner or servicer of nance charges other than a periodic
the mortgage as a part of the transfer rate, the corresponding annual percent-
of the loan file. Such owner or servicer age rate shall be stated, and other cost
shall retain such disclosures for the re- information may be given.
mainder of the five-year period de- (b) Closed-end credit. In an oral re-
scribed under paragraph (c)(1)(ii)(A) of sponse to a consumer’s inquiry about
this section. the cost of closed-end credit, only the
annual percentage rate shall be stated,
(C) The Bureau shall have the right
except that a simple annual rate or
to require provision of copies of records
periodic rate also may be stated if it is
related to the disclosures required applied to an unpaid balance. If the an-
under § 1026.19(f)(1)(i) and (f)(4)(i). nual percentage rate cannot be deter-
(2) Records related to requirements for mined in advance, the annual percent-
loan originator compensation. Notwith- age rate for a sample transaction shall
standing paragraph (a) of this section, be stated, and other cost information
for transactions subject to § 1026.36: for the consumer’s specific transaction
(i) A creditor shall maintain records may be given.
sufficient to evidence all compensation
it pays to a loan originator, as defined § 1026.27 Language of disclosures.
in § 1026.36(a)(1), and the compensation Disclosures required by this part may
agreement that governs those pay- be made in a language other than
ments for three years after the date of English, provided that the disclosures
payment. are made available in English upon the
(ii) A loan originator organization, as consumer’s request. This requirement
defined in § 1026.36(a)(1)(iii), shall main- for providing English disclosures on re-
tain records sufficient to evidence all quest does not apply to advertisements
compensation it receives from a cred- subject to §§ 1026.16 and 1026.24.
itor, a consumer, or another person; all
compensation it pays to any individual § 1026.28 Effect on state laws.
loan originator, as defined in (a) Inconsistent disclosure requirements.
§ 1026.36(a)(1)(ii); and the compensation (1) Except as provided in paragraph (d)
agreement that governs each such re- of this section, State law requirements
ceipt or payment, for three years after that are inconsistent with the require-
the date of each such receipt or pay- ments contained in chapter 1 (General
ment. Provisions), chapter 2 (Credit Trans-
(3) Records related to minimum stand- actions), or chapter 3 (Credit Adver-
ards for transactions secured by a dwell- tising) of the Act and the imple-
ing. Notwithstanding paragraph (a) of menting provisions of this part are pre-
this section, a creditor shall retain evi- empted to the extent of the inconsist-
jspears on DSK121TN23PROD with CFR
dence of compliance with § 1026.43 of ency. A State law is inconsistent if it
this regulation for three years after requires a creditor to make disclosures
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§ 1026.29 12 CFR Ch. X (1–1–25 Edition)
or take actions that contradict the re- Federal disclosures, the state disclo-
quirements of the Federal law. A State sures shall appear under a demarcation
law is contradictory if it requires the line below the Federal disclosures, and
use of the same term to represent a dif- the Federal disclosures shall be identi-
ferent amount or a different meaning fied by a heading indicating that they
than the Federal law, or if it requires are made in compliance with Federal
the use of a term different from that law.
required in the Federal law to describe (ii) State law requirements are in-
the same item. A creditor, State, or consistent with the requirements con-
other interested party may request the tained in chapter 4 (Credit billing) of
Bureau to determine whether a State the Act (other than section 161 or 162)
law requirement is inconsistent. After and the implementing provisions of
the Bureau determines that a State this part and are preempted if the cred-
law is inconsistent, a creditor may not itor cannot comply with state law
make disclosures using the incon- without violating Federal law.
sistent term or form. A determination (iii) A state may request the Bureau
as to whether a State law is incon- to determine whether its law is incon-
sistent with the requirements of sec- sistent with chapter 4 of the Act and
tions 4 and 5 of RESPA (other than the its implementing provisions.
RESPA section 5(c) requirements re- (b) Equivalent disclosure requirements.
garding provision of a list of certified If the Bureau determines that a disclo-
homeownership counselors) and sure required by state law (other than
§§ 1026.19(e) and (f), 1026.37, and 1026.38 a requirement relating to the finance
shall be made in accordance with this charge, annual percentage rate, or the
section and not 12 CFR 1024.13. disclosures required under § 1026.32) is
(2)(i) State law requirements are in- substantially the same in meaning as a
consistent with the requirements con- disclosure required under the Act or
tained in sections 161 (Correction of this part, creditors in that state may
billing errors) or 162 (Regulation of make the state disclosure in lieu of the
credit reports) of the Act and the im- Federal disclosure. A creditor, state, or
plementing provisions of this part and other interested party may request the
are preempted if they provide rights, Bureau to determine whether a state
responsibilities, or procedures for con- disclosure is substantially the same in
sumers or creditors that are different meaning as a Federal disclosure.
from those required by the Federal law. (c) Request for determination. The pro-
However, a state law that allows a con- cedures under which a request for a de-
sumer to inquire about an open-end termination may be made under this
credit account and imposes on the section are set forth in appendix A.
creditor an obligation to respond to (d) Special rule for credit and charge
such inquiry after the time allowed in cards. State law requirements relating
the Federal law for the consumer to to the disclosure of credit information
submit written notice of a billing error in any credit or charge card applica-
shall not be preempted in any situation tion or solicitation that is subject to
where the time period for making writ- the requirements of section 127(c) of
ten notice under this part has expired. chapter 2 of the Act (§ 1026.60 of the reg-
If a creditor gives written notice of a ulation) or in any renewal notice for a
consumer’s rights under such state credit or charge card that is subject to
law, the notice shall state that reliance the requirements of section 127(d) of
on the longer time period available chapter 2 of the Act (§ 1026.9(e) of the
under state law may result in the loss regulation) are preempted. State laws
of important rights that could be pre- relating to the enforcement of section
served by acting more promptly under 127(c) and (d) of the Act are not pre-
Federal law; it shall also explain that empted.
the state law provisions apply only [76 FR 79772, Dec. 22, 2011, as amended at 78
after expiration of the time period for FR 80112, Dec. 31, 2013]
submitting a proper written notice of a
billing error under the Federal law. If § 1026.29 State exemptions.
jspears on DSK121TN23PROD with CFR
the state disclosures are made on the (a) General rule. Any state may apply
same side of a page as the required to the Bureau to exempt a class of
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Consumer Financial Protection Bureau § 1026.31
transactions within the state from the consumer in electronic form, subject to
requirements of chapter 2 (Credit compliance with the consumer consent
transactions) or chapter 4 (Credit bill- and other applicable provisions of the
ing) of the Act and the corresponding Electronic Signatures in Global and
provisions of this part. The Bureau National Commerce Act (E-Sign Act)
shall grant an exemption if it deter- (15 U.S.C. 7001 et seq.).
mines that: (c) Timing of disclosure—(1) Disclosures
(1) The state law is substantially for high-cost mortgages. The creditor
similar to the Federal law or, in the
shall furnish the disclosures required
case of chapter 4, affords the consumer
greater protection than the Federal by § 1026.32 at least three business days
law; and prior to consummation or account
(2) There is adequate provision for opening of a high-cost mortgage as de-
enforcement. fined in § 1026.32(a).
(b) Civil liability. (1) No exemptions (i) Change in terms. After complying
granted under this section shall extend with this paragraph (c)(1) and prior to
to the civil liability provisions of sec- consummation or account opening, if
tions 130 and 131 of the Act. the creditor changes any term that
(2) If an exemption has been granted, makes the disclosures inaccurate, new
the disclosures required by the applica- disclosures shall be provided in accord-
ble state law (except any additional re- ance with the requirements of this sub-
quirements not imposed by Federal part.
law) shall constitute the disclosures re- (ii) Telephone disclosures. A creditor
quired by the Act. may provide new disclosures required
(c) Applications. The procedures under
by paragraph (c)(1)(i) of this section by
which a state may apply for an exemp-
telephone if the consumer initiates the
tion under this section are set forth in
appendix B to this part. change and if, prior to or at con-
summation or account opening:
§ 1026.30 Limitation on rates. (A) The creditor provides new written
A creditor shall include in any con- disclosures; and
sumer credit contract secured by a (B) The consumer and creditor sign a
dwelling and subject to the Act and statement that the new disclosures
this part the maximum interest rate were provided by telephone at least
that may be imposed during the term three days prior to consummation or
of the obligation when: account opening, as applicable.
(a) In the case of closed-end credit, (iii) Consumer’s waiver of waiting pe-
the annual percentage rate may in- riod before consummation or account
crease after consummation, or opening. The consumer may, after re-
(b) In the case of open-end credit, the ceiving the disclosures required by this
annual percentage rate may increase paragraph (c)(1), modify or waive the
during the plan. three-day waiting period between de-
livery of those disclosures and con-
Subpart E—Special Rules for Cer- summation or account opening if the
tain Home Mortgage Trans- consumer determines that the exten-
actions sion of credit is needed to meet a bona
fide personal financial emergency. To
§ 1026.31 General rules.
modify or waive the right, the con-
(a) Relation to other subparts in this sumer shall give the creditor a dated
part. The requirements and limitations written statement that describes the
of this subpart are in addition to and emergency, specifically modifies or
not in lieu of those contained in other waives the waiting period, and bears
subparts of this part.
the signature of all the consumers enti-
(b) Form of disclosures. The creditor
tled to the waiting period. Printed
shall make the disclosures required by
this subpart clearly and conspicuously forms for this purpose are prohibited,
in writing, in a form that the consumer except when creditors are permitted to
jspears on DSK121TN23PROD with CFR
may keep. The disclosures required by use printed forms pursuant to
this subpart may be provided to the § 1026.23(e)(2).
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§ 1026.31 12 CFR Ch. X (1–1–25 Edition)
(2) Disclosures for reverse mortgages. is covered by section 1026.32, if it is ac-
The creditor shall furnish the disclo- curate according to the requirements
sures required by § 1026.33 at least three and within the tolerances under sec-
business days prior to: tion 1026.22 for closed-end credit trans-
(i) Consummation of a closed-end actions or 1026.6(a) for open-end credit
credit transaction; or plans. The finance charge tolerances
(ii) The first transaction under an for rescission under section 1026.23(g)
open-end credit plan. or (h) shall not apply for this purpose.
(d) Basis of disclosures and use of esti- (h) Corrections and unintentional viola-
mates—(1) Legal obligation. Disclosures tions. A creditor or assignee in a high-
shall reflect the terms of the legal obli- cost mortgage, as defined in § 1026.32(a),
gation between the parties. who, when acting in good faith, failed
(2) Estimates. If any information nec- to comply with any requirement under
essary for an accurate disclosure is un- section 129 of the Act will not be
known to the creditor, the creditor deemed to have violated such require-
shall make the disclosure based on the ment if the creditor or assignee satis-
best information reasonably available fies either of the following sets of con-
at the time the disclosure is provided, ditions:
and shall state clearly that the disclo- (1)(i) Within 30 days of consummation
sure is an estimate. or account opening and prior to the in-
(3) Per-diem interest. For a transaction stitution of any action, the consumer
in which a portion of the interest is de- is notified of or discovers the violation;
termined on a per-diem basis and col- (ii) Appropriate restitution is made
lected at consummation, any disclo- within a reasonable time; and
sure affected by the per-diem interest (iii) Within a reasonable time, what-
shall be considered accurate if the dis- ever adjustments are necessary are
closure is based on the information made to the loan or credit plan to ei-
known to the creditor at the time that ther, at the choice of the consumer:
the disclosure documents are prepared. (A) Make the loan or credit plan sat-
(e) Multiple creditors; multiple con- isfy the requirements of 15 U.S.C. 1631–
sumers. If a transaction involves more 1651; or
than one creditor, only one set of dis- (B) Change the terms of the loan or
closures shall be given and the credi- credit plan in a manner beneficial to
tors shall agree among themselves the consumer so that the loan or credit
which creditor must comply with the plan will no longer be a high-cost mort-
requirements that this part imposes on gage.
any or all of them. If there is more (2)(i) Within 60 days of the creditor’s
than one consumer, the disclosures discovery or receipt of notification of
may be made to any consumer who is an unintentional violation or bona fide
primarily liable on the obligation. If error and prior to the institution of
the transaction is rescindable under any action, the consumer is notified of
§ 1026.15 or § 1026.23, however, the disclo- the compliance failure;
sures shall be made to each consumer (ii) Appropriate restitution is made
who has the right to rescind. within a reasonable time; and
(f) Effect of subsequent events. If a dis- (iii) Within a reasonable time, what-
closure becomes inaccurate because of ever adjustments are necessary are
an event that occurs after the creditor made to the loan or credit plan to ei-
delivers the required disclosures, the ther, at the choice of the consumer:
inaccuracy is not a violation of Regula- (A) Make the loan or credit plan sat-
tion Z (12 CFR part 1026), although new isfy the requirements of 15 U.S.C. 1631–
disclosures may be required for mort- 1651; or
gages covered by § 1026.32 under para- (B) Change the terms of the loan or
graph (c) of this section, § 1026.9(c), credit plan in a manner beneficial to
§ 1026.19, or § 1026.20. the consumer so that the loan or credit
(g) Accuracy of annual percentage plan will no longer be a high-cost mort-
rate. For purposes of section 1026.32, gage.
the annual percentage rate shall be
jspears on DSK121TN23PROD with CFR
[76 FR 79772, Dec. 22, 2011, as amended at 78
considered accurate, and may be used FR 6962, Jan. 31, 2013; 78 FR 60440, Oct. 1,
in determining whether a transaction 2013]
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Consumer Financial Protection Bureau § 1026.32
§ 1026.32 Requirements for high-cost (ii) A transaction to finance the ini-
mortgages. tial construction of a dwelling;
(a) Coverage. (1) The requirements of (iii) A transaction originated by a
this section apply to a high-cost mort- Housing Finance Agency, where the
gage, which is any consumer credit Housing Finance Agency is the creditor
transaction that is secured by the con- for the transaction; or
sumer’s principal dwelling, other than (iv) A transaction originated pursu-
as provided in paragraph (a)(2) of this ant to the United States Department of
section, and in which: Agriculture’s Rural Development Sec-
(i) The annual percentage rate appli- tion 502 Direct Loan Program.
cable to the transaction, as determined (3) Determination of annual percentage
in accordance with paragraph (a)(3) of rate. For purposes of paragraph (a)(1)(i)
this section, will exceed the average of this section, a creditor shall deter-
prime offer rate, as defined in mine the annual percentage rate for a
§ 1026.35(a)(2), for a comparable trans- closed- or open-end credit transaction
action by more than: based on the following:
(A) 6.5 percentage points for a first- (i) For a transaction in which the an-
lien transaction, other than as de- nual percentage rate will not vary dur-
scribed in paragraph (a)(1)(i)(B) of this ing the term of the loan or credit plan,
section; the interest rate in effect as of the date
(B) 8.5 percentage points for a first- the interest rate for the transaction is
lien transaction if the dwelling is per- set;
sonal property and the loan amount is (ii) For a transaction in which the in-
less than $50,000; or terest rate may vary during the term
(C) 8.5 percentage points for a subor- of the loan or credit plan in accordance
dinate-lien transaction; or with an index, the interest rate that
(ii) The transaction’s total points results from adding the maximum mar-
and fees, as defined in paragraphs (b)(1) gin permitted at any time during the
and (2) of this section, will exceed: term of the loan or credit plan to the
(A) 5 percent of the total loan value of the index rate in effect as of
amount for a transaction with a loan the date the interest rate for the trans-
amount of $20,000 or more; the $20,000 action is set, or the introductory inter-
figure shall be adjusted annually on est rate, whichever is greater; and
January 1 by the annual percentage (iii) For a transaction in which the
change in the Consumer Price Index interest rate may or will vary during
that was reported on the preceding the term of the loan or credit plan,
June 1; or other than a transaction described in
(B) The lesser of 8 percent of the paragraph (a)(3)(ii) of this section, the
total loan amount or $1,000 for a trans- maximum interest rate that may be
action with a loan amount of less than imposed during the term of the loan or
$20,000; the $1,000 and $20,000 figures credit plan.
shall be adjusted annually on January (b) Definitions. For purposes of this
1 by the annual percentage change in subpart, the following definitions
the Consumer Price Index that was re- apply:
ported on the preceding June 1; or (1) In connection with a closed-end
(iii) Under the terms of the loan con- credit transaction, points and fees
tract or open-end credit agreement, the means the following fees or charges
creditor can charge a prepayment pen- that are known at or before consumma-
alty, as defined in paragraph (b)(6) of tion:
this section, more than 36 months after (i) All items included in the finance
consummation or account opening, or charge under § 1026.4(a) and (b), except
prepayment penalties that can exceed, that the following items are excluded:
in total, more than 2 percent of the (A) Interest or the time-price dif-
amount prepaid. ferential;
(2) Exemptions. This section does not (B) Any premium or other charge im-
apply to the following: posed in connection with any Federal
jspears on DSK121TN23PROD with CFR
(i) A reverse mortgage transaction or State agency program for any guar-
subject to § 1026.33; anty or insurance that protects the
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§ 1026.32 12 CFR Ch. X (1–1–25 Edition)
creditor against the consumer’s default insured under Title I of the National
or other credit loss; Housing Act (12 U.S.C. 1702 et seq.) by
(C) For any guaranty or insurance more than two percentage points;
that protects the creditor against the (ii) All compensation paid directly or
consumer’s default or other credit loss indirectly by a consumer or creditor to
and that is not in connection with any a loan originator, as defined in
Federal or State agency program: § 1026.36(a)(1), that can be attributed to
(1) If the premium or other charge is that transaction at the time the inter-
payable after consummation, the en- est rate is set unless:
tire amount of such premium or other (A) That compensation is paid by a
charge; or consumer to a mortgage broker, as de-
(2) If the premium or other charge is fined in § 1026.36(a)(2), and already has
payable at or before consummation, been included in points and fees under
the portion of any such premium or paragraph (b)(1)(i) of this section;
other charge that is not in excess of (B) That compensation is paid by a
the amount payable under policies in mortgage broker, as defined in
effect at the time of origination under § 1026.36(a)(2), to a loan originator that
section 203(c)(2)(A) of the National is an employee of the mortgage broker;
Housing Act (12 U.S.C. 1709(c)(2)(A)), (C) That compensation is paid by a
provided that the premium or charge is creditor to a loan originator that is an
required to be refundable on a pro rata employee of the creditor; or
basis and the refund is automatically (D) That compensation is paid by a
issued upon notification of the satisfac- retailer of manufactured homes to its
tion of the underlying mortgage loan; employee.
(D) Any bona fide third-party charge (iii) All items listed in § 1026.4(c)(7)
not retained by the creditor, loan origi- (other than amounts held for future
nator, or an affiliate of either, unless payment of taxes), unless:
the charge is required to be included in (A) The charge is reasonable;
points and fees under paragraph (B) The creditor receives no direct or
(b)(1)(i)(C), (iii), or (iv) of this section; indirect compensation in connection
(E) Up to two bona fide discount with the charge; and
points paid by the consumer in connec- (C) The charge is not paid to an affil-
tion with the transaction, if the inter- iate of the creditor;
est rate without any discount does not (iv) Premiums or other charges pay-
exceed: able at or before consummation for any
(1) The average prime offer rate, as credit life, credit disability, credit un-
defined in § 1026.35(a)(2), by more than employment, or credit property insur-
one percentage point; or ance, or any other life, accident,
(2) For purposes of paragraph health, or loss-of-income insurance for
(a)(1)(ii) of this section, for trans- which the creditor is a beneficiary, or
actions that are secured by personal any payments directly or indirectly for
property, the average rate for a loan any debt cancellation or suspension
insured under Title I of the National agreement or contract;
Housing Act (12 U.S.C. 1702 et seq.) by (v) The maximum prepayment pen-
more than one percentage point; and alty, as defined in paragraph (b)(6)(i) of
(F) If no discount points have been this section, that may be charged or
excluded under paragraph (b)(1)(i)(E) of collected under the terms of the mort-
this section, then up to one bona fide gage loan; and
discount point paid by the consumer in (vi) The total prepayment penalty, as
connection with the transaction, if the defined in paragraph (b)(6)(i) or (ii) of
interest rate without any discount does this section, as applicable, incurred by
not exceed: the consumer if the consumer refi-
(1) The average prime offer rate, as nances the existing mortgage loan, or
defined in § 1026.35(a)(2), by more than terminates an existing open-end credit
two percentage points; or plan in connection with obtaining a
(2) For purposes of paragraph new mortgage loan, with the current
(a)(1)(ii) of this section, for trans- holder of the existing loan or plan, a
jspears on DSK121TN23PROD with CFR
actions that are secured by personal servicer acting on behalf of the current
property, the average rate for a loan holder, or an affiliate of either.
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Consumer Financial Protection Bureau § 1026.32
(2) In connection with an open-end (ii) All compensation paid directly or
credit plan, points and fees means the indirectly by a consumer or creditor to
following fees or charges that are a loan originator, as defined in
known at or before account opening: § 1026.36(a)(1), that can be attributed to
(i) All items included in the finance that transaction at the time the inter-
charge under § 1026.4(a) and (b), except est rate is set unless:
that the following items are excluded: (A) That compensation is paid by a
(A) Interest or the time-price dif- consumer to a mortgage broker, as de-
ferential; fined in § 1026.36(a)(2), and already has
(B) Any premium or other charge im- been included in points and fees under
posed in connection with any Federal paragraph (b)(2)(i) of this section;
or State agency program for any guar- (B) That compensation is paid by a
anty or insurance that protects the mortgage broker, as defined in
creditor against the consumer’s default § 1026.36(a)(2), to a loan originator that
or other credit loss; is an employee of the mortgage broker;
(C) For any guaranty or insurance (C) That compensation is paid by a
that protects the creditor against the creditor to a loan originator that is an
consumer’s default or other credit loss employee of the creditor; or
and that is not in connection with any (D) That compensation is paid by a
Federal or State agency program: retailer of manufactured homes to its
(1) If the premium or other charge is employee.
payable after account opening, the en-
(iii) All items listed in § 1026.4(c)(7)
tire amount of such premium or other
(other than amounts held for future
charge; or
payment of taxes) unless:
(2) If the premium or other charge is
(A) The charge is reasonable;
payable at or before account opening,
the portion of any such premium or (B) The creditor receives no direct or
other charge that is not in excess of indirect compensation in connection
the amount payable under policies in with the charge; and
effect at the time of account opening (C) The charge is not paid to an affil-
under section 203(c)(2)(A) of the Na- iate of the creditor;
tional Housing Act (12 U.S.C. (iv) Premiums or other charges pay-
1709(c)(2)(A)), provided that the pre- able at or before account opening for
mium or charge is required to be re- any credit life, credit disability, credit
fundable on a pro rata basis and the re- unemployment, or credit property in-
fund is automatically issued upon noti- surance, or any other life, accident,
fication of the satisfaction of the un- health, or loss-of-income insurance for
derlying mortgage transaction; which the creditor is a beneficiary, or
(D) Any bona fide third-party charge any payments directly or indirectly for
not retained by the creditor, loan origi- any debt cancellation or suspension
nator, or an affiliate of either, unless agreement or contract;
the charge is required to be included in (v) The maximum prepayment pen-
points and fees under paragraphs alty, as defined in paragraph (b)(6)(ii)
(b)(2)(i)(C), (b)(2)(iii) or (b)(2)(iv) of this of this section, that may be charged or
section; collected under the terms of the open-
(E) Up to two bona fide discount end credit plan;
points payable by the consumer in con- (vi) The total prepayment penalty, as
nection with the transaction, provided defined in paragraph (b)(6)(i) or (ii) of
that the conditions specified in para- this section, as applicable, incurred by
graph (b)(1)(i)(E) of this section are the consumer if the consumer refi-
met; and nances an existing closed-end credit
(F) Up to one bona fide discount transaction with an open-end credit
point payable by the consumer in con- plan, or terminates an existing open-
nection with the transaction, provided end credit plan in connection with ob-
that no discount points have been ex- taining a new open-end credit plan,
cluded under paragraph (b)(2)(i)(E) of with the current holder of the existing
this section and the conditions speci- transaction or plan, a servicer acting
jspears on DSK121TN23PROD with CFR
fied in paragraph (b)(1)(i)(F) of this sec- on behalf of the current holder, or an
tion are met; affiliate of either;
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§ 1026.32 12 CFR Ch. X (1–1–25 Edition)
(vii) Any fees charged for participa- Company Act of 1956 (12 U.S.C. 1841 et
tion in an open-end credit plan, pay- seq.).
able at or before account opening, as (6) Prepayment penalty—(i) Closed-end
described in § 1026.4(c)(4); and credit transactions. For a closed-end
(viii) Any transaction fee, including credit transaction, prepayment penalty
any minimum fee or per-transaction means a charge imposed for paying all
fee, that will be charged for a draw on or part of the transaction’s principal
the credit line, where the creditor must before the date on which the principal
assume that the consumer will make at is due, other than a waived, bona fide
least one draw during the term of the third-party charge that the creditor
plan. imposes if the consumer prepays all of
(3) Bona fide discount point—(i) Closed- the transaction’s principal sooner than
end credit. The term bona fide discount 36 months after consummation, pro-
point means an amount equal to 1 per- vided, however, that interest charged
cent of the loan amount paid by the consistent with the monthly interest
consumer that reduces the interest accrual amortization method is not a
rate or time-price differential applica- prepayment penalty for extensions of
ble to the transaction based on a cal- credit insured by the Federal Housing
culation that is consistent with estab- Administration that are consummated
lished industry practices for deter- before January 21, 2015.
mining the amount of reduction in the (ii) Open-end credit. For an open-end
interest rate or time-price differential credit plan, prepayment penalty means a
appropriate for the amount of discount charge imposed by the creditor if the
points paid by the consumer. consumer terminates the open-end
(ii) Open-end credit. The term bona credit plan prior to the end of its term,
fide discount point means an amount other than a waived, bona fide third-
equal to 1 percent of the credit limit party charge that the creditor imposes
for the plan when the account is if the consumer terminates the open-
opened, paid by the consumer, and that end credit plan sooner than 36 months
reduces the interest rate or time-price after account opening.
differential applicable to the trans- (c) Disclosures. In addition to other
action based on a calculation that is disclosures required by this part, in a
consistent with established industry mortgage subject to this section, the
practices for determining the amount creditor shall disclose the following in
of reduction in the interest rate or conspicuous type size:
time-price differential appropriate for (1) Notices. The following statement:
the amount of discount points paid by ‘‘You are not required to complete this
the consumer. See comment 32(b)(3)(i)- agreement merely because you have re-
1 for additional guidance in deter- ceived these disclosures or have signed
mining whether a discount point is a loan application. If you obtain this
bona fide. loan, the lender will have a mortgage
(4) Total loan amount—(i) Closed-end on your home. You could lose your
credit. The total loan amount for a home, and any money you have put
closed-end credit transaction is cal- into it, if you do not meet your obliga-
culated by taking the amount financed, tions under the loan.’’
as determined according to § 1026.18(b), (2) Annual percentage rate. The annual
and deducting any cost listed in percentage rate.
§ 1026.32(b)(1)(iii), (iv), or (vi) that is (3) Regular payment; minimum periodic
both included as points and fees under payment example; balloon payment. (i)
§ 1026.32(b)(1) and financed by the cred- For a closed-end credit transaction, the
itor. amount of the regular monthly (or
(ii) Open-end credit. The total loan other periodic) payment and the
amount for an open-end credit plan is amount of any balloon payment pro-
the credit limit for the plan when the vided in the credit contract, if per-
account is opened. mitted under paragraph (d)(1) of this
(5) Affiliate means any company that section. The regular payment disclosed
controls, is controlled by, or is under under this paragraph shall be treated
jspears on DSK121TN23PROD with CFR
common control with another com- as accurate if it is based on an amount
pany, as set forth in the Bank Holding borrowed that is deemed accurate and
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Consumer Financial Protection Bureau § 1026.32
is disclosed under paragraph (c)(5) of periodic payment, or a substantially
this section. similar statement.
(ii) For an open-end credit plan: (4) Variable-rate. For variable-rate
(A) An example showing the first transactions, a statement that the in-
minimum periodic payment for the terest rate and monthly payment may
draw period, the first minimum peri- increase, and the amount of the single
odic payment for any repayment pe- maximum monthly payment, based on
riod, and the balance outstanding at the maximum interest rate required to
the beginning of any repayment period. be included in the contract by § 1026.30.
The example must be based on the fol- (5) Amount borrowed; credit limit. (i)
lowing assumptions: For a closed-end credit transaction, the
(1) The consumer borrows the full total amount the consumer will bor-
credit line, as disclosed in paragraph row, as reflected by the face amount of
(c)(5) of this section, at account open- the note. Where the amount borrowed
ing and does not obtain any additional includes financed charges that are not
extensions of credit; prohibited under § 1026.34(a)(10), that
fact shall be stated, grouped together
(2) The consumer makes only min-
with the disclosure of the amount bor-
imum periodic payments during the
rowed. The disclosure of the amount
draw period and any repayment period;
borrowed shall be treated as accurate if
and
it is not more than $100 above or below
(3) The annual percentage rate used the amount required to be disclosed.
to calculate the example payments re- (ii) For an open-end credit plan, the
mains the same during the draw period credit limit for the plan when the ac-
and any repayment period. The cred- count is opened.
itor must provide the minimum peri- (d) Limitations. A high-cost mortgage
odic payment example based on the an- shall not include the following terms:
nual percentage rate for the plan, as (1)(i) Balloon payment. Except as pro-
described in paragraph (c)(2) of this vided by paragraphs (d)(1)(ii) and (iii)
section, except that if an introductory of this section, a payment schedule
annual percentage rate applies, the with a payment that is more than two
creditor must use the rate that will times a regular periodic payment.
apply to the plan after the introduc- (ii) Exceptions. The limitations in
tory rate expires. paragraph (d)(1)(i) of this section do
(B) If the credit contract provides for not apply to:
a balloon payment under the plan as (A) A mortgage transaction with a
permitted under paragraph (d)(1) of payment schedule that is adjusted to
this section, a disclosure of that fact the seasonal or irregular income of the
and an example showing the amount of consumer;
the balloon payment based on the as- (B) A loan with maturity of 12
sumptions described in paragraph months or less, if the purpose of the
(c)(3)(ii)(A) of this section. loan is a ‘‘bridge’’ loan connected with
(C) A statement that the example the acquisition or construction of a
payments show the first minimum dwelling intended to become the con-
periodic payments at the current an- sumer’s principal dwelling; or
nual percentage rate if the consumer (C) A loan that meets the criteria set
borrows the maximum credit available forth in §§ 1026.43(f)(1)(i) through (vi)
when the account is opened and does and 1026.43(f)(2), or the conditions set
not obtain any additional extensions of forth in § 1026.43(e)(6).
credit, or a substantially similar state- (iii) Open-end credit plans. If the
ment. terms of an open-end credit plan pro-
(D) A statement that the example vide for a repayment period during
payments are not the consumer’s ac- which no further draws may be taken,
tual payments and that the actual the limitations in paragraph (d)(1)(i) of
minimum periodic payments will de- this section do not apply to any adjust-
pend on the amount the consumer bor- ment in the regular periodic payment
rows, the interest rate applicable to that results solely from the credit
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that period, and whether the consumer plan’s transition from the draw period
pays more than the required minimum to the repayment period. If the terms
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§ 1026.33 12 CFR Ch. X (1–1–25 Edition)
of an open-end credit plan do not pro- (1) A mortgage, deed of trust, or
vide for any repayment period, the lim- equivalent consensual security interest
itations in paragraph (d)(1)(i) of this securing one or more advances is cre-
section apply to all periods of the cred- ated in the consumer’s principal dwell-
it plan. ing; and
(2) Negative amortization. A payment (2) Any principal, interest, or shared
schedule with regular periodic pay- appreciation or equity is due and pay-
ments that cause the principal balance able (other than in the case of default)
to increase. only after:
(3) Advance payments. A payment (i) The consumer dies;
schedule that consolidates more than (ii) The dwelling is transferred; or
two periodic payments and pays them (iii) The consumer ceases to occupy
in advance from the proceeds. the dwelling as a principal dwelling.
(4) Increased interest rate. An increase (b) Content of disclosures. In addition
in the interest rate after default. to other disclosures required by this
(5) Rebates. A refund calculated by a part, in a reverse mortgage transaction
method less favorable than the actu- the creditor shall provide the following
arial method (as defined by section disclosures in a form substantially
933(d) of the Housing and Community similar to the model form found in
Development Act of 1992, 15 U.S.C. paragraph (d) of appendix K of this
1615(d)), for rebates of interest arising part:
from a loan acceleration due to de- (1) Notice. A statement that the con-
fault. sumer is not obligated to complete the
(6) Prepayment penalties. A prepay- reverse mortgage transaction merely
ment penalty, as defined in paragraph because the consumer has received the
(b)(6) of this section. disclosures required by this section or
(7) [Reserved] has signed an application for a reverse
(8) Acceleration of debt. A demand fea- mortgage loan.
ture that permits the creditor to accel- (2) Total annual loan cost rates. A
erate the indebtedness by terminating good-faith projection of the total cost
the high-cost mortgage in advance of of the credit, determined in accordance
the original maturity date and to de- with paragraph (c) of this section and
mand repayment of the entire out- expressed as a table of ‘‘total annual
standing balance, except in the fol- loan cost rates,’’ using that term, in
lowing circumstances: accordance with appendix K of this
(i) There is fraud or material mis- part.
representation by the consumer in con- (3) Itemization of pertinent information.
nection with the loan or open-end cred- An itemization of loan terms, charges,
it agreement; the age of the youngest borrower and
(ii) The consumer fails to meet the the appraised property value.
repayment terms of the agreement for (4) Explanation of table. An expla-
any outstanding balance that results in nation of the table of total annual loan
a default in payment under the loan; or cost rates as provided in the model
(iii) There is any action or inaction form found in paragraph (d) of appendix
by the consumer that adversely affects K of this part.
the creditor’s security for the loan, or (c) Projected total cost of credit. The
any right of the creditor in such secu- projected total cost of credit shall re-
rity. flect the following factors, as applica-
[76 FR 79772, Dec. 22, 2011, as amended at 78 ble:
FR 6583, Jan. 30, 2013; 78 FR 6962, Jan. 31, (1) Costs to consumer. All costs and
2013; 78 FR 35502, June 12, 2013; 78 FR 60440, charges to the consumer, including the
Oct. 1, 2013] costs of any annuity the consumer pur-
chases as part of the reverse mortgage
§ 1026.33 Requirements for reverse transaction.
mortgages. (2) Payments to consumer. All ad-
(a) Definition. For purposes of this vances to and for the benefit of the
subpart, reverse mortgage transaction consumer, including annuity payments
jspears on DSK121TN23PROD with CFR
means a nonrecourse consumer credit that the consumer will receive from an
obligation in which: annuity that the consumer purchases
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Consumer Financial Protection Bureau § 1026.34
as part of the reverse mortgage trans- (2) Notice to assignee. A creditor may
action. not sell or otherwise assign a high-cost
(3) Additional creditor compensation. mortgage without furnishing the fol-
Any shared appreciation or equity in lowing statement to the purchaser or
the dwelling that the creditor is enti- assignee: ‘‘Notice: This is a mortgage
tled by contract to receive. subject to special rules under the Fed-
(4) Limitations on consumer liability. eral Truth in Lending Act. Purchasers
Any limitation on the consumer’s li- or assignees of this mortgage could be
ability (such as nonrecourse limits and liable for all claims and defenses with
equity conservation agreements). respect to the mortgage that the con-
(5) Assumed annual appreciation rates. sumer could assert against the cred-
Each of the following assumed annual itor.’’
appreciation rates for the dwelling: (3) Refinancings within one-year pe-
(i) 0 percent. riod. Within one year of having ex-
(ii) 4 percent. tended a high-cost mortgage, a creditor
shall not refinance any high-cost mort-
(iii) 8 percent.
gage to the same consumer into an-
(6) Assumed loan period. (i) Each of
other high-cost mortgage, unless the
the following assumed loan periods, as
refinancing is in the consumer’s inter-
provided in appendix L of this part:
est. An assignee holding or servicing a
(A) Two years. high-cost mortgage shall not, for the
(B) The actuarial life expectancy of remainder of the one-year period fol-
the consumer to become obligated on lowing the date of origination of the
the reverse mortgage transaction (as of credit, refinance any high-cost mort-
that consumer’s most recent birthday). gage to the same consumer into an-
In the case of multiple consumers, the other high-cost mortgage, unless the
period shall be the actuarial life ex- refinancing is in the consumer’s inter-
pectancy of the youngest consumer (as est. A creditor (or assignee) is prohib-
of that consumer’s most recent birth- ited from engaging in acts or practices
day). to evade this provision, including a
(C) The actuarial life expectancy pattern or practice of arranging for the
specified by paragraph (c)(6)(i)(B) of refinancing of its own loans by affili-
this section, multiplied by a factor of ated or unaffiliated creditors.
1.4 and rounded to the nearest full (4) Repayment ability for high-cost
year. mortgages. In connection with an open-
(ii) At the creditor’s option, the actu- end, high-cost mortgage, a creditor
arial life expectancy specified by para- shall not open a plan for a consumer
graph (c)(6)(i)(B) of this section, multi- where credit is or will be extended
plied by a factor of .5 and rounded to without regard to the consumer’s re-
the nearest full year. payment ability as of account opening,
including the consumer’s current and
§ 1026.34 Prohibited acts or practices reasonably expected income, employ-
in connection with high-cost mort- ment, assets other than the collateral,
gages.
and current obligations including any
(a) Prohibited acts or practices for high- mortgage-related obligations that are
cost mortgages—(1) Home improvement required by another credit obligation
contracts. A creditor shall not pay a undertaken prior to or at account
contractor under a home improvement opening, and are secured by the same
contract from the proceeds of a high- dwelling that secures the high-cost
cost mortgage, other than: mortgage transaction. The require-
(i) By an instrument payable to the ments set forth in § 1026.34(a)(4)(i)
consumer or jointly to the consumer through (iv) apply to open-end high-
and the contractor; or cost mortgages, but do not apply to
(ii) At the election of the consumer, closed-end high-cost mortgages. In con-
through a third-party escrow agent in nection with a closed-end, high-cost
accordance with terms established in a mortgage, a creditor must comply with
written agreement signed by the con- the repayment ability requirements set
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sumer, the creditor, and the contractor forth in § 1026.43. Temporary or
prior to the disbursement. ‘‘bridge’’ loans with terms of twelve
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§ 1026.34 12 CFR Ch. X (1–1–25 Edition)
months or less, such as a loan to pur- (2) The consumer makes only re-
chase a new dwelling where the con- quired minimum periodic payments
sumer plans to sell a current dwelling during the draw period and any repay-
within twelve months, are exempt from ment period;
this repayment ability requirement. (3) If the annual percentage rate may
(i) Mortgage-related obligations. For increase during the plan, the maximum
purposes of this paragraph (a)(4), mort- annual percentage rate that is included
gage-related obligations are property in the contract, as required by § 1026.30,
taxes; premiums and similar charges applies to the plan at account opening
identified in § 1026.4(b)(5), (7), (8), and and will apply during the draw period
(10) that are required by the creditor; and any repayment period.
fees and special assessments imposed (C) Assesses the consumer’s repay-
by a condominium, cooperative, or ment ability taking into account at
homeowners association; ground rent; least one of the following: The ratio of
and leasehold payments. total current obligations, including
(ii) Basis for determination of repay- any mortgage-related obligations that
ment ability. Under this paragraph (a)(4) are required by another credit obliga-
a creditor must determine the con- tion undertaken prior to or at account
sumer’s repayment ability in connec- opening, and are secured by the same
tion with an open-end, high cost mort- dwelling that secures the high-cost
gage as follows: mortgage transaction, to income, or
the income the consumer will have
(A) A creditor must verify amounts
after paying current obligations.
of income or assets that it relies on to
(iv) Exclusions from presumption of
determine repayment ability, including
compliance. Notwithstanding the pre-
expected income or assets, by the con-
vious paragraph, no presumption of
sumer’s Internal Revenue Service
compliance is available for an open-
Form W–2, tax returns, payroll re-
end, high-cost mortgage transaction
ceipts, financial institution records, or
for which the regular periodic pay-
other third-party documents that pro-
ments when aggregated do not fully
vide reasonably reliable evidence of the
amortize the outstanding principal bal-
consumer’s income or assets.
ance except as otherwise provided by
(B) A creditor must verify the con- § 1026.32(d)(1)(ii).
sumer’s current obligations, including (5) Pre-loan counseling—(i) Certifi-
any mortgage-related obligations that cation of counseling required. A creditor
are required by another credit obliga- shall not extend a high-cost mortgage
tion undertaken prior to or at account to a consumer unless the creditor re-
opening, and are secured by the same ceives written certification that the
dwelling that secures the high-cost consumer has obtained counseling on
mortgage transaction. the advisability of the mortgage from a
(iii) Presumption of compliance. For an counselor that is approved to provide
open-end, high cost mortgage, a cred- such counseling by the Secretary of the
itor is presumed to have complied with U.S. Department of Housing and Urban
this paragraph (a)(4) with respect to a Development or, if permitted by the
transaction if the creditor: Secretary, by a State housing finance
(A) Determines the consumer’s re- authority.
payment ability as provided in para- (ii) Timing of counseling. The coun-
graph (a)(4)(ii); seling required under this paragraph
(B) Determines the consumer’s repay- (a)(5) must occur after:
ment ability taking into account cur- (A) The consumer receives either the
rent obligations and mortgage-related disclosure required by section 5(c) of
obligations as defined in paragraph the Real Estate Settlement Procedures
(a)(4)(i) of this section, and using the Act of 1974 (12 U.S.C. 2604(c)) or the dis-
largest required minimum periodic closures required by § 1026.40; or
payment based on the following as- (B) The consumer receives the disclo-
sumptions: sures required by § 1026.32(c), for trans-
(1) The consumer borrows the full actions in which neither of the disclo-
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credit line at account opening with no sures listed in paragraph (a)(5)(ii)(A) of
additional extensions of credit; this section are provided.
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Consumer Financial Protection Bureau § 1026.34
(iii) Affiliation prohibited. The coun- selor or counseling organization for the
seling required under this paragraph counseling required under this para-
(a)(5) shall not be provided by a coun- graph (a)(5).
selor who is employed by or affiliated (6) Recommended default. A creditor or
with the creditor. mortgage broker, as defined in section
(iv) Content of certification. The cer- 1026.36(a)(2), may not recommend or en-
tification of counseling required under courage default on an existing loan or
paragraph (a)(5)(i) must include: other debt prior to and in connection
(A) The name(s) of the consumer(s) with the consummation or account
who obtained counseling; opening of a high-cost mortgage that
(B) The date(s) of counseling; refinances all or any portion of such
(C) The name and address of the existing loan or debt.
counselor; (7) Modification and deferral fees. A
(D) A statement that the consumer(s) creditor, successor-in-interest, as-
received counseling on the advisability signee, or any agent of such parties
of the high-cost mortgage based on the may not charge a consumer any fee to
terms provided in either the disclosure modify, renew, extend or amend a high-
required by section 5(c) of the Real Es- cost mortgage, or to defer any payment
tate Settlement Procedures Act of 1974 due under the terms of such mortgage.
(12 U.S.C. 2604(c)) or the disclosures re- (8) Late fees—(i) General. Any late
quired by § 1026.40. payment charge imposed in connection
(E) For transactions for which nei- with a high-cost mortgage must be spe-
ther of the disclosures listed in para- cifically permitted by the terms of the
graph (a)(5)(ii)(A) of this section are loan contract or open-end credit agree-
provided, a statement that the con- ment and may not exceed 4 percent of
sumer(s) received counseling on the ad- the amount of the payment past due.
visability of the high-cost mortgage No such charge may be imposed more
based on the terms provided in the dis- than once for a single late payment.
closures required by § 1026.32(c); and (ii) Timing. A late payment charge
(F) A statement that the counselor may be imposed in connection with a
has verified that the consumer(s) re- high-cost mortgage only if the pay-
ceived the disclosures required by ei- ment is not received by the end of the
ther § 1026.32(c) or the Real Estate Set- 15-day period beginning on the date the
tlement Procedures Act of 1974 (12 payment is due or, in the case of a
U.S.C. 2601 et seq.) with respect to the high-cost mortgage on which interest
transaction. on each installment is paid in advance,
(v) Counseling fees. A creditor may the end of the 30-day period beginning
pay the fees of a counselor or coun- on the date the payment is due.
seling organization for providing coun- (iii) Multiple late charges assessed on
seling required under this paragraph payment subsequently paid. A late pay-
(a)(5) but may not condition the pay- ment charge may not be imposed in
ment of such fees on the consummation connection with a high-cost mortgage
or account-opening of a mortgage payment if any delinquency is attrib-
transaction. If the consumer withdraws utable only to a late payment charge
the application that would result in imposed on an earlier payment, and the
the extension of a high-cost mortgage, payment otherwise is a full payment
a creditor may not condition the pay- for the applicable period and is paid by
ment of such fees on the receipt of cer- the due date or within any applicable
tification from the counselor required grace period.
by paragraph (a)(5)(i) of this section. A (iv) Failure to make required payment.
creditor may, however, confirm that a The terms of a high-cost mortgage
counselor has provided counseling to agreement may provide that any pay-
the consumer pursuant to this para- ment shall first be applied to any past
graph (a)(5) prior to paying the fee of a due balance. If the consumer fails to
counselor or counseling organization. make a timely payment by the due
(vi) Steering prohibited. A creditor date and subsequently resumes making
that extends a high-cost mortgage payments but has not paid all past due
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shall not steer or otherwise direct a payments, the creditor may impose a
consumer to choose a particular coun- separate late payment charge for any
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§ 1026.35 12 CFR Ch. X (1–1–25 Edition)
payment(s) outstanding (without de- the consumer to obtain such informa-
duction due to late fees or related fees) tion, in a subsequent calendar year are
until the default is cured. subject to the requirements of this sec-
(9) Payoff statements—(i) Fee prohibi- tion.
tion. In general, a creditor or servicer (v) Timing of delivery of payoff state-
(as defined in 12 CFR 1024.2(b)) may not ments. A payoff statement, as described
charge a fee for providing to a con- in paragraph (a)(9)(i) of this section, for
sumer, or a person authorized by the a high-cost mortgage shall be provided
consumer to obtain such information, a by a creditor or servicer within five
statement of the amount due to pay off business days after receiving a request
the outstanding balance of a high-cost for such statement by a consumer or a
mortgage. person authorized by the consumer to
(ii) Processing fee. A creditor or obtain such statement.
servicer may charge a processing fee to (10) Financing of points and fees. A
cover the cost of providing a payoff creditor that extends credit under a
statement, as described in paragraph high-cost mortgage may not finance
(a)(9)(i) of this section, by fax or cou- charges that are required to be in-
rier, provided that such fee may not ex- cluded in the calculation of points and
ceed an amount that is comparable to fees, as that term is defined in
fees imposed for similar services pro- § 1026.32(b)(1) and (2). Credit insurance
vided in connection with consumer premiums or debt cancellation or sus-
credit transactions that are secured by pension fees that are required to be in-
the consumer’s principal dwelling and cluded in points and fees under
are not high-cost mortgages. A creditor § 1026.32(b)(1)(iv) or (2)(iv) shall not be
or servicer shall make a payoff state- considered financed by the creditor
ment available to a consumer, or a per- when they are calculated and paid in
son authorized by the consumer to ob- full on a monthly basis.
tain such information, by a method (b) Prohibited acts or practices for
other than by fax or courier and with- dwelling-secured loans; structuring loans
out charge pursuant to paragraph to evade high-cost mortgage requirements.
(a)(9)(i) of this section. A creditor shall not structure any
(iii) Processing fee disclosure. Prior to transaction that is otherwise a high-
charging a processing fee for provision cost mortgage in a form, for the pur-
of a payoff statement by fax or courier, pose, and with the intent to evade the
as permitted pursuant to paragraph requirements of a high-cost mortgage
(a)(9)(ii) of this section, a creditor or subject to this subpart, including by di-
servicer shall disclose to a consumer or viding any loan transaction into sepa-
a person authorized by the consumer to rate parts.
obtain the consumer’s payoff state-
ment that payoff statements, as de- [78 FR 6964, Jan. 31, 2013, as amended at 78
scribed in paragraph (a)(9)(i) of this FR 30745, May 23, 2013; 78 FR 63005, Oct. 23,
section, are available by a method 2013]
other than by fax or courier without
§ 1026.35 Requirements for higher-
charge. priced mortgage loans.
(iv) Fees permitted after multiple re-
quests. A creditor or servicer that has (a) Definitions. For purposes of this
provided a payoff statement, as de- section:
scribed in paragraph (a)(9)(i) of this (1) ‘‘Higher-priced mortgage loan’’
section, to a consumer, or a person au- means a closed-end consumer credit
thorized by the consumer to obtain transaction secured by the consumer’s
such information, without charge, principal dwelling with an annual per-
other than the processing fee permitted centage rate that exceeds the average
under paragraph (a)(9)(ii) of this sec- prime offer rate for a comparable
tion, four times during a calendar year, transaction as of the date the interest
may thereafter charge a reasonable fee rate is set:
for providing such statements during (i) By 1.5 or more percentage points
the remainder of the calendar year. for loans secured by a first lien with a
jspears on DSK121TN23PROD with CFR
Fees for payoff statements provided to principal obligation at consummation
a consumer, or a person authorized by that does not exceed the limit in effect
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Consumer Financial Protection Bureau § 1026.35
as of the date the transaction’s inter- (i) An escrow account need not be es-
est rate is set for the maximum prin- tablished for:
cipal obligation eligible for purchase (A) A transaction secured by shares
by Freddie Mac; in a cooperative;
(ii) By 2.5 or more percentage points (B) A transaction to finance the ini-
for loans secured by a first lien with a tial construction of a dwelling;
principal obligation at consummation (C) A temporary or ‘‘bridge’’ loan
that exceeds the limit in effect as of with a loan term of twelve months or
the date the transaction’s interest rate less, such as a loan to purchase a new
is set for the maximum principal obli- dwelling where the consumer plans to
gation eligible for purchase by Freddie sell a current dwelling within twelve
Mac; or months; or
(iii) By 3.5 or more percentage points (D) A reverse mortgage transaction
for loans secured by a subordinate lien. subject to § 1026.33.
(2) ‘‘Average prime offer rate’’ means (ii) Insurance premiums described in
an annual percentage rate that is de- paragraph (b)(1) of this section need
rived from average interest rates, not be included in escrow accounts for
points, and other loan pricing terms loans secured by dwellings in con-
currently offered to consumers by a dominiums, planned unit develop-
representative sample of creditors for ments, or other common interest com-
munities in which dwelling ownership
mortgage transactions that have low-
requires participation in a governing
risk pricing characteristics. The Bu-
association, where the governing asso-
reau publishes average prime offer
ciation has an obligation to the dwell-
rates for a broad range of types of
ing owners to maintain a master policy
transactions in a table updated at least
insuring all dwellings.
weekly as well as the methodology the
(iii) Except as provided in paragraph
Bureau uses to derive these rates.
(b)(2)(v) of this section, an escrow ac-
(3) ‘‘Insured credit union’’ has the count need not be established for a
meaning given in Section 101 of the transaction if, at the time of con-
Federal Credit Union Act (12 U.S.C. summation:
1752). (A) During the preceding calendar
(4) ‘‘Insured depository institution’’ year, or, if the application for the
has the meaning given in Section 3 of transaction was received before April 1
the Federal Deposit Insurance Act (12 of the current calendar year, during ei-
U.S.C. 1813). ther of the two preceding calendar
(b) Escrow accounts—(1) Requirement years, the creditor extended a covered
to escrow for property taxes and insur- transaction, as defined by § 1026.43(b)(1),
ance. Except as provided in paragraph secured by a first lien on a property
(b)(2) of this section, a creditor may that is located in an area that is either
not extend a higher-priced mortgage ‘‘rural’’ or ‘‘underserved,’’ as set forth
loan secured by a first lien on a con- in paragraph (b)(2)(iv) of this section;
sumer’s principal dwelling unless an es- (B) During the preceding calendar
crow account is established before con- year, or, if the application for the
summation for payment of property transaction was received before April 1
taxes and premiums for mortgage-re- of the current calendar year, during ei-
lated insurance required by the cred- ther of the two preceding calendar
itor, such as insurance against loss of years, the creditor and its affiliates to-
or damage to property, or against li- gether extended no more than 2,000
ability arising out of the ownership or covered transactions, as defined by
use of the property, or insurance pro- § 1026.43(b)(1), secured by first liens,
tecting the creditor against the con- that were sold, assigned, or otherwise
sumer’s default or other credit loss. transferred to another person, or that
For purposes of this paragraph (b), the were subject at the time of consumma-
term ‘‘escrow account’’ has the same tion to a commitment to be acquired
meaning as under Regulation X (12 by another person;
CFR 1024.17(b)), as amended. (C) As of the preceding December
jspears on DSK121TN23PROD with CFR
(2) Exemptions. Notwithstanding para- 31st, or, if the application for the
graph (b)(1) of this section: transaction was received before April 1
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§ 1026.35 12 CFR Ch. X (1–1–25 Edition)
of the current calendar year, as of ei- creditors extended covered trans-
ther of the two preceding December actions, as defined in § 1026.43(b)(1), se-
31sts, the creditor and its affiliates cured by first liens on properties in the
that regularly extended covered trans- county five or more times.
actions, as defined by § 1026.43(b)(1), se- (C) A property shall be deemed to be
cured by first liens, together, had total in an area that is rural or underserved
assets of less than $2,000,000,000; this in a particular calendar year if the
asset threshold shall adjust automati- property is:
cally each year, based on the year-to- (1) Located in a county that appears
year change in the average of the Con- on the lists published by the Bureau of
sumer Price Index for Urban Wage counties that are rural or underserved,
Earners and Clerical Workers, not sea- as defined by § 1026.35(b)(2)(iv)(A)(1) or
sonally adjusted, for each 12-month pe- § 1026.35(b)(2)(iv)(B), for that calendar
riod ending in November, with round- year,
ing to the nearest million dollars (see (2) Designated as rural or under-
comment 35(b)(2)(iii)–1.iii for the appli- served for that calendar year by any
cable threshold); and automated tool that the Bureau pro-
(D) Neither the creditor nor its affil- vides on its public Web site, or
iate maintains an escrow account of
(3) Not designated as located in an
the type described in paragraph (b)(1)
urban area, as defined by the most re-
of this section for any extension of con-
cent delineation of urban areas an-
sumer credit secured by real property
nounced by the Census Bureau, by any
or a dwelling that the creditor or its
automated address search tool that the
affiliate currently services, other than:
(1) Escrow accounts established for U.S. Census Bureau provides on its
first-lien higher-priced mortgage loans public Web site for that purpose and
for which applications were received on that specifically indicates the urban or
or after April 1, 2010, and before June rural designations of properties.
17, 2021; or (v) Notwithstanding paragraphs
(2) Escrow accounts established after (b)(2)(iii) and (vi) of this section, an es-
consummation as an accommodation crow account must be established pur-
to distressed consumers to assist such suant to paragraph (b)(1) of this section
consumers in avoiding default or fore- for any first-lien higher-priced mort-
closure. gage loan that, at consummation, is
(iv) For purposes of paragraph subject to a commitment to be ac-
(b)(2)(iii)(A) of this section: quired by a person that does not satisfy
(A) An area is ‘‘rural’’ during a cal- the conditions in paragraph (b)(2)(iii)
endar year if it is: or (vi) of this section, unless otherwise
(1) A county that is neither in a met- exempted by this paragraph (b)(2).
ropolitan statistical area nor in a (vi) Except as provided in paragraph
micropolitan statistical area that is (b)(2)(v) of this section, an escrow ac-
adjacent to a metropolitan statistical count need not be established for a
area, as those terms are defined by the transaction made by a creditor that is
U.S. Office of Management and Budget an insured depository institution or in-
and as they are applied under currently sured credit union if, at the time of
applicable Urban Influence Codes consummation:
(UICs), established by the United (A) As of the preceding December
States Department of Agriculture’s 31st, or, if the application for the
Economic Research Service (USDA– transaction was received before April 1
ERS); or of the current calendar year, as of ei-
(2) A census block that is not in an ther of the two preceding December
urban area, as defined by the U.S. Cen- 31sts, the insured depository institu-
sus Bureau using the latest decennial tion or insured credit union had assets
census of the United States. of $10,000,000,000 or less, adjusted annu-
(B) An area is ‘‘underserved’’ during ally for inflation using the Consumer
a calendar year if, according to Home Price Index for Urban Wage Earners
Mortgage Disclosure Act (HMDA) data and Clerical Workers, not seasonally
jspears on DSK121TN23PROD with CFR
for the preceding calendar year, it is a adjusted, for each 12-month period end-
county in which no more than two ing in November (see comment
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Consumer Financial Protection Bureau § 1026.35
35(b)(2)(vi)(A)–1 for the applicable (ii) Credit risk means the financial
threshold); risk that a consumer will default on a
(B) During the preceding calendar loan.
year, or, if the application for the (iii) Manufactured home has the same
transaction was received before April 1 meaning as in 24 CFR 3280.2.
of the current calendar year, during ei- (iv) Manufacturer’s invoice means a
ther of the two preceding calendar document issued by a manufacturer
years, the creditor and its affiliates, as and provided with a manufactured
defined in § 1026.32(b)(5), together ex- home to a retail dealer that separately
tended no more than 1,000 covered details the wholesale (base) prices at
transactions secured by a first lien on the factory for specific models or series
a principal dwelling; and of manufactured homes and itemized
(C) The transaction satisfies the cri- options (large appliances, built-in
teria in paragraphs (b)(2)(iii)(A) and (D) items and equipment), plus actual
of this section. itemized charges for freight from the
(3) Cancellation—(i) General. Except as factory to the dealer’s lot or the home-
provided in paragraph (b)(3)(ii) of this site (including any rental of wheels and
section, a creditor or servicer may can- axles) and for any sales taxes to be paid
cel an escrow account required in para- by the dealer. The invoice may recite
graph (b)(1) of this section only upon such prices and charges on an itemized
the earlier of: basis or by stating an aggregate price
or charge, as appropriate, for each cat-
(A) Termination of the underlying
egory.
debt obligation; or
(v) National Registry means the data-
(B) Receipt no earlier than five years
base of information about State cer-
after consummation of a consumer’s
tified and licensed appraisers main-
request to cancel the escrow account.
tained by the Appraisal Subcommittee
(ii) Delayed cancellation. Notwith- of the Federal Financial Institutions
standing paragraph (b)(3)(i) of this sec- Examination Council.
tion, a creditor or servicer shall not (vi) New manufactured home means a
cancel an escrow account pursuant to a manufactured home that has not been
consumer’s request described in para- previously occupied.
graph (b)(3)(i)(B) of this section unless
(vii) State agency means a ‘‘State ap-
the following conditions are satisfied: praiser certifying and licensing agen-
(A) The unpaid principal balance is cy’’ recognized in accordance with sec-
less than 80 percent of the original tion 1118(b) of the Financial Institu-
value of the property securing the un- tions Reform, Recovery, and Enforce-
derlying debt obligation; and ment Act of 1989 (12 U.S.C. 3347(b)) and
(B) The consumer currently is not de- any implementing regulations.
linquent or in default on the under- (2) Exemptions. Unless otherwise spec-
lying debt obligation. ified, the requirements in paragraph
(c) Appraisals—(1) Definitions. For (c)(3) through (6) of this section do not
purposes of this section: apply to the following types of trans-
(i) Certified or licensed appraiser means actions:
a person who is certified or licensed by (i) A loan that satisfies the criteria
the State agency in the State in which of a qualified mortgage as defined pur-
the property that secures the trans- suant to 15 U.S.C. 1639c;
action is located, and who performs the (ii) An extension of credit for which
appraisal in conformity with the Uni- the amount of credit extended is equal
form Standards of Professional Ap- to or less than the applicable threshold
praisal Practice and the requirements amount, which is adjusted every year
applicable to appraisers in title XI of to reflect increases in the Consumer
the Financial Institutions Reform, Re- Price Index for Urban Wage Earners
covery, and Enforcement Act of 1989, as and Clerical Workers, as applicable,
amended (12 U.S.C. 3331 et seq.), and any and published in the official staff com-
implementing regulations in effect at mentary to this paragraph (c)(2)(ii);
jspears on DSK121TN23PROD with CFR
the time the appraiser signs the ap- (iii) A transaction secured by a mo-
praiser’s certification. bile home, boat, or trailer.
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§ 1026.35 12 CFR Ch. X (1–1–25 Edition)
(iv) A transaction to finance the ini- action, provided that the date of manu-
tial construction of a dwelling. facture is no earlier than 18 months
(v) A loan with a maturity of 12 prior to the creditor’s receipt of the
months or less, if the purpose of the consumer’s application for credit;
loan is a ‘‘bridge’’ loan connected with (2) A cost estimate of the value of the
the acquisition of a dwelling intended manufactured home securing the trans-
to become the consumer’s principal action obtained from an independent
dwelling. cost service provider; or
(vi) A reverse-mortgage transaction (3) A valuation, as defined in
subject to 12 CFR 1026.33(a). § 1026.42(b)(3), of the manufactured
(vii) An extension of credit that is a home performed by a person who has
refinancing secured by a first lien, with no direct or indirect interest, financial
refinancing defined as in § 1026.20(a) or otherwise, in the property or trans-
(except that the creditor need not be action for which the valuation is per-
the original creditor or a holder or formed and has training in valuing
servicer of the original obligation), manufactured homes.
provided that the refinancing meets (3) Appraisals required—(i) In general.
the following criteria: Except as provided in paragraph (c)(2)
(A) Either— of this section, a creditor shall not ex-
(1) The credit risk of the refinancing tend a higher-priced mortgage loan to
is retained by the person that held the a consumer without obtaining, prior to
credit risk of the existing obligation consummation, a written appraisal of
and there is no commitment, at con- the property to be mortgaged. The ap-
summation, to transfer the credit risk praisal must be performed by a cer-
to another person; or tified or licensed appraiser who con-
(2) The refinancing is insured or ducts a physical visit of the interior of
guaranteed by the same Federal gov- the property that will secure the trans-
ernment agency that insured or guar- action.
anteed the existing obligation; (ii) Safe harbor. A creditor obtains a
(B) The regular periodic payments written appraisal that meets the re-
under the refinance loan do not— quirements for an appraisal required
(1) Cause the principal balance to in- under paragraph (c)(3)(i) of this section
crease; if the creditor:
(2) Allow the consumer to defer re- (A) Orders that the appraiser perform
payment of principal; or the appraisal in conformity with the
(3) Result in a balloon payment, as Uniform Standards of Professional Ap-
defined in § 1026.18(s)(5)(i); and praisal Practice and title XI of the Fi-
(C) The proceeds from the refi- nancial Institutions Reform, Recovery,
nancing are used solely to satisfy the and Enforcement Act of 1989, as amend-
existing obligation and amounts attrib- ed (12 U.S.C. 3331 et seq.), and any im-
uted solely to the costs of the refi- plementing regulations in effect at the
nancing; and time the appraiser signs the appraiser’s
(viii) A transaction secured by: certification;
(A) A new manufactured home and (B) Verifies through the National
land, but the exemption shall only Registry that the appraiser who signed
apply to the requirement in paragraph the appraiser’s certification was a cer-
(c)(3)(i) of this section that the ap- tified or licensed appraiser in the State
praiser conduct a physical visit of the in which the appraised property is lo-
interior of the new manufactured cated as of the date the appraiser
home; or signed the appraiser’s certification;
(B) A manufactured home and not (C) Confirms that the elements set
land, for which the creditor obtains one forth in appendix N to this part are ad-
of the following and provides a copy to dressed in the written appraisal; and
the consumer no later than three busi- (D) Has no actual knowledge con-
ness days prior to consummation of the trary to the facts or certifications con-
transaction— tained in the written appraisal.
(1) For a new manufactured home, (4) Additional appraisal for certain
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the manufacturer’s invoice for the higher-priced mortgage loans—(i) In gen-
manufactured home securing the trans- eral. Except as provided in paragraphs
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Consumer Financial Protection Bureau § 1026.35
(c)(2) and (c)(4)(vii) of this section, a (vi) Creditor’s determination of prior
creditor shall not extend a higher- sale date and price—(A) Reasonable dili-
priced mortgage loan to a consumer to gence. A creditor must obtain two writ-
finance the acquisition of the con- ten appraisals under paragraph (c)(4)(i)
sumer’s principal dwelling without ob- of this section unless the creditor can
taining, prior to consummation, two demonstrate by exercising reasonable
written appraisals, if: diligence that the requirement to ob-
(A) The seller acquired the property tain two appraisals does not apply. A
90 or fewer days prior to the date of the creditor acts with reasonable diligence
consumer’s agreement to acquire the if the creditor bases its determination
property and the price in the con- on information contained in written
sumer’s agreement to acquire the prop- source documents, such as the docu-
erty exceeds the seller’s acquisition ments listed in appendix O to this part.
price by more than 10 percent; or (B) Inability to determine prior sale
(B) The seller acquired the property date or price—modified requirements for
91 to 180 days prior to the date of the additional appraisal. If, after exercising
consumer’s agreement to acquire the reasonable diligence, a creditor cannot
property and the price in the con- determine whether the conditions in
sumer’s agreement to acquire the prop- paragraphs (c)(4)(i)(A) and (c)(4)(i)(B)
erty exceeds the seller’s acquisition are present and therefore must obtain
price by more than 20 percent. two written appraisals in accordance
(ii) Different certified or licensed ap- with paragraphs (c)(4)(i) through (v) of
praisers. The two appraisals required this section, one of the two appraisals
under paragraph (c)(4)(i) of this section shall include an analysis of the factors
may not be performed by the same cer- in paragraph (c)(4)(iv) of this section
tified or licensed appraiser. only to the extent that the information
(iii) Relationship to general appraisal necessary for the appraiser to perform
requirements. If two appraisals must be the analysis can be determined.
obtained under paragraph (c)(4)(i) of (vii) Exemptions from the additional
this section, each appraisal shall meet appraisal requirement. The additional
the requirements of paragraph (c)(3)(i) appraisal required under paragraph
of this section. (c)(4)(i) of this section shall not apply
(iv) Required analysis in the additional to extensions of credit that finance a
appraisal. One of the two required ap- consumer’s acquisition of property:
praisals must include an analysis of: (A) From a local, State or Federal
(A) The difference between the price government agency;
at which the seller acquired the prop- (B) From a person who acquired title
erty and the price that the consumer is to the property through foreclosure,
obligated to pay to acquire the prop- deed-in-lieu of foreclosure, or other
erty, as specified in the consumer’s similar judicial or non-judicial proce-
agreement to acquire the property dure as a result of the person’s exercise
from the seller; of rights as the holder of a defaulted
(B) Changes in market conditions be- mortgage loan;
tween the date the seller acquired the (C) From a non-profit entity as part
property and the date of the con- of a local, State, or Federal govern-
sumer’s agreement to acquire the prop- ment program under which the non-
erty; and profit entity is permitted to acquire
(C) Any improvements made to the title to single-family properties for re-
property between the date the seller sale from a seller who acquired title to
acquired the property and the date of the property through the process of
the consumer’s agreement to acquire foreclosure, deed-in-lieu of foreclosure,
the property. or other similar judicial or non-judicial
(v) No charge for the additional ap- procedure;
praisal. If the creditor must obtain two (D) From a person who acquired title
appraisals under paragraph (c)(4)(i) of to the property by inheritance or pur-
this section, the creditor may charge suant to a court order of dissolution of
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the consumer for only one of the ap- marriage, civil union, or domestic
praisals. partnership, or of partition of joint or
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§ 1026.35 12 CFR Ch. X (1–1–25 Edition)
marital assets to which the seller was (6) Copy of appraisals—(i) In general.
a party; Except as provided in paragraph (c)(2)
(E) From an employer or relocation of this section, a creditor shall provide
agency in connection with the reloca- to the consumer a copy of any written
tion of an employee; appraisal performed in connection with
(F) From a servicemember, as defined a higher-priced mortgage loan pursu-
in 50 U.S.C. App. 511(1), who received a ant to paragraphs (c)(3) and (c)(4) of
deployment or permanent change of this section.
station order after the servicemember (ii) Timing. A creditor shall provide
purchased the property; to the consumer a copy of each written
(G) Located in an area designated by appraisal pursuant to paragraph
the President as a federal disaster area, (c)(6)(i) of this section:
if and for as long as the Federal finan- (A) No later than three business days
cial institutions regulatory agencies, prior to consummation of the loan; or
as defined in 12 U.S.C. 3350(6), waive the (B) In the case of a loan that is not
requirements in title XI of the Finan- consummated, no later than 30 days
cial Institutions Reform, Recovery, after the creditor determines that the
and Enforcement Act of 1989, as amend-
loan will not be consummated.
ed (12 U.S.C. 3331 et seq.), and any im-
(iii) Form of copy. Any copy of a writ-
plementing regulations in that area; or
ten appraisal required by paragraph
(H) Located in a rural county, as de-
(c)(6)(i) of this section may be provided
fined in 12 CFR 1026.35(b)(2)(iv)(A).
to the applicant in electronic form,
(5) Required disclosure—(i) In general.
subject to compliance with the con-
Except as provided in paragraph (c)(2)
sumer consent and other applicable
of this section, a creditor shall disclose
the following statement, in writing, to provisions of the Electronic Signatures
a consumer who applies for a higher- in Global and National Commerce Act
priced mortgage loan: ‘‘We may order (E-Sign Act) (15 U.S.C. 7001 et seq.).
an appraisal to determine the prop- (iv) No charge for copy of appraisal. A
erty’s value and charge you for this ap- creditor shall not charge the consumer
praisal. We will give you a copy of any for a copy of a written appraisal re-
appraisal, even if your loan does not quired to be provided to the consumer
close. You can pay for an additional ap- pursuant to paragraph (c)(6)(i) of this
praisal for your own use at your own section.
cost.’’ Compliance with the disclosure (7) Relation to other rules. The rules in
requirement in Regulation B, 12 CFR this paragraph (c) were adopted jointly
1002.14(a)(2), satisfies the requirements by the Federal Reserve Board (Board),
of this paragraph. the Office of the Comptroller of the
(ii) Timing of disclosure. The disclo- Currency (OCC), the Federal Deposit
sure required by paragraph (c)(5)(i) of Insurance Corporation, the National
this section shall be delivered or placed Credit Union Administration, the Fed-
in the mail no later than the third eral Housing Finance Agency, and the
business day after the creditor receives Bureau. These rules are substantively
the consumer’s application for a high- identical to the Board’s and the OCC’s
er-priced mortgage loan subject to higher-priced mortgage loan appraisal
paragraph (c) of this section. In the rules published separately in 12 CFR
case of a loan that is not a higher- 226.43 (for the Board) and in 12 CFR
priced mortgage loan subject to para- part 34, subpart G and 12 CFR part 164,
graph (c) of this section at the time of subpart B (for the OCC).
application, but becomes a higher- (d) Evasion; open-end credit. In con-
priced mortgage loan subject to para-
nection with credit secured by a con-
graph (c) of this section after applica-
sumer’s principal dwelling that does
tion, the disclosure shall be delivered
or placed in the mail not later than the not meet the definition of open-end
third business day after the creditor credit in § 1026.2(a)(20), a creditor shall
determines that the loan is a higher- not structure a home-secured loan as
jspears on DSK121TN23PROD with CFR
priced mortgage loan subject to para-
graph (c) of this section.
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Consumer Financial Protection Bureau § 1026.36
an open-end plan to evade the require- it terms (including rates, fees, and
ments of this section. other costs) available from a creditor.
[78 FR 4753, Jan. 22, 2013, as amended at 78
(C) A person that performs only real
FR 10442, Feb. 13, 2013; 78 FR 30745, May 23, estate brokerage activities and is li-
2013; 78 FR 44718, July 24, 2013; 78 FR 60441, censed or registered in accordance with
Oct. 1, 2013; 78 FR 78585, 78586, Dec. 26, 2013; applicable State law, unless such per-
80 FR 59967, Oct. 2, 2015; 81 FR 16082, Mar. 25, son is compensated by a creditor or
2016; 86 FR 9852, Feb. 17, 2021] loan originator or by any agent of such
creditor or loan originator for a par-
§ 1026.36 Prohibited acts or practices ticular consumer credit transaction
and certain requirements for credit
secured by a dwelling. subject to this section.
(D) A seller financer that meets the
(a) Definitions—(1) Loan originator. (i) criteria in paragraph (a)(4) or (a)(5) of
For purposes of this section, the term this section, as applicable.
‘‘loan originator’’ means a person who, (E) A servicer or servicer’s employ-
in expectation of direct or indirect ees, agents, and contractors who offer
compensation or other monetary gain or negotiate terms for purposes of re-
or for direct or indirect compensation negotiating, modifying, replacing, or
or other monetary gain, performs any subordinating principal of existing
of the following activities: takes an ap- mortgages where consumers are behind
plication, offers, arranges, assists a in their payments, in default, or have a
consumer in obtaining or applying to reasonable likelihood of defaulting or
obtain, negotiates, or otherwise ob- falling behind. This exception does not
tains or makes an extension of con- apply, however, to a servicer or
sumer credit for another person; or servicer’s employees, agents, and con-
through advertising or other means of tractors who offer or negotiate a trans-
communication represents to the pub- action that constitutes a refinancing
lic that such person can or will perform
under § 1026.20(a) or obligates a dif-
any of these activities. The term ‘‘loan
ferent consumer on the existing debt.
originator’’ includes an employee,
(ii) An ‘‘individual loan originator’’
agent, or contractor of the creditor or
is a natural person who meets the defi-
loan originator organization if the em-
nition of ‘‘loan originator’’ in para-
ployee, agent, or contractor meets this
definition. The term ‘‘loan originator’’ graph (a)(1)(i) of this section.
includes a creditor that engages in loan (iii) A ‘‘loan originator organization’’
origination activities if the creditor is any loan originator, as defined in
does not finance the transaction at paragraph (a)(1)(i) of this section, that
consummation out of the creditor’s is not an individual loan originator.
own resources, including by drawing on (2) Mortgage broker. For purposes of
a bona fide warehouse line of credit or this section, a mortgage broker with
out of deposits held by the creditor. All respect to a particular transaction is
creditors that engage in any of the any loan originator that is not an em-
foregoing loan origination activities ployee of the creditor.
are loan originators for purposes of (3) Compensation. The term ‘‘com-
paragraphs (f) and (g) of this section. pensation’’ includes salaries, commis-
The term does not include: sions, and any financial or similar in-
(A) A person who does not take a centive.
consumer credit application or offer or (4) Seller financers; three properties. A
negotiate credit terms available from a person (as defined in § 1026.2(a)(22)) that
creditor, but who performs purely ad- meets all of the following criteria is
ministrative or clerical tasks on behalf not a loan originator under paragraph
of a person who does engage in such ac- (a)(1) of this section:
tivities. (i) The person provides seller financ-
(B) An employee of a manufactured ing for the sale of three or fewer prop-
home retailer who does not take a con- erties in any 12-month period to pur-
sumer credit application, offer or nego- chasers of such properties, each of
jspears on DSK121TN23PROD with CFR
tiate credit terms available from a which is owned by the person and
creditor, or advise a consumer on cred- serves as security for the financing.
101
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§ 1026.36 12 CFR Ch. X (1–1–25 Edition)
(ii) The person has not constructed, able rate is based on is a widely avail-
or acted as a contractor for the con- able index such as indices for U.S.
struction of, a residence on the prop- Treasury securities or SOFR.
erty in the ordinary course of business (6) Credit terms. For purposes of this
of the person. section, the term ‘‘credit terms’’ in-
(iii) The person provides seller fi- cludes rates, fees, and other costs.
nancing that meets the following re- Credit terms are selected based on the
quirements: consumer’s financial characteristics
(A) The financing is fully amortizing. when those terms are selected based on
(B) The financing is one that the per- any factors that may influence a credit
son determines in good faith the con- decision, such as debts, income, assets,
sumer has a reasonable ability to or credit history.
repay. (b) Scope. Paragraphs (c)(1) and (2) of
(C) The financing has a fixed rate or this section apply to closed-end con-
an adjustable rate that is adjustable sumer credit transactions secured by a
after five or more years, subject to rea- consumer’s principal dwelling. Para-
sonable annual and lifetime limita- graph (c)(3) of this section applies to a
tions on interest rate increases. If the consumer credit transaction secured by
financing agreement has an adjustable a dwelling. Paragraphs (d) through (i)
rate, the rate is determined by the ad- of this section apply to closed-end con-
dition of a margin to an index rate and sumer credit transactions secured by a
is subject to reasonable rate adjust- dwelling. This section does not apply
ment limitations. The index the adjust- to a home equity line of credit subject
able rate is based on is a widely avail- to § 1026.40, except that paragraphs (h)
able index such as indices for U.S. and (i) of this section apply to such
Treasury securities or SOFR. credit when secured by the consumer’s
(5) Seller financers; one property. A principal dwelling and paragraph (c)(3)
natural person, estate, or trust that
applies to such credit when secured by
meets all of the following criteria is
a dwelling. Paragraphs (d) through (i)
not a loan originator under paragraph
of this section do not apply to a loan
(a)(1) of this section:
that is secured by a consumer’s inter-
(i) The natural person, estate, or
est in a timeshare plan described in 11
trust provides seller financing for the
U.S.C. 101(53D).
sale of only one property in any 12-
month period to purchasers of such (c) Servicing practices. For purposes of
property, which is owned by the nat- this paragraph (c), the terms
ural person, estate, or trust and serves ‘‘servicer’’ and ‘‘servicing’’ have the
as security for the financing. same meanings as provided in 12 CFR
(ii) The natural person, estate, or 1024.2(b).
trust has not constructed, or acted as a (1) Payment processing. In connection
contractor for the construction of, a with a closed-end consumer credit
residence on the property in the ordi- transaction secured by a consumer’s
nary course of business of the person. principal dwelling:
(iii) The natural person, estate, or (i) Periodic payments. No servicer
trust provides seller financing that shall fail to credit a periodic payment
meets the following requirements: to the consumer’s loan account as of
(A) The financing has a repayment the date of receipt, except when a delay
schedule that does not result in nega- in crediting does not result in any
tive amortization. charge to the consumer or in the re-
(B) The financing has a fixed rate or porting of negative information to a
an adjustable rate that is adjustable consumer reporting agency, or except
after five or more years, subject to rea- as provided in paragraph (c)(1)(iii) of
sonable annual and lifetime limita- this section. A periodic payment, as
tions on interest rate increases. If the used in this paragraph (c), is an
financing agreement has an adjustable amount sufficient to cover principal,
rate, the rate is determined by the ad- interest, and escrow (if applicable) for
dition of a margin to an index rate and a given billing cycle. A payment quali-
jspears on DSK121TN23PROD with CFR
is subject to reasonable rate adjust- fies as a periodic payment even if it
ment limitations. The index the adjust- does not include amounts required to
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Consumer Financial Protection Bureau § 1026.36
cover late fees, other fees, or non-es- such a request because a loan is in
crow payments a servicer has advanced bankruptcy or foreclosure, because the
on a consumer’s behalf. loan is a reverse mortgage or shared
(ii) Partial payments. Any servicer appreciation mortgage, or because of
that retains a partial payment, mean- natural disasters or other similar cir-
ing any payment less than a periodic cumstances, the payoff statement must
payment, in a suspense or unapplied be provided within a reasonable time.
funds account shall: A creditor or assignee that does not
(A) Disclose to the consumer the currently own the mortgage loan or
total amount of funds held in such sus- the mortgage servicing rights is not
pense or unapplied funds account on subject to the requirement in this
the periodic statement as required by paragraph (c)(3) to provide a payoff
§ 1026.41(d)(3), if a periodic statement is statement.
required; and (d) Prohibited payments to loan origina-
(B) On accumulation of sufficient tors—(1) Payments based on a term of a
funds to cover a periodic payment in transaction. (i) Except as provided in
any suspense or unapplied funds ac- paragraph (d)(1)(iii) or (iv) of this sec-
count, treat such funds as a periodic tion, in connection with a consumer
payment received in accordance with credit transaction secured by a dwell-
paragraph (c)(1)(i) of this section. ing, no loan originator shall receive
(iii) Non-conforming payments. If a and no person shall pay to a loan origi-
servicer specifies in writing require- nator, directly or indirectly, com-
ments for the consumer to follow in pensation in an amount that is based
making payments, but accepts a pay- on a term of a transaction, the terms
ment that does not conform to the re- of multiple transactions by an indi-
quirements, the servicer shall credit vidual loan originator, or the terms of
the payment as of five days after re- multiple transactions by multiple indi-
ceipt. vidual loan originators. If a loan origi-
(2) No pyramiding of late fees. In con- nator’s compensation is based in whole
nection with a closed-end consumer or in part on a factor that is a proxy
credit transaction secured by a con- for a term of a transaction, the loan
sumer’s principal dwelling, a servicer originator’s compensation is based on a
shall not impose any late fee or delin- term of a transaction. A factor that is
quency charge for a payment if: not itself a term of a transaction is a
(i) Such a fee or charge is attrib- proxy for a term of the transaction if
utable solely to failure of the consumer the factor consistently varies with that
to pay a late fee or delinquency charge term over a significant number of
on an earlier payment; and transactions, and the loan originator
(ii) The payment is otherwise a peri- has the ability, directly or indirectly,
odic payment received on the due date, to add, drop, or change the factor in
or within any applicable courtesy pe- originating the transaction.
riod. (ii) For purposes of this paragraph
(3) Payoff statements. In connection (d)(1) only, a ‘‘term of a transaction’’ is
with a consumer credit transaction se- any right or obligation of the parties
cured by a consumer’s dwelling, a cred- to a credit transaction. The amount of
itor, assignee or servicer, as applicable, credit extended is not a term of a
must provide an accurate statement of transaction or a proxy for a term of a
the total outstanding balance that transaction, provided that compensa-
would be required to pay the con- tion received by or paid to a loan origi-
sumer’s obligation in full as of a speci- nator, directly or indirectly, is based
fied date. The statement shall be sent on a fixed percentage of the amount of
within a reasonable time, but in no credit extended; however, such com-
case more than seven business days, pensation may be subject to a min-
after receiving a written request from imum or maximum dollar amount.
the consumer or any person acting on (iii) An individual loan originator
behalf of the consumer. When a cred- may receive, and a person may pay to
itor, assignee, or servicer, as applica- an individual loan originator, com-
jspears on DSK121TN23PROD with CFR
ble, is not able to provide the state- pensation in the form of a contribution
ment within seven business days of to a defined contribution plan that is a
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§ 1026.36 12 CFR Ch. X (1–1–25 Edition)
designated tax-advantaged plan or a period preceding the date of the com-
benefit under a defined benefit plan pensation determination.
that is a designated tax-advantaged (2) Payments by persons other than con-
plan. In the case of a contribution to a sumer—(i) Dual compensation. (A) Ex-
defined contribution plan, the con- cept as provided in paragraph
tribution shall not be directly or indi- (d)(2)(i)(C) of this section, if any loan
rectly based on the terms of that indi- originator receives compensation di-
vidual loan originator’s transactions. rectly from a consumer in a consumer
As used in this paragraph (d)(1)(iii), credit transaction secured by a dwell-
‘‘designated tax-advantaged plan’’ ing:
means any plan that meets the require- (1) No loan originator shall receive
ments of Internal Revenue Code sec- compensation, directly or indirectly,
tion 401(a), 26 U.S.C. 401(a); employee from any person other than the con-
annuity plan described in Internal Rev- sumer in connection with the trans-
enue Code section 403(a), 26 U.S.C. action; and
403(a); simple retirement account, as (2) No person who knows or has rea-
defined in Internal Revenue Code sec- son to know of the consumer-paid com-
tion 408(p), 26 U.S.C. 408(p); simplified pensation to the loan originator (other
employee pension described in Internal than the consumer) shall pay any com-
Revenue Code section 408(k), 26 U.S.C. pensation to a loan originator, directly
408(k); annuity contract described in or indirectly, in connection with the
Internal Revenue Code section 403(b), transaction.
26 U.S.C. 403(b); or eligible deferred (B) Compensation received directly
compensation plan, as defined in Inter- from a consumer includes payments to
nal Revenue Code section 457(b), 26 a loan originator made pursuant to an
U.S.C. 457(b). agreement between the consumer and a
(iv) An individual loan originator person other than the creditor or its af-
may receive, and a person may pay to filiates, under which such other person
an individual loan originator, com- agrees to provide funds toward the con-
pensation under a non-deferred profits- sumer’s costs of the transaction (in-
based compensation plan (i.e., any ar- cluding loan originator compensation).
rangement for the payment of non-de- (C) If a loan originator organization
ferred compensation that is determined receives compensation directly from a
with reference to the profits of the per- consumer in connection with a trans-
son from mortgage-related business), action, the loan originator organiza-
provided that: tion may pay compensation to an indi-
(A) The compensation paid to an in- vidual loan originator, and the indi-
dividual loan originator pursuant to vidual loan originator may receive
this paragraph (d)(1)(iv) is not directly compensation from the loan originator
or indirectly based on the terms of that organization, subject to paragraph
individual loan originator’s trans- (d)(1) of this section.
actions that are subject to this para- (ii) Exemption. A payment to a loan
graph (d); and originator that is otherwise prohibited
(B) At least one of the following con- by section 129B(c)(2)(A) of the Truth in
ditions is satisfied: Lending Act is nevertheless permitted
(1) The compensation paid to an indi- pursuant to section 129B(c)(2)(B) of the
vidual loan originator pursuant to this Act, regardless of whether the con-
paragraph (d)(1)(iv) does not, in the ag- sumer makes any upfront payment of
gregate, exceed 10 percent of the indi- discount points, origination points, or
vidual loan originator’s total com- fees, as described in section
pensation corresponding to the time 129B(c)(2)(B)(ii) of the Act, as long as
period for which the compensation the loan originator does not receive
under the non-deferred profits-based any compensation directly from the
compensation plan is paid; or consumer as described in section
(2) The individual loan originator was 129B(c)(2)(B)(i) of the Act.
a loan originator for ten or fewer (3) Affiliates. For purposes of this
jspears on DSK121TN23PROD with CFR
transactions subject to this paragraph paragraph (d), affiliates shall be treat-
(d) consummated during the 12-month ed as a single ‘‘person.’’
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Consumer Financial Protection Bureau § 1026.36
(e) Prohibition on steering—(1) General. two or more loans have the same total
In connection with a consumer credit dollar amount of discount points, origi-
transaction secured by a dwelling, a nation points or origination fees, the
loan originator shall not direct or loan with the lowest interest rate that
‘‘steer’’ a consumer to consummate a has the lowest total dollar amount of
transaction based on the fact that the discount points, origination points or
originator will receive greater com- origination fees).
pensation from the creditor in that (ii) The loan originator must have a
transaction than in other transactions good faith belief that the options pre-
the originator offered or could have of- sented to the consumer pursuant to
fered to the consumer, unless the con- paragraph (e)(3)(i) of this section are
summated transaction is in the con- loans for which the consumer likely
sumer’s interest. qualifies.
(2) Permissible transactions. A trans- (iii) For each type of transaction, if
action does not violate paragraph (e)(1) the originator presents to the con-
of this section if the consumer is pre- sumer more than three loans, the origi-
sented with loan options that meet the nator must highlight the loans that
conditions in paragraph (e)(3) of this satisfy the criteria specified in para-
section for each type of transaction in graph (e)(3)(i) of this section.
which the consumer expressed an inter- (4) Number of loan options presented.
est. For purposes of paragraph (e) of
The loan originator can present fewer
this section, the term ‘‘type of trans-
than three loans and satisfy para-
action’’ refers to whether:
graphs (e)(2) and (e)(3)(i) of this section
(i) A loan has an annual percentage
if the loan(s) presented to the con-
rate that cannot increase after con-
sumer satisfy the criteria of the op-
summation;
tions in paragraph (e)(3)(i) of this sec-
(ii) A loan has an annual percentage
tion and the provisions of paragraph
rate that may increase after con-
(e)(3) of this section are otherwise met.
summation; or
(iii) A loan is a reverse mortgage. (f) Loan originator qualification re-
(3) Loan options presented. A trans- quirements. A loan originator for a con-
action satisfies paragraph (e)(2) of this sumer credit transaction secured by a
section only if the loan originator pre- dwelling must, when required by appli-
sents the loan options required by that cable State or Federal law, be reg-
paragraph and all of the following con- istered and licensed in accordance with
ditions are met: those laws, including the Secure and
(i) The loan originator must obtain Fair Enforcement for Mortgage Licens-
loan options from a significant number ing Act of 2008 (SAFE Act, 12 U.S.C.
of the creditors with which the origi- 5102 et seq.), its implementing regula-
nator regularly does business and, for tions (12 CFR part 1007 or part 1008),
each type of transaction in which the and State SAFE Act implementing
consumer expressed an interest, must law. To comply with this paragraph (f),
present the consumer with loan options a loan originator organization that is
that include: not a government agency or State
(A) The loan with the lowest interest housing finance agency must:
rate; (1) Comply with all applicable State
(B) The loan with the lowest interest law requirements for legal existence
rate without negative amortization, a and foreign qualification;
prepayment penalty, interest-only pay- (2) Ensure that each individual loan
ments, a balloon payment in the first 7 originator who works for the loan
years of the life of the loan, a demand originator organization is licensed or
feature, shared equity, or shared appre- registered to the extent the individual
ciation; or, in the case of a reverse is required to be licensed or registered
mortgage, a loan without a prepay- under the SAFE Act, its implementing
ment penalty, or shared equity or regulations, and State SAFE Act im-
shared appreciation; and plementing law before the individual
(C) The loan with the lowest total acts as a loan originator in a consumer
jspears on DSK121TN23PROD with CFR
dollar amount of discount points, origi- credit transaction secured by a dwell-
nation points or origination fees (or, if ing; and
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§ 1026.36 12 CFR Ch. X (1–1–25 Edition)
(3) For each of its individual loan background standards in effect at the
originator employees who is not re- time of hire or before January 1, 2014,
quired to be licensed and is not li- used to screen the individual) and for
censed as a loan originator pursuant to any individual regardless of when hired
§ 1008.103 of this chapter or State SAFE who, based on reliable information
Act implementing law: known to the loan originator organiza-
(i) Obtain for any individual whom tion, likely does not meet the stand-
the loan originator organization hired ards under this paragraph (f)(3)(ii), be-
on or after January 1, 2014 (or whom fore the individual acts as a loan origi-
the loan originator organization hired nator in a consumer credit transaction
before this date but for whom there secured by a dwelling, that the indi-
were no applicable statutory or regu- vidual loan originator:
latory background standards in effect
(A)(1) Has not been convicted of, or
at the time of hire or before January 1,
pleaded guilty or nolo contendere to, a
2014, used to screen the individual) and
felony in a domestic or military court
for any individual regardless of when
during the preceding seven-year period
hired who, based on reliable informa-
tion known to the loan originator orga- or, in the case of a felony involving an
nization, likely does not meet the act of fraud, dishonesty, a breach of
standards under § 1026.36(f)(3)(ii), before trust, or money laundering, at any
the individual acts as a loan originator time;
in a consumer credit transaction se- (2) For purposes of this paragraph
cured by a dwelling: (f)(3)(ii)(A):
(A) A criminal background check (i) A crime is a felony only if at the
through the Nationwide Mortgage Li- time of conviction it was classified as a
censing System and Registry (NMLSR) felony under the law of the jurisdiction
or, in the case of an individual loan under which the individual was con-
originator who is not a registered loan victed;
originator under the NMLSR, a crimi- (ii) Expunged convictions and par-
nal background check from a law en- doned convictions do not render an in-
forcement agency or commercial serv- dividual unqualified; and
ice; (iii) A conviction or plea of guilty or
(B) A credit report from a consumer nolo contendere does not render an indi-
reporting agency described in section vidual unqualified under this § 1026.36(f)
603(p) of the Fair Credit Reporting Act if the loan originator organization has
(15 U.S.C. 1681a(p)) secured, where ap- obtained consent to employ the indi-
plicable, in compliance with the re-
vidual from the Federal Deposit Insur-
quirements of section 604(b) of the Fair
ance Corporation (or the Board of Gov-
Credit Reporting Act, 15 U.S.C.
ernors of the Federal Reserve System,
1681b(b); and
as applicable) pursuant to section 19 of
(C) Information from the NMLSR
about any administrative, civil, or the Federal Deposit Insurance Act
criminal findings by any government (FDIA), 12 U.S.C. 1829, the National
jurisdiction or, in the case of an indi- Credit Union Administration pursuant
vidual loan originator who is not a reg- to section 205 of the Federal Credit
istered loan originator under the Union Act (FCUA), 12 U.S.C. 1785(d), or
NMLSR, such information from the in- the Farm Credit Administration pursu-
dividual loan originator; ant to section 5.65(d) of the Farm Cred-
(ii) Determine on the basis of the in- it Act of 1971 (FCA), 12 U.S.C. 227a–
formation obtained pursuant to para- 14(d), notwithstanding the bars posed
graph (f)(3)(i) of this section and any with respect to that conviction or plea
other information reasonably available by the FDIA, FCUA, and FCA, as appli-
to the loan originator organization, for cable; and
any individual whom the loan origi- (B) Has demonstrated financial re-
nator organization hired on or after sponsibility, character, and general fit-
January 1, 2014 (or whom the loan ness such as to warrant a determina-
originator organization hired before tion that the individual loan originator
jspears on DSK121TN23PROD with CFR
this date but for whom there were no will operate honestly, fairly, and effi-
applicable statutory or regulatory ciently; and
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Consumer Financial Protection Bureau § 1026.36
(iii) Provide periodic training cov- (2) No waivers of Federal statutory
ering Federal and State law require- causes of action. A contract or other
ments that apply to the individual loan agreement relating to a consumer cred-
originator’s loan origination activities. it transaction secured by a dwelling
(g) Name and NMLSR ID on loan docu- (including a home equity line of credit
ments. (1) For a consumer credit trans- secured by the consumer’s principal
action secured by a dwelling, a loan dwelling) may not be applied or inter-
originator organization must include preted to bar a consumer from bringing
on the loan documents described in a claim in court pursuant to any provi-
paragraph (g)(2) of this section, when- sion of law for damages or other relief
ever each such loan document is pro- in connection with any alleged viola-
vided to a consumer or presented to a
tion of any Federal law. This prohibi-
consumer for signature, as applicable:
tion does not limit a consumer and
(i) Its name and NMLSR ID, if the
NMLSR has provided it an NMLSR ID; creditor or any assignee from agreeing,
and after a dispute or claim under the
(ii) The name of the individual loan transaction arises, to settle or use ar-
originator (as the name appears in the bitration or other non-judicial proce-
NMLSR) with primary responsibility dure to resolve that dispute or claim.
for the origination and, if the NMLSR (i) Prohibition on financing credit in-
has provided such person an NMLSR surance. (1) A creditor may not finance,
ID, that NMLSR ID. directly or indirectly, any premiums or
(2) The loan documents that must in- fees for credit insurance in connection
clude the names and NMLSR IDs pur- with a consumer credit transaction se-
suant to paragraph (g)(1) of this section cured by a dwelling (including a home
are: equity line of credit secured by the
(i) The credit application; consumer’s principal dwelling). This
(ii) The disclosures required by prohibition does not apply to credit in-
§ 1026.19 (e) and (f); surance for which premiums or fees are
(iii) The note or loan contract; and calculated and paid in full on a month-
(iv) The security instrument. ly basis.
(3) For purposes of this section, (2) For purposes of this paragraph (i):
NMLSR ID means a number assigned
(i) ‘‘Credit insurance’’:
by the Nationwide Mortgage Licensing
System and Registry to facilitate elec- (A) Means credit life, credit dis-
tronic tracking and uniform identifica- ability, credit unemployment, or credit
tion of loan originators and public ac- property insurance, or any other acci-
cess to the employment history of, and dent, loss-of-income, life, or health in-
the publicly adjudicated disciplinary surance, or any payments directly or
and enforcement actions against, loan indirectly for any debt cancellation or
originators. suspension agreement or contract, but
(h) Prohibition on mandatory arbitra- (B) Excludes credit unemployment
tion clauses and waivers of certain con- insurance for which the unemployment
sumer rights—(1) Arbitration. A contract insurance premiums are reasonable,
or other agreement for a consumer the creditor receives no direct or indi-
credit transaction secured by a dwell- rect compensation in connection with
ing (including a home equity line of the unemployment insurance pre-
credit secured by the consumer’s prin- miums, and the unemployment insur-
cipal dwelling) may not include terms ance premiums are paid pursuant to a
that require arbitration or any other separate insurance contract and are
non-judicial procedure to resolve any not paid to an affiliate of the creditor;
controversy or settle any claims aris- (ii) A creditor finances premiums or
ing out of the transaction. This prohi-
fees for credit insurance if it provides a
bition does not limit a consumer and
consumer the right to defer payment of
creditor or any assignee from agreeing,
after a dispute or claim under the a credit insurance premium or fee owed
transaction arises, to settle or use ar- by the consumer beyond the monthly
jspears on DSK121TN23PROD with CFR
bitration or other non-judicial proce- period in which the premium or fee is
dure to resolve that dispute or claim. due; and
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
(iii) Credit insurance premiums or (3) Steering prohibited. A creditor that
fees are calculated on a monthly basis extends credit to a first-time borrower
if they are determined mathematically in connection with a closed-end trans-
by multiplying a rate by the actual action secured by a dwelling, other
monthly outstanding balance. than a reverse mortgage transaction
(j) Policies and procedures to ensure subject to § 1026.33 or a transaction se-
and monitor compliance. (1) A depository cured by a consumer’s interest in a
institution must establish and main- timeshare plan described in 11 U.S.C.
tain written policies and procedures 101(53D), that may result in negative
reasonably designed to ensure and amortization shall not steer or other-
monitor the compliance of the deposi- wise direct a consumer to choose a par-
tory institution, its employees, its sub- ticular counselor or counseling organi-
sidiaries, and its subsidiaries’ employ- zation for the counseling required
ees with the requirements of para- under this paragraph (k).
graphs (d), (e), (f), and (g) of this sec- [76 FR 79772, Dec. 22, 2011, as amended at 78
tion. These written policies and proce- FR 6966, Jan. 31, 2013; 78 FR 11006, Feb. 14,
dures must be appropriate to the na- 2013; 78 FR 11410, Feb. 15, 2013; 78 FR 60441,
ture, size, complexity, and scope of the Oct. 1, 2013; 80 FR 8776, Feb. 19, 2015; 81 FR
mortgage lending activities of the de- 72388, Oct. 19, 2016; 86 FR 69781, Dec. 8, 2021]
pository institution and its subsidi-
aries. § 1026.37 Content of disclosures for
certain mortgage transactions
(2) For purposes of this paragraph (j), (Loan Estimate).
‘‘depository institution’’ has the mean-
ing in section 1503(3) of the SAFE Act, For each transaction subject to
12 U.S.C. 5102(3). For purposes of this § 1026.19(e), the creditor shall disclose
paragraph (j), ‘‘subsidiary’’ has the the information in this section:
meaning in section 3 of the Federal De- (a) General information—(1) Form title.
posit Insurance Act, 12 U.S.C. 1813. The title of the form, ‘‘Loan Esti-
(k) Negative amortization counseling. mate,’’ using that term.
(1) Counseling required. A creditor shall (2) Form purpose. The statement,
not extend credit to a first-time bor- ‘‘Save this Loan Estimate to compare
rower in connection with a closed-end with your Closing Disclosure.’’
transaction secured by a dwelling, (3) Creditor. The name and address of
other than a reverse mortgage trans- the creditor making the disclosures.
action subject to § 1026.33 or a trans- (4) Date issued. The date the disclo-
action secured by a consumer’s interest sures are mailed or delivered to the
in a timeshare plan described in 11 consumer by the creditor, labeled
U.S.C. 101(53D), that may result in neg- ‘‘Date Issued.’’
ative amortization, unless the creditor (5) Applicants. The name and mailing
receives documentation that the con- address of the consumer(s) applying for
sumer has obtained homeownership the credit, labeled ‘‘Applicants.’’
counseling from a counseling organiza- (6) Property. The address including
tion or counselor certified or approved the zip code of the property that se-
by the U.S. Department of Housing and cures or will secure the transaction, or
Urban Development to provide such if the address is unavailable, the loca-
counseling. tion of such property including a zip
(2) Definitions. For the purposes of code, labeled ‘‘Property.’’
this paragraph (k), the following defi- (7) Sale price. (i) For transactions
nitions apply: that involve a seller, the contract sale
(i) A ‘‘first-time borrower’’ means a price of the property identified in para-
consumer who has not previously re- graph (a)(6) of this section, labeled
ceived a closed-end credit transaction ‘‘Sale Price.’’
or open-end credit plan secured by a (ii) For transactions that do not in-
dwelling. volve a seller, the estimated value of
(ii) ‘‘Negative amortization’’ means a the property identified in paragraph
payment schedule with regular periodic (a)(6), labeled ‘‘Prop. Value.’’
jspears on DSK121TN23PROD with CFR
payments that cause the principal bal- (8) Loan term. The term to maturity
ance to increase. of the credit transaction, stated in
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Consumer Financial Protection Bureau § 1026.37
years or months, or both, as applicable, the creditor shall disclose the loan
labeled ‘‘Loan Term.’’ product as a ‘‘Fixed Rate.’’
(9) Purpose. The consumer’s intended (ii) The description of the loan prod-
use for the credit, labeled ‘‘Purpose,’’ uct shall include the features that may
using one of the following terms: change the periodic payment using the
(i) Purchase. If the credit is to finance following terms, subject to paragraph
the acquisition of the property identi- (a)(10)(iii) of this section, as applicable:
fied in paragraph (a)(6) of this section, (A) Negative amortization. If the prin-
the creditor shall disclose that the loan cipal balance may increase due to the
is for a ‘‘Purchase.’’ addition of accrued interest to the
(ii) Refinance. If the credit is not for principal balance, the creditor shall
the purpose described in paragraph
disclose that the loan product has a
(a)(9)(i) of this section, and if the credit
‘‘Negative Amortization’’ feature.
will be used to refinance an existing
obligation, as defined in § 1026.20(a) (but (B) Interest only. If one or more reg-
without regard to whether the creditor ular periodic payments may be applied
is the original creditor or a holder or only to interest accrued and not to the
servicer of the original obligation), loan principal, the creditor shall dis-
that is secured by the property identi- close that the loan product has an ‘‘In-
fied in paragraph (a)(6) of this section, terest Only’’ feature.
the creditor shall disclose that the loan (C) Step payment. If scheduled vari-
is for a ‘‘Refinance.’’ ations in regular periodic payment
(iii) Construction. If the credit is not amounts occur that are not caused by
for one of the purposes described in changes to the interest rate during the
paragraphs (a)(9)(i) or (ii) of this sec- loan term, the creditor shall disclose
tion and the credit will be used to fi- that the loan product has a ‘‘Step Pay-
nance the initial construction of a ment’’ feature.
dwelling on the property identified in (D) Balloon payment. If the terms of
paragraph (a)(6) of this section, the the legal obligation include a ‘‘balloon
creditor shall disclose that the loan is payment,’’ as that term is defined in
for ‘‘Construction.’’ paragraph (b)(5) of this section, the
(iv) Home equity loan. If the credit is creditor shall disclose that the loan
not for one of the purposes described in has a ‘‘Balloon Payment’’ feature.
paragraphs (a)(9)(i) through (iii) of this (E) Seasonal payment. If the terms of
section, the creditor shall disclose that the legal obligation expressly provide
the loan is a ‘‘Home Equity Loan.’’ that regular periodic payments are not
(10) Product. A description of the loan scheduled between specified unit-peri-
product, labeled ‘‘Product.’’ ods on a regular basis, the creditor
(i) The description of the loan prod- shall disclose that the loan product has
uct shall include one of the following
a ‘‘Seasonal Payment’’ feature.
terms:
(iii) The disclosure of a loan feature
(A) Adjustable rate. If the interest
rate may increase after consummation, under paragraph (a)(10)(ii) of this sec-
but the rates that will apply or the pe- tion shall precede the disclosure of the
riods for which they will apply are not loan product under paragraph (a)(10)(i)
known at consummation, the creditor of this section. If a transaction has
shall disclose the loan product as an more than one of the loan features de-
‘‘Adjustable Rate.’’ scribed in paragraph (a)(10)(ii) of this
(B) Step rate. If the interest rate will section, the creditor shall disclose only
change after consummation, and the the first applicable feature in the order
rates that will apply and the periods the features are listed in paragraph
for which they will apply are known at (a)(10)(ii) of this section.
consummation, the creditor shall dis- (iv) The disclosures required by para-
close the loan product as a ‘‘Step graphs (a)(10)(i)(A) and (B), and
Rate.’’ (a)(10)(ii)(A) through (D) of this section
(C) Fixed rate. If the loan product is must each be preceded by the duration
not an Adjustable Rate or a Step Rate, of any introductory rate or payment
jspears on DSK121TN23PROD with CFR
as described in paragraphs (a)(10)(i)(A) period, and the first adjustment period,
and (B) of this section, respectively, as applicable.
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
(11) Loan type. The type of loan, la- (2) Interest rate. The interest rate
beled ‘‘Loan Type,’’ offered to the con- that will be applicable to the trans-
sumer using one of the following terms, action at consummation, labeled ‘‘In-
as applicable: terest Rate.’’ For an adjustable rate
(i) Conventional. If the loan is not transaction, if the interest rate at con-
guaranteed or insured by a Federal or summation is not known, the rate dis-
State government agency, the creditor closed shall be the fully-indexed rate,
shall disclose that the loan is a ‘‘Con- which, for purposes of this paragraph,
ventional.’’ means the interest rate calculated
(ii) FHA. If the loan is insured by the using the index value and margin at
Federal Housing Administration, the the time of consummation.
creditor shall disclose that the loan is (3) Principal and interest payment. The
an ‘‘FHA.’’ initial periodic payment amount that
(iii) VA. If the loan is guaranteed by will be due under the terms of the legal
the U.S. Department of Veterans Af- obligation, labeled ‘‘Principal & Inter-
fairs, the creditor shall disclose that est,’’ immediately preceded by the ap-
the loan is a ‘‘VA.’’ plicable unit-period, and a statement
referring to the payment amount that
(iv) Other. For federally-insured or
includes any mortgage insurance and
guaranteed loans other than those de-
escrow payments that is required to be
scribed in paragraphs (a)(11)(ii) and (iii)
disclosed pursuant to paragraph (c) of
of this section, and for loans insured or
this section. If the interest rate at con-
guaranteed by a State agency, the
summation is not known, the amount
creditor shall disclose the loan type as
disclosed shall be calculated using the
‘‘Other,’’ and provide a brief descrip-
fully-indexed rate disclosed under para-
tion of the loan type.
graph (b)(2) of this section.
(12) Loan identification number (Loan (4) Prepayment penalty. A statement
ID #). A number that may be used by of whether the transaction includes a
the creditor, consumer, and other par- prepayment penalty, labeled ‘‘Prepay-
ties to identify the transaction, labeled ment Penalty.’’ For purposes of this
‘‘Loan ID #.’’ paragraph (b)(4), ‘‘prepayment pen-
(13) Rate lock. A statement of whether alty’’ means a charge imposed for pay-
the interest rate disclosed pursuant to ing all or part of a transaction’s prin-
paragraph (b)(2) of this section is cipal before the date on which the prin-
locked for a specific period of time, la- cipal is due, other than a waived, bona
beled ‘‘Rate Lock.’’ fide third-party charge that the cred-
(i) For transactions in which the in- itor imposes if the consumer prepays
terest rate is locked for a specific pe- all of the transaction’s principal sooner
riod of time, the creditor must provide than 36 months after consummation.
the date and time (including the appli- (5) Balloon payment. A statement of
cable time zone) when that period ends. whether the transaction includes a bal-
(ii) The ‘‘Rate Lock’’ statement re- loon payment, labeled ‘‘Balloon Pay-
quired by this paragraph (a)(13) shall be ment.’’ For purposes of this paragraph
accompanied by a statement that the (b)(5), ‘‘balloon payment’’ means a pay-
interest rate, any points, and any lend- ment that is more than two times a
er credits may change unless the inter- regular periodic payment. ‘‘Balloon
est rate has been locked, and the date payment’’ includes the payment or
and time (including the applicable time payments under a transaction that re-
zone) at which estimated closing costs quires only one or two payments dur-
expire. ing the loan term.
(b) Loan terms. A separate table under (6) Adjustments after consummation.
the heading ‘‘Loan Terms’’ that con- For each amount required to be dis-
tains the following information and closed by paragraphs (b)(1) through (3)
that satisfies the following require- of this section, a statement of whether
ments: the amount may increase after con-
(1) Loan amount. The total amount summation as an affirmative or nega-
the consumer will borrow, as reflected tive answer to the question, and under
jspears on DSK121TN23PROD with CFR
by the face amount of the note, labeled such question disclosed as a sub-
‘‘Loan Amount.’’ heading, ‘‘Can this amount increase
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Consumer Financial Protection Bureau § 1026.37
after closing?’’ and, in the case of an ment penalty or balloon payment is re-
affirmative answer, the following addi- quired to be disclosed, the following in-
tional information, as applicable: formation shall be included, as applica-
(i) Adjustment in loan amount. The ble:
maximum principal balance for the (i) The maximum amount of the pre-
transaction and the due date of the last payment penalty that may be imposed
payment that may cause the principal and the date when the period during
balance to increase. The disclosure fur- which the penalty may be imposed ter-
ther shall indicate whether the max- minates; and
imum principal balance is potential or (ii) The maximum amount of the bal-
is scheduled to occur under the terms loon payment and the due date of such
of the legal obligation. payment.
(ii) Adjustment in interest rate. The (8) Timing. (i) The dates required to
frequency of interest rate adjustments, be disclosed by paragraph (b)(6)(ii) of
the date when the interest rate may this section shall be disclosed as the
first adjust, the maximum interest year in which the event occurs, count-
rate, and the first date when the inter- ing from the date that interest for the
est rate can reach the maximum inter- first scheduled periodic payment be-
est rate, followed by a reference to the gins to accrue after consummation.
disclosure required by paragraph (j) of (ii) The dates required to be disclosed
this section. If the loan term, as de- by paragraphs (b)(6)(i), (b)(6)(iii) and
fined under paragraph (a)(8) of this sec- (b)(7)(ii) of this section shall be dis-
tion, may increase based on an interest closed as the year in which the event
rate adjustment, the disclosure re- occurs, counting from the due date of
quired by this paragraph (b)(6)(ii) shall the initial periodic payment.
also state that fact and the maximum (iii) The date required to be disclosed
possible loan term determined in ac- by paragraph (b)(7)(i) of this section
cordance with paragraph (a)(8) of this shall be disclosed as the year in which
section. the event occurs, counting from the
(iii) Increase in periodic payment. The date of consummation.
scheduled frequency of adjustments to (c) Projected payments. In a separate
the periodic principal and interest pay- table under the heading ‘‘Projected
ment, the due date of the first adjusted Payments,’’ an itemization of each sep-
principal and interest payment, the arate periodic payment or range of
maximum possible periodic principal payments, together with an estimate of
and interest payment, and the date taxes, insurance, and assessments and
when the periodic principal and inter- the payments to be made with escrow
est payment may first equal the max- account funds.
imum principal and interest payment. (1) Periodic payment or range of pay-
If any adjustments to the principal and ments. (i) The initial periodic payment
interest payment are not the result of or range of payments is a separate peri-
a change to the interest rate, a ref- odic payment or range of payments
erence to the disclosure required by and, except as otherwise provided in
paragraph (i) of this section. If there is paragraph (c)(1)(ii) and (iii) of this sec-
a period during which only interest is tion, the following events require the
required to be paid, the disclosure re- disclosure of additional separate peri-
quired by this paragraph (b)(6)(iii) shall odic payments or ranges of payments:
also state that fact and the due date of (A) The periodic principal and inter-
the last periodic payment of such pe- est payment or range of such payments
riod. may change;
(7) Details about prepayment penalty (B) A scheduled balloon payment, as
and balloon payment. The information defined in paragraph (b)(5) of this sec-
required to be disclosed by paragraphs tion;
(b)(4) and (5) of this section shall be (C) The creditor must automatically
disclosed as an affirmative or negative terminate mortgage insurance or any
answer to the question, and under such functional equivalent under applicable
question disclosed as a subheading, law; and
jspears on DSK121TN23PROD with CFR
‘‘Does the loan have these features?’’ If (D) The anniversary of the due date
an affirmative answer for a prepay- of the initial periodic payment or
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
range of payments that immediately pursuant to paragraph (c)(1)(ii) of this
follows the occurrence of multiple section;
events described in paragraph (B) Multiple events described in para-
(c)(1)(i)(A) of this section during a sin- graph (c)(1)(i)(A) of this section occur
gle year. during a single year or an event de-
(ii) The table required by this para- scribed in paragraph (c)(1)(i)(A) of this
graph (c) shall not disclose more than section occurs during the same year as
four separate periodic payments or the initial periodic payment or range
ranges of payments. For all events re- of payments, in which case the creditor
quiring disclosure of additional sepa- discloses the range of payments that
rate periodic payments or ranges of would apply during the year in which
payments described in paragraph the events occur; or
(c)(1)(i)(A) through (D) of this section (C) The periodic principal and inter-
occurring after the third separate peri- est payment may adjust based on index
odic payment or range of payments dis- rates at the time an interest rate ad-
closed, the separate periodic payments justment may occur.
or ranges of payments shall be dis- (2) Itemization. Each separate periodic
closed as a single range of payments, payment or range of payments dis-
subject to the following exceptions: closed on the table required by this
(A) A balloon payment that is sched- paragraph (c) shall be itemized as fol-
uled as a final payment under the lows:
terms of the legal obligation shall al- (i) The amount payable for principal
ways be disclosed as a separate periodic and interest, labeled ‘‘Principal & In-
payment or range of payments, in terest,’’ including the term ‘‘only in-
which case all events requiring disclo- terest’’ if the payment or range of pay-
sure of additional separate periodic ments includes any interest only pay-
payments or ranges of payments de- ment:
scribed in paragraph (c)(1)(i)(A) (A) In the case of a loan that has an
through (D) of this section occurring adjustable interest rate, the maximum
after the second separate periodic pay- principal and interest payment
ment or range of payments disclosed, amounts are determined by assuming
other than the balloon payment that is that the interest rate in effect
scheduled as a final payment, shall be throughout the loan term is the max-
disclosed as a single range of pay- imum possible interest rate, and the
ments. minimum amounts are determined by
(B) The automatic termination of assuming that the interest rate in ef-
mortgage insurance or any functional fect throughout the loan term is the
equivalent under applicable law shall minimum possible interest rate;
require disclosure of an additional sep- (B) In the case of a loan that has an
arate periodic payment or range of adjustable interest rate and also con-
payments only if the total number of tains a negative amortization feature,
separate periodic payments or ranges the maximum principal and interest
of payments otherwise disclosed pursu- payment amounts after the end of the
ant to this paragraph (c)(1) does not ex- period of the loan’s term during which
ceed three. the loan’s principal balance may in-
(iii) When a range of payments is re- crease due to the addition of accrued
quired to be disclosed under this para- interest are determined by assuming
graph (c)(1), the creditor must disclose the maximum principal amount per-
the minimum and maximum amount mitted under the terms of the legal ob-
for both the principal and interest pay- ligation at the end of such period, and
ment under paragraph (c)(2)(i) of this the minimum amounts are determined
section and the total periodic payment pursuant to paragraph (c)(2)(i)(A) of
under paragraph (c)(2)(iv) of this sec- this section;
tion. A range of payments is required (ii) The maximum amount payable
to be disclosed under this paragraph for mortgage insurance premiums cor-
(c)(1) when: responding to the principal and inter-
(A) Multiple events described in para- est payment disclosed pursuant to
jspears on DSK121TN23PROD with CFR
graph (c)(1)(i) of this section are com- paragraph (c)(2)(i) of this section, la-
bined in a single range of payments beled ‘‘Mortgage Insurance’’;
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Consumer Financial Protection Bureau § 1026.37
(iii) The amount payable into an es- (v) A statement that the consumer
crow account to pay some or all of the must pay separately any amounts de-
charges described in paragraph scribed in paragraph (c)(4)(ii) of this
(c)(4)(ii), as applicable, labeled ‘‘Es- section that are not paid by the cred-
crow,’’ together with a statement that itor using escrow account funds; and
the amount disclosed can increase over (vi) A reference to the information
time; and disclosed pursuant to paragraph (g)(3)
(iv) The total periodic payment, cal- of this section.
culated as the sum of the amounts dis- (5) Calculation of taxes and insurance.
closed pursuant to paragraphs (c)(2)(i) For purposes of paragraphs (c)(2)(iii)
through (iii) of this section, labeled and (c)(4)(ii) of this section, estimated
‘‘Total Monthly Payment.’’ property taxes and homeowner’s insur-
(3) Subheadings. (i) The labels re- ance shall reflect:
quired pursuant to paragraph (c)(2) of (i) The taxable assessed value of the
this section must be listed under the real property or cooperative unit secur-
subheading ‘‘Payment Calculation.’’ ing the transaction after consumma-
(ii) Except as provided in paragraph tion, including the value of any im-
(c)(3)(iii) of this section, each separate provements on the property or to be
periodic payment or range of payments constructed on the property, if known,
to be disclosed under this paragraph (c) whether or not such construction will
must be disclosed under a subheading be financed from the proceeds of the
that states the years of the loan during transaction, for property taxes; and
which that payment or range of pay- (ii) The replacement costs of the
ments will apply. The subheadings property during the initial year after
must be stated in a sequence of whole the transaction, for amounts identified
years from the due date of the initial in § 1026.4(b)(8).
periodic payment. (d) Costs at closing—(1) Costs at closing
(iii) A balloon payment that is sched- table. In a separate table, under the
uled as a final payment under the heading ‘‘Costs at Closing’’:
terms of the legal obligation must be (i) Labeled ‘‘Closing Costs,’’ the dol-
disclosed under the subheading ‘‘Final lar amount disclosed pursuant to para-
Payment.’’ graph (g)(6) of this section, together
(4) Taxes, insurance, and assessments. with:
Under the information required by (A) A statement that the amount dis-
paragraphs (c)(1) through (3) of this closed pursuant to paragraph (d)(1)(i) of
section: this section includes the amounts dis-
(i) The label ‘‘Taxes, Insurance & As- closed pursuant to paragraphs (f)(4),
sessments’’; (g)(5), and (g)(6)(ii);
(ii) The sum of the charges identified (B) The dollar amount disclosed pur-
in § 1026.43(b)(8), other than amounts suant to paragraph (f)(4) of this sec-
identified in § 1026.4(b)(5), expressed as tion, labeled ‘‘Loan Costs’’;
a monthly amount, even if no escrow (C) The dollar amount disclosed pur-
account for the payment of some or suant to paragraph (g)(5) of this sec-
any of such charges will be established; tion, labeled ‘‘Other Costs’’:
(iii) A statement that the amount (D) The dollar amount disclosed pur-
disclosed pursuant to paragraph suant to paragraph (g)(6)(ii) of this sec-
(c)(4)(ii) of this section can increase tion, labeled ‘‘Lender Credits’’; and
over time; (E) A statement referring the con-
(iv) A statement of whether the sumer to the tables disclosed pursuant
amount disclosed pursuant to para- to paragraphs (f) and (g) of this section
graph (c)(4)(ii) of this section includes for details.
payments for property taxes, amounts (ii) Labeled ‘‘Cash to Close,’’ the dol-
identified in § 1026.4(b)(8), and other lar amount calculated in accordance
amounts described in paragraph with paragraph (h)(1)(viii) of this sec-
(c)(4)(ii) of this section, along with a tion, together with:
description of any such other amounts, (A) A statement that the amount in-
and an indication of whether such cludes the amount disclosed pursuant
jspears on DSK121TN23PROD with CFR
amounts will be paid by the creditor to paragraph (d)(1)(i) of this section,
using escrow account funds; and
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
(B) A statement referring the con- the points disclosed under paragraph
sumer to the location of the table re- (f)(1)(i) of this section, shall not exceed
quired pursuant to paragraph (h) of 13.
this section for details. (2) Services you cannot shop for. Under
(2) Optional alternative table for trans- the subheading ‘‘Services You Cannot
actions without a seller or for simulta- Shop For,’’ an itemization of each
neous subordinate financing. For trans- amount, and a subtotal of all such
actions that do not involve a seller or amounts, the consumer will pay for
for simultaneous subordinate financ- settlement services for which the con-
ing, instead of the amount and state- sumer cannot shop in accordance with
ments described in paragraph (d)(1)(ii) § 1026.19(e)(1)(vi)(A) and that are pro-
of this section, the creditor may alter- vided by persons other than the cred-
natively disclose, using the label ‘‘Cash itor or mortgage broker.
to Close’’: (i) For any item that is a component
(i) The amount calculated in accord- of title insurance or is for conducting
ance with paragraph (h)(2)(iv) of this the closing, the introductory descrip-
section; tion ‘‘Title —’’ shall appear at the be-
(ii) A statement of whether the dis- ginning of the label for that item.
closed estimated amount is due from or (ii) The number of items disclosed
to the consumer; and under this paragraph (f)(2) shall not ex-
(iii) A statement referring the con- ceed 13.
sumer to the alternative table dis-
(3) Services you can shop for. Under
closed pursuant to paragraph (h)(2) of
the subheading ‘‘Services You Can
this section for details.
Shop For,’’ an itemization of each
(e) Web site reference. A statement
amount and a subtotal of all such
that the consumer may obtain general
amounts the consumer will pay for set-
information and tools at the Web site
tlement services for which the con-
of the Bureau, and the link or uniform
sumer can shop in accordance with
resource locator address to the Web
§ 1026.19(e)(1)(vi)(A) and that are pro-
site: www.consumerfinance.gov/mortgage-
vided by persons other than the cred-
estimate.
itor or mortgage broker.
(f) Closing cost details; loan costs.
(i) For any item that is a component
Under the master heading ‘‘Closing
of title insurance or is for conducting
Cost Details,’’ in a table under the
the closing, the introductory descrip-
heading ‘‘Loan Costs,’’ all loan costs
tion ‘‘Title —’’ shall appear at the be-
associated with the transaction. The
ginning of the label for that item.
table shall contain the items and
amounts listed under four subheadings, (ii) The number of items disclosed
described in paragraphs (f)(1) through under this paragraph (f)(3) shall not ex-
(4) of this section. ceed 14.
(1) Origination charges. Under the sub- (4) Total loan costs. Under the sub-
heading ‘‘Origination Charges,’’ an heading ‘‘Total Loan Costs,’’ the sum
itemization of each amount, and a sub- of the subtotals disclosed under para-
total of all such amounts, that the con- graphs (f)(1) through (3) of this section.
sumer will pay to each creditor and (5) Item descriptions and ordering. The
loan originator for originating and ex- items listed as loan costs pursuant to
tending the credit. this paragraph (f) shall be labeled using
(i) The points paid to the creditor to terminology that describes each item,
reduce the interest rate shall be subject to the requirements of para-
itemized separately, as both a percent- graphs (f)(1)(i), (f)(2)(i), and (f)(3)(i) of
age of the amount of credit extended this section.
and a dollar amount, and using the (i) The item prescribed in paragraph
label ‘‘____% of Loan Amount (f)(1)(i) of this section for points shall
(Points).’’ If points to reduce the inter- be the first item listed in the disclo-
est rate are not paid, the disclosure re- sure pursuant to paragraph (f)(1) of this
quired by this paragraph (f)(1)(i) must section.
be blank. (ii) All other items must be listed in
jspears on DSK121TN23PROD with CFR
(ii) The number of items disclosed alphabetical order by their labels under
under this paragraph (f)(1), including the applicable subheading.
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Consumer Financial Protection Bureau § 1026.37
(6) Use of addenda. (i) An addendum (ii) On the second line, the sum of all
to a form of disclosures prescribed by transfer taxes paid by the consumer,
this section may not be used for items labeled ‘‘Transfer Taxes.’’
described in paragraph (f)(1) or (2) of (iii) If an amount required to be dis-
this section. If the creditor is not able closed by this paragraph (g)(1) is not
to itemize every service and every cor- charged to the consumer, the amount
responding charge required to be dis- disclosed on the applicable line re-
closed in the number of lines provided quired by this paragraph (g)(1) must be
by paragraph (f)(1)(ii) or (f)(2)(ii) of this blank.
section, the remaining charges shall be (2) Prepaids. Under the subheading
disclosed as an aggregate amount in ‘‘Prepaids,’’ an itemization of the
the last line permitted under para- amounts to be paid by the consumer in
graph (f)(1)(ii) or (f)(2)(ii), as applica- advance of the first scheduled pay-
ble, labeled ‘‘Additional Charges.’’ ment, and the subtotal of all such
(ii) An addendum to a form of disclo- amounts, as follows:
sures prescribed by this section may be (i) On the first line, the number of
used for items described in paragraph months for which homeowner’s insur-
(f)(3) of this section. If the creditor is ance premiums are to be paid by the
not able to itemize all of the charges consumer at consummation and the
required to be disclosed in the number total dollar amount to be paid by the
of lines provided by paragraph (f)(3)(ii), consumer at consummation for such
the remaining charges shall be dis- premiums, labeled ‘‘Homeowner’s In-
closed as follows: surance Premium ( ____ months).’’
(A) Label the last line permitted (ii) On the second line, the number of
under paragraph (f)(3)(ii) with an ap- months for which mortgage insurance
propriate reference to an addendum premiums are to be paid by the con-
and list the remaining items on the ad- sumer at consummation and the total
dendum in accordance with the re- dollar amount to be paid by the con-
quirements in paragraphs (f)(3) and (5) sumer at consummation for such pre-
of this section; or miums, labeled ‘‘Mortgage Insurance
(B) Disclose the remaining charges as Premium ( ____ months).’’
an aggregate amount in the last line (iii) On the third line, the amount of
permitted under paragraph (f)(3)(ii), la- prepaid interest to be paid per day, the
beled ‘‘Additional Charges.’’ number of days for which prepaid inter-
(g) Closing cost details; other costs. est will be collected, the interest rate,
Under the master heading ‘‘Closing and the total dollar amount to be paid
Cost Details,’’ in a table under the by the consumer at consummation for
heading ‘‘Other Costs,’’ all costs associ- such interest, labeled ‘‘Prepaid Interest
ated with the transaction that are in ( ______ per day for ____ days @____ %).’’
addition to the costs disclosed under (iv) On the fourth line, the number of
paragraph (f) of this section. The table months for which property taxes are to
shall contain the items and amounts be paid by the consumer at consumma-
listed under six subheadings, described tion and the total dollar amount to be
in paragraphs (g)(1) through (6) of this paid by the consumer at consummation
section. for such taxes, labeled ‘‘Property Taxes
(1) Taxes and other government fees. ( ____ months).’’
Under the subheading ‘‘Taxes and (v) If an amount is not charged to the
Other Government Fees,’’ the amounts consumer for any item for which this
to be paid to State and local govern- paragraph (g)(2) prescribes a label, each
ments for taxes and other government of the amounts required to be disclosed
fees, and the subtotal of all such on that line must be blank.
amounts, as follows: (vi) A maximum of three additional
(i) On the first line, the sum of all re- items may be disclosed under this para-
cording fees and other government fees graph (g)(2), and each additional item
and taxes, except for transfer taxes must be identified and include the ap-
paid by the consumer and disclosed plicable time period covered by the
pursuant to paragraph (g)(1)(ii) of this amount to be paid by the consumer at
jspears on DSK121TN23PROD with CFR
section, labeled ‘‘Recording Fees and consummation and the total amount to
Other Taxes.’’ be paid.
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
(3) Initial escrow payment at closing. issuing the Loan Estimate, a descrip-
Under the subheading ‘‘Initial Escrow tive label of each such amount, and the
Payment at Closing,’’ an itemization of subtotal of all such amounts.
the amounts that the consumer will be (i) For any item that is a component
expected to place into a reserve or es- of title insurance, the introductory de-
crow account at consummation to be scription ‘‘Title —’’ shall appear at the
applied to recurring periodic charges, beginning of the label for that item.
and the subtotal of all such amounts, (ii) The parenthetical description
as follows: ‘‘(optional)’’ shall appear at the end of
(i) On the first line, the amount the label for items disclosing any pre-
escrowed per month, the number of miums paid for separate insurance,
months covered by an escrowed warranty, guarantee, or event-coverage
amount collected at consummation, products.
and the total amount to be paid into (iii) The number of items disclosed
the escrow account by the consumer at under this paragraph (g)(4) shall not
consummation for homeowner’s insur- exceed five.
ance premiums, labeled ‘‘Homeowner’s (5) Total other costs. Under the sub-
Insurance ____ per month for ____ mo.’’ heading ‘‘Total Other Costs,’’ the sum
(ii) On the second line, the amount of the subtotals disclosed pursuant to
escrowed per month, the number of paragraphs (g)(1) through (4) of this
months covered by an escrowed section.
amount collected at consummation, (6) Total closing costs. Under the sub-
and the total amount to be paid into heading ‘‘Total Closing Costs,’’ the
the escrow account by the consumer at component amounts and their sum, as
consummation for mortgage insurance follows:
premiums, labeled ‘‘Mortgage Insur- (i) The sum of the amounts disclosed
ance ____ per month for ____ mo.’’ as loan costs and other costs under
(iii) On the third line, the amount paragraphs (f)(4) and (g)(5) of this sec-
escrowed per month, the number of tion, labeled ‘‘D + I’’; and
months covered by an escrowed (ii) The amount of any lender credits,
amount collected at consummation, disclosed as a negative number with
and the total amount to be paid into the label ‘‘Lender Credits’’ provided
the escrow account by the consumer at that, if no such amount is disclosed,
consummation for property taxes, la- the amount must be blank.
beled ‘‘Property Taxes ____ per month (7) Item descriptions and ordering. The
for ____ mo.’’ items listed as other costs pursuant to
(iv) If an amount is not charged to this paragraph (g) shall be labeled
the consumer for any item for which using terminology that describes each
this paragraph (g)(3) prescribes a label, item.
each of the amounts required to be dis- (i) The items prescribed in para-
closed on that line must be blank. graphs (g)(1)(i) and (ii), (g)(2)(i) through
(v) A maximum of five items may be (iv), and (g)(3)(i) through (iii) of this
disclosed pursuant to this paragraph section must be listed in the order pre-
(g)(3) in addition to the items described scribed as the initial items under the
in paragraph (g)(3)(i) through (iii) of applicable subheading, with any addi-
this section, and each such additional tional items to follow.
item must be identified with a descrip- (ii) All additional items must be list-
tive label and include the applicable ed in alphabetical order under the ap-
amount per month, the number of plicable subheading.
months collected at consummation, (8) Use of addenda. An addendum to a
and the total amount to be paid. form of disclosures prescribed by this
(4) Other. Under the subheading section may not be used for items re-
‘‘Other,’’ an itemization of any other quired to be disclosed by this para-
amounts in connection with the trans- graph (g). If the creditor is not able to
action that the consumer is likely to itemize all of the charges described in
pay or has contracted with a person this paragraph (g) in the number of
other than the creditor or loan origi- lines provided by paragraphs (g)(2)(vi),
jspears on DSK121TN23PROD with CFR
nator to pay at closing and of which (3)(v), or (4)(iii) of this section, the re-
the creditor is aware at the time of maining charges shall be disclosed as
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Consumer Financial Protection Bureau § 1026.37
an aggregate amount in the last line ance with paragraph (h)(1)(v) of this
permitted under paragraphs (g)(2)(vi), section;
(g)(3)(v), or (g)(4)(iii), as applicable, (iv) Deposit. (A) In a purchase trans-
using the label ‘‘Additional Charges.’’ action as defined in paragraph (a)(9)(i)
(h) Calculating cash to close—(1) For of this section, the amount that is paid
all transactions. Under the master head- to the seller or held in trust or escrow
ing ‘‘Closing Cost Details,’’ under the by an attorney or other party under
heading ‘‘Calculating Cash to Close,’’ the terms of the agreement for the sale
the total amount of cash or other funds of the property, disclosed as a negative
that must be provided by the consumer number, labeled ‘‘Deposit’’;
at consummation, with an itemization (B) In all transactions other than
of that amount into the following com- purchase transactions as defined in
ponent amounts: paragraph (a)(9)(i) of this section, the
(i) Total closing costs. The amount dis- amount of $0, labeled ‘‘Deposit’’;
closed under paragraph (g)(6) of this (v) Funds for borrower. The amount of
section, labeled ‘‘Total Closing Costs’’; funds for the consumer, labeled ‘‘Funds
(ii) Closing costs to be financed. The for Borrower.’’ The amount of the down
amount of any closing costs to be paid payment and other funds from the con-
out of loan proceeds, disclosed as a neg- sumer disclosed under paragraph
ative number, labeled ‘‘Closing Costs (h)(1)(iii)(A)(2) or (h)(1)(iii)(B) of this
Financed (Paid from your Loan section, as applicable, and of funds for
Amount)’’; the consumer disclosed under this
(iii) Down payment and other funds paragraph (h)(1)(v), are determined by
from borrower. Labeled ‘‘Down Pay- subtracting the sum of the loan
ment/Funds from Borrower’’: amount disclosed under paragraph
(A)(1) In a purchase transaction as (b)(1) of this section and any amount of
defined in paragraph (a)(9)(i) of this existing loans assumed or taken sub-
section, the amount determined by ject to that will be disclosed under
subtracting the sum of the loan § 1026.38(j)(2)(iv) (excluding any closing
amount disclosed under paragraph costs financed disclosed under para-
(b)(1) of this section and any amount of graph (h)(1)(ii) of this section) from the
existing loans assumed or taken sub- total amount of all existing debt being
ject to that will be disclosed under satisfied in the transaction;
§ 1026.38(j)(2)(iv) from the sale price of (A) If the calculation under this para-
the property disclosed under paragraph graph (h)(1)(v) yields an amount that is
(a)(7)(i) of this section, except as re- a positive number, such amount is dis-
quired by paragraph (h)(1)(iii)(A)(2) of closed under paragraph (h)(1)(iii)(A)(2)
this section; or (h)(1)(iii)(B) of this section, as appli-
(2) In a purchase transaction as de- cable, and $0 is disclosed under this
fined in paragraph (a)(9)(i) of this sec- paragraph (h)(1)(v);
tion that is a simultaneous subordinate (B) If the calculation under this para-
financing transaction or that involves graph (h)(1)(v) yields an amount that is
improvements to be made on the prop- a negative number, such amount is dis-
erty, or when the sum of the loan closed under this paragraph (h)(1)(v) as
amount disclosed under paragraph a negative number, and $0 is disclosed
(b)(1) of this section and any amount of under paragraph (h)(1)(iii)(A)(2) or
existing loans assumed or taken sub- (h)(1)(iii)(B) of this section, as applica-
ject to that will be disclosed under ble;
§ 1026.38(j)(2)(iv) exceeds the sale price (C) If the calculation under this para-
of the property disclosed under para- graph (h)(1)(v) yields $0, then $0 is dis-
graph (a)(7)(i) of this section, the closed under paragraph (h)(1)(iii)(A)(2)
amount of estimated funds from the or (h)(1)(iii)(B) of this section, as appli-
consumer as determined in accordance cable, and under this paragraph
with paragraph (h)(1)(v) of this section; (h)(1)(v);
or (vi) Seller credits. The total amount
(B) In all transactions not subject to that the seller will pay for total loan
paragraph (h)(1)(iii)(A) of this section, costs as determined by paragraph (f)(4)
jspears on DSK121TN23PROD with CFR
the amount of estimated funds from of this section and total other costs as
the consumer as determined in accord- determined by paragraph (g)(5) of this
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
section, to the extent known, disclosed (iv) Cash to or from consumer. The
as a negative number, labeled ‘‘Seller amount of cash or other funds due from
Credits’’; or to the consumer and a statement of
(vii) Adjustments and other credits. The whether the disclosed estimated
amount of all loan costs determined amount is due from or to the con-
under paragraph (f) of this section and sumer, calculated by the sum of the
other costs determined under para- amounts disclosed under paragraphs
graph (g) of this section that are paid (h)(2)(i) through (iii) of this section, la-
by persons other than the loan origi- beled ‘‘Cash to Close’’; and
nator, creditor, consumer, or seller, to- (v) Closing costs financed. The sum of
gether with any other amounts not the amounts disclosed under para-
otherwise disclosed under paragraph (f) graphs (h)(2)(i) and (iii) of this section,
or (g) of this section that are required but only to the extent that the sum is
to be paid by the consumer at closing greater than zero and less than or
in a transaction disclosed under para- equal to the sum disclosed under para-
graph (h)(1)(iii)(A)(1) of this section or graph (g)(6) of this section, labeled
pursuant to a purchase and sale con- ‘‘Closing Costs Financed (Paid from
tract, labeled ‘‘Adjustments and Other your Loan Amount).’’
Credits’’; and (i) Adjustable payment table. If the
(viii) Estimated Cash to Close. The sum periodic principal and interest pay-
of the amounts disclosed under para- ment may change after consummation
graphs (h)(1)(i) through (vii) of this sec- but not based on an adjustment to the
tion labeled ‘‘Cash to Close.’’ interest rate, or if the transaction is a
(2) Optional alternative calculating seasonal payment product as described
cash to close table for transactions with- in paragraph (a)(10)(ii)(E) of this sec-
out a seller or for simultaneous subordi- tion, a separate table under the master
nate financing. For transactions that do heading ‘‘Closing Cost Details’’ re-
not involve a seller or for simultaneous quired by paragraph (f) of this section
subordinate financing, instead of the and under the heading ‘‘Adjustable
table described in paragraph (h)(1) Payment (AP) Table’’ that contains
above, the creditor may alternatively the following information and satisfies
provide, in a separate table, under the the following requirements:
master heading ‘‘Closing Cost Details,’’ (1) Interest only payments. Whether
under the heading ‘‘Calculating Cash to the transaction is an interest only
Close,’’ the total amount of cash or product pursuant to paragraph
other funds that must be provided by (a)(10)(ii)(B) of this section as an af-
the consumer at consummation with firmative or negative answer to the
an itemization of that amount into the question ‘‘Interest Only Payments?’’
following component amounts: and, if an affirmative answer is dis-
(i) Loan amount. The amount dis- closed, the period during which inter-
closed under paragraph (b)(1) of this est only periodic payments are sched-
section, labeled ‘‘Loan Amount’’; uled.
(ii) Total closing costs. The amount (2) Optional payments. Whether the
disclosed under paragraph (g)(6) of this terms of the legal obligation expressly
section, disclosed as a negative number provide that the consumer may elect to
if the amount disclosed under para- pay a specified periodic principal and
graph (g)(6) of this section is a positive interest payment in an amount other
number and disclosed as a positive than the scheduled amount of the pay-
number if the amount disclosed under ment, as an affirmative or negative an-
paragraph (g)(6) of this section is a neg- swer to the question ‘‘Optional Pay-
ative number, labeled ‘‘Total Closing ments?’’ and, if an affirmative answer
Costs’’; is disclosed, the period during which
(iii) Payoffs and payments. The total the consumer may elect to make such
amount of payoffs and payments to be payments.
made to third parties not otherwise (3) Step payments. Whether the trans-
disclosed under paragraphs (f) and (g) action is a step payment product pur-
jspears on DSK121TN23PROD with CFR
of this section, labeled ‘‘Total Payoffs suant to paragraph (a)(10)(ii)(C) of this
and Payments’’; section as an affirmative or negative
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Consumer Financial Protection Bureau § 1026.37
answer to the question ‘‘Step Pay- the interest rate, if any, labeled ‘‘Index
ments?’’ and, if an affirmative answer + Margin.’’
is disclosed, the period during which (2) Increases in interest rate. If the
the regular periodic payments are product type is a ‘‘Step Rate’’ and not
scheduled to increase. also an ‘‘Adjustable Rate’’ under para-
(4) Seasonal payments. Whether the graph (a)(10)(i)(A) of this section, the
transaction is a seasonal payment maximum amount of any adjustments
product pursuant to paragraph to the interest rate that are scheduled
(a)(10)(ii)(E) of this section as an af- and pre-determined, labeled ‘‘Interest
firmative or negative answer to the Rate Adjustments.’’
question ‘‘Seasonal Payments?’’ and, if (3) Initial interest rate. The interest
an affirmative answer is disclosed, the rate at consummation of the loan
period during which periodic payments transaction, labeled ‘‘Initial Interest
are not scheduled.
Rate.’’
(5) Principal and interest payments.
(4) Minimum and maximum interest
Under the subheading ‘‘Principal and
rate. The minimum and maximum in-
Interest Payments,’’ which subheading
terest rates for the loan, after any in-
is immediately preceded by the appli-
troductory period expires, labeled
cable unit-period, the following infor-
mation: ‘‘Minimum/Maximum Interest Rate.’’
(i) The number of the payment of the (5) Frequency of adjustments. The fol-
first periodic principal and interest lowing information, under the sub-
payment that may change under the heading ‘‘Change Frequency’’:
terms of the legal obligation disclosed (i) The month when the interest rate
under this paragraph (i), counting from after consummation may first change,
the first periodic payment due after calculated from the date interest for
consummation, and the amount or the first scheduled periodic payment
range of the periodic principal and in- begins to accrue, labeled ‘‘First
terest payment for such payment, la- Change’’; and
beled ‘‘First Change/Amount’’; (ii) The frequency of interest rate ad-
(ii) The frequency of subsequent justments after the initial adjustment
changes to the periodic principal and to the interest rate, labeled, ‘‘Subse-
interest payment, labeled ‘‘Subsequent quent Changes.’’
Changes’’; and (6) Limits on interest rate changes. The
(iii) The maximum periodic principal following information, under the sub-
and interest payment that may occur heading ‘‘Limits on Interest Rate
during the term of the transaction, and Changes’’:
the first periodic principal and interest (i) The maximum possible change for
payment that can reach such max- the first adjustment of the interest
imum, counting from the first periodic rate after consummation, labeled
payment due after consummation, la- ‘‘First Change’’; and
beled ‘‘Maximum Payment.’’ (ii) The maximum possible change for
(j) Adjustable interest rate table. If the subsequent adjustments of the interest
interest rate may increase after con- rate after consummation, labeled
summation, a separate table under the ‘‘Subsequent Changes.’’
master heading ‘‘Closing Cost Details’’
(k) Contact information. Under the
required by paragraph (f) of this sec-
master heading, ‘‘Additional Informa-
tion and under the heading ‘‘Adjustable
Interest Rate (AIR) Table’’ that con- tion About This Loan,’’ the following
tains the following information and information:
satisfies the following requirements: (1) The name and Nationwide Mort-
(1) Index and margin. If the interest gage Licensing System and Registry
rate may adjust and the product type identification number (NMLSR ID) (la-
is not a ‘‘Step Rate’’ under paragraph beled ‘‘NMLS ID/License ID’’) for the
(a)(10)(i)(B) of this section, the index creditor (labeled ‘‘Lender’’) and the
upon which the adjustments to the in- mortgage broker (labeled ‘‘Mortgage
jspears on DSK121TN23PROD with CFR
terest rate are based and the margin Broker’’), if any. In the event the cred-
that is added to the index to determine itor or the mortgage broker has not
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§ 1026.37 12 CFR Ch. X (1–1–25 Edition)
been assigned an NMLSR ID, the li- lowing statement: ‘‘Your costs over the
cense number or other unique identi- loan term expressed as a rate. This is
fier issued by the applicable jurisdic- not your interest rate.’’
tion or regulating body with which the (3) Total interest percentage. The total
creditor or mortgage broker is licensed amount of interest that the consumer
and/or registered shall be disclosed, will pay over the life of the loan, ex-
with the abbreviation for the State of pressed as a percentage of the amount
the applicable jurisdiction or regu- of credit extended, using the term
latory body stated before the word ‘‘Total Interest Percentage,’’ the ab-
‘‘License’’ in the label, if any; breviation ‘‘TIP,’’ and the statement
(2) The name and NMLSR ID of the ‘‘The total amount of interest that you
individual loan officer (labeled ‘‘Loan will pay over the loan term as a per-
Officer’’ and ‘‘NMLS ID/License ID,’’ centage of your loan amount.’’
respectively) of the creditor and the (m) Other considerations. Under the
mortgage broker, if any, who is the pri- master heading ‘‘Additional Informa-
mary contact for the consumer. In the tion About This Loan’’ required by
event the individual loan officer has paragraph (k) of this section and under
not been assigned an NMLSR ID, the li- the heading ‘‘Other Considerations’’:
cense number or other unique identi- (1) Appraisal. For transactions sub-
fier issued by the applicable jurisdic- ject to 15 U.S.C. 1639h or 1691(e), as im-
tion or regulating body with which the plemented in this part or Regulation B,
loan officer is licensed and/or reg- 12 CFR part 1002, respectively, a state-
istered shall be disclosed with the ab- ment, labeled ‘‘Appraisal,’’ that:
breviation for the State of the applica-
(i) The creditor may order an ap-
ble jurisdiction or regulatory body
praisal to determine the value of the
stated before the word ‘‘License’’ in the
property identified in paragraph (a)(6)
label, if any; and
of this section and may charge the con-
(3) The email address and telephone
sumer for that appraisal;
number of the loan officer (labeled
(ii) The creditor will promptly pro-
‘‘Email’’ and ‘‘Phone,’’ respectively).
vide the consumer a copy of any ap-
(l) Comparisons. Under the master
praisal, even if the transaction is not
heading, ‘‘Additional Information
consummated; and
About This Loan’’ required by para-
graph (k) of this section, in a separate (iii) The consumer may choose to pay
table under the heading ‘‘Comparisons’’ for an additional appraisal of the prop-
along with the statement ‘‘Use these erty for the consumer’s use.
measures to compare this loan with (2) Assumption. A statement of wheth-
other loans’’: er a subsequent purchaser of the prop-
(1) In five years. Using the label ‘‘In 5 erty may be permitted to assume the
Years’’: remaining loan obligation on its origi-
(i) The total principal, interest, nal terms, labeled ‘‘Assumption.’’
mortgage insurance, and loan costs (3) Homeowner’s insurance. At the op-
scheduled to be paid through the end of tion of the creditor, a statement that
the 60th month after the due date of homeowner’s insurance is required on
the first periodic payment, expressed the property and that the consumer
as a dollar amount, along with the may choose the insurance provider, la-
statement ‘‘Total you will have paid in beled ‘‘Homeowner’s Insurance.’’
principal, interest, mortgage insur- (4) Late payment. A statement detail-
ance, and loan costs’’; and ing any charge that may be imposed
(ii) The principal scheduled to be for a late payment, stated as a dollar
paid through the end of the 60th month amount or percentage charge of the
after the due date of the first periodic late payment amount, and the number
payment, expressed as a dollar amount, of days that a payment must be late to
along with the statement ‘‘Principal trigger the late payment fee, labeled
you will have paid off.’’ ‘‘Late Payment.’’
(2) Annual percentage rate. The ‘‘An- (5) Refinance. The following state-
nual Percentage Rate,’’ using that ment, labeled ‘‘Refinance’’: ‘‘Refi-
jspears on DSK121TN23PROD with CFR
term and the abbreviation ‘‘APR’’ and nancing this loan will depend on your
expressed as a percentage, and the fol- future financial situation, the property
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Consumer Financial Protection Bureau § 1026.37
value, and market conditions. You may together and segregated from every-
not be able to refinance this loan.’’ thing else.
(6) Servicing. A statement of whether (ii) Except as provided in paragraph
the creditor intends to service the loan (o)(5) of this section, the disclosures
or transfer the loan to another shall contain only the information re-
servicer, labeled ‘‘Servicing.’’ quired by paragraphs (a) through (n) of
(7) Liability after foreclosure. If the this section and shall be made in the
purpose of the credit transaction is to same order, and positioned relative to
refinance an extension of credit as de- the master headings, headings, sub-
scribed in paragraph (a)(9)(ii) of this headings, labels, and similar designa-
section, a brief statement that certain tions in the same manner, as shown in
State law protections against liability form H–24, set forth in appendix H to
for any deficiency after foreclosure this part.
may be lost, the potential con- (2) Headings and labels. If a master
sequences of the loss of such protec- heading, heading, subheading, label, or
tions, and a statement that the con- similar designation contains the word
sumer should consult an attorney for ‘‘estimated’’ or a capital letter des-
additional information, labeled ‘‘Li- ignation in form H–24, set forth in ap-
ability after Foreclosure.’’ pendix H to this part, that heading,
(8) Construction loans. In transactions label, or similar designation shall con-
involving new construction, where the tain the word ‘‘estimated’’ and the ap-
creditor reasonably expects that settle- plicable capital letter designation.
ment will occur more than 60 days (3) Form. Except as provided in para-
after the provision of the loan esti- graph (o)(5) of this section:
mate, at the creditor’s option, a clear (i) For a transaction subject to
and conspicuous statement that the § 1026.19(e) that is a federally related
creditor may issue a revised disclosure mortgage loan, as defined in Regula-
any time prior to 60 days before con- tion X, 12 CFR 1024.2, the disclosures
summation, pursuant to must be made using form H–24, set
§ 1026.19(e)(3)(iv)(F). forth in appendix H to this part.
(n) Signature statement. (1) At the (ii) For any other transaction subject
creditor’s option, under the master to this section, the disclosures must be
heading required by paragraph (k) of made with headings, content, and for-
this section and under the heading mat substantially similar to form H–24,
‘‘Confirm Receipt,’’ a line for the sig- set forth in appendix H to this part.
natures of the consumers in the trans- (iii) The disclosures required by this
action. If the creditor includes a line section may be provided to the con-
for the consumer’s signature, the cred- sumer in electronic form, subject to
itor must disclose the following above compliance with the consumer consent
the signature line: ‘‘By signing, you and other applicable provisions of the
are only confirming that you have re- Electronic Signatures in Global and
ceived this form. You do not have to National Commerce Act (15 U.S.C. 7001
accept this loan because you have et seq.).
signed or received this form.’’ (4) Rounding—(i) Nearest dollar. (A)
(2) If the creditor does not include a The dollar amounts required to be dis-
line for the consumer’s signature, the closed by paragraphs (b)(6) and (7),
creditor must disclose the following (c)(1)(iii), (c)(2)(ii) and (iii), (c)(4)(ii),
statement under the heading ‘‘Other (f), (g), (h), (i), and (l) of this section
Considerations’’ required by paragraph shall be rounded to the nearest whole
(m) of this section, labeled ‘‘Loan Ac- dollar, except that the per-diem dollar
ceptance’’: ‘‘You do not have to accept amount required to be disclosed by
this loan because you have received paragraph (g)(2)(iii) of this section and
this form or signed a loan application.’’ the monthly dollar amounts required
(o) Form of disclosures—(1) General re- to be disclosed by paragraphs (g)(3)(i)
quirements. (i) The creditor shall make through (iii) and (g)(3)(v) of this sec-
the disclosures required by this section tion shall not be rounded.
clearly and conspicuously in writing, (B) The dollar amount required to be
jspears on DSK121TN23PROD with CFR
in a form that the consumer may keep. disclosed by paragraph (b)(1) of this
The disclosures also shall be grouped section shall not be rounded, and if the
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
amount is a whole number then the (v) Administrative information. The
amount disclosed shall be truncated at creditor may insert at the bottom of
the decimal point. each page under the disclosures re-
(C) The dollar amounts required to be quired by this section as illustrated by
disclosed by paragraph (c)(2)(iv) of this form H–24 of appendix H to this part,
section shall be rounded to the nearest any administrative information, text,
whole dollar, if any of the component or codes that assist in identification of
amounts are required by paragraph the form or the information disclosed
(o)(4)(i)(A) of this section to be rounded on the form, provided that the space
to the nearest whole dollar. provided on form H–24 of appendix H to
(ii) Percentages. The percentage this part for any of the information re-
amounts required to be disclosed under quired by this section is not altered.
paragraphs (b)(2) and (6), (f)(1)(i), [78 FR 80113, Dec. 31, 2013, as amended at 80
(g)(2)(iii), (j), and (l)(2) and (3) of this FR 8776, Feb. 19, 2015; 82 FR 37769, Aug. 11,
section shall be disclosed by rounding 2017]
the exact amounts to three decimal
places and then dropping any trailing § 1026.38 Content of disclosures for
zeros that occur to the right of the dec- certain mortgage transactions
imal place. (Closing Disclosure).
(5) Exceptions—(i) Unit-period. Wher- For each transaction subject to
ever the form or this section uses § 1026.19(f), the creditor shall disclose
‘‘monthly’’ to describe the frequency of the information in this section:
any payments or uses ‘‘month’’ to de- (a) General information—(1) Form title.
scribe the applicable unit-period, the The title of the form, ‘‘Closing Disclo-
creditor shall substitute the appro- sure,’’ using that term.
priate term to reflect the fact that the (2) Form purpose. The following state-
transaction’s terms provide for other ment: ‘‘This form is a statement of
than monthly periodic payments, such final loan terms and closing costs.
as bi-weekly or quarterly payments. Compare this document with your
(ii) Translation. The form may be Loan Estimate.’’
translated into languages other than (3) Closing information. Under the
English, and creditors may modify heading ‘‘Closing Information’’:
form H–24 of appendix H to this part to (i) Date issued. The date the disclo-
the extent that translation prevents sures required by this section are deliv-
the headings, labels, designations, and ered to the consumer, labeled ‘‘Date
required disclosure items under this Issued.’’
section from fitting in the space pro- (ii) Closing date. The date of con-
vided on form H–24. summation, labeled ‘‘Closing Date.’’
(iii) Logo or slogan. The creditor pro- (iii) Disbursement date. The date the
viding the form may use a logo for, and amount disclosed under paragraph
include a slogan with, the information (j)(3)(iii) (cash to close from or to bor-
required by paragraph (a)(3) of this sec- rower) or (k)(3)(iii) (cash from or to
tion in any font size or type, provided seller) of this section is expected to be
that such logo or slogan does not cause paid in a purchase transaction under
the information required by paragraph § 1026.37(a)(9)(i) to the consumer or sell-
(a)(3) of this section to exceed the er, respectively, as applicable, except
space provided for that information, as as provided in comment 38(a)(3)(iii)–1,
illustrated in form H–24 of appendix H or the date some or all of the loan
to this part. If the creditor does not amount disclosed under paragraph (b)
use a logo for the information required of this section is expected to be paid to
by paragraph (a)(3) of this section, the the consumer or a third party other
information shall be disclosed in a than a settlement agent in a trans-
similar format as form H–24. action that is not a purchase trans-
(iv) Business card. The creditor may action under § 1026.37(a)(9)(i), labeled
physically attach a business card over ‘‘Disbursement Date.’’
the information required to be dis- (iv) Settlement agent. The name of the
jspears on DSK121TN23PROD with CFR
closed by paragraph (a)(3) of this sec- settlement agent conducting the clos-
tion. ing, labeled ‘‘Settlement Agent.’’
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Consumer Financial Protection Bureau § 1026.38
(v) File number. The number assigned the following information and require-
to the transaction by the settlement ments:
agent for identification purposes, la- (1) Projected payments or range of pay-
beled ‘‘File #.’’ ments. The information required to be
(vi) Property. The address or location disclosed pursuant to § 1026.37(c)(1)
of the property required to be disclosed through (4), other than
under § 1026.37(a)(6), labeled ‘‘Prop- § 1026.37(c)(4)(vi). In disclosing esti-
erty.’’ mated escrow payments as described in
(vii) Sale price. (A) In credit trans- § 1026.37(c)(2)(iii) and (c)(4)(ii), the
actions where there is a seller, the con- amount disclosed on the Closing Dis-
tract sale price of the property identi- closure:
fied in paragraph (a)(3)(vi) of this sec- (i) For transactions subject to
tion, labeled ‘‘Sale Price.’’ RESPA, is determined under the es-
(B) In credit transactions where crow account analysis described in
there is no seller, the appraised value Regulation X, 12 CFR 1024.17;
of the property identified in paragraph (ii) For transactions not subject to
(a)(3)(vi) of this section, labeled ‘‘Ap- RESPA, may be determined under the
praised Prop. Value.’’ escrow account analysis described in
(4) Transaction information. Under the Regulation X, 12 CFR 1024.17 or in the
heading ‘‘Transaction Information’’: manner set forth in § 1026.37(c)(5).
(i) Borrower. The consumer’s name (2) Estimated taxes, insurance, and as-
and mailing address, labeled ‘‘Bor- sessments. A reference to the disclosure
rower.’’ required by paragraph (l)(7) of this sec-
(ii) Seller. Where applicable, the sell- tion.
er’s name and mailing address, labeled (d) Costs at closing—(1) Costs at closing
‘‘Seller.’’ table. In a separate table, under the
(iii) Lender. The name of the creditor heading ‘‘Costs at Closing’’:
making the disclosure, labeled ‘‘Lend- (i) Labeled ‘‘Closing Costs,’’ the sum
er.’’ of the dollar amounts disclosed pursu-
(5) Loan information. Under the head- ant to paragraphs (f)(4), (g)(5), and
ing ‘‘Loan Information’’: (h)(3) of this section, together with:
(i) Loan term. The information re- (A) A statement that the amount dis-
quired to be disclosed under closed pursuant to paragraph (d)(1)(i) of
§ 1026.37(a)(8), labeled ‘‘Loan Term.’’ this section includes the amounts dis-
(ii) Purpose. The information re- closed pursuant to paragraphs (f)(4),
quired to be disclosed under (g)(5), and (h)(3) of this section;
§ 1026.37(a)(9), labeled ‘‘Purpose.’’ (B) The dollar amount disclosed pur-
(iii) Product. The information re- suant to paragraph (f)(4) of this sec-
quired to be disclosed under tion, labeled ‘‘Loan Costs’’;
§ 1026.37(a)(10), labeled ‘‘Product.’’ (C) The dollar amount disclosed pur-
(iv) Loan type. The information re- suant to paragraph (g)(5) of this sec-
quired to be disclosed under tion, labeled ‘‘Other Costs’’;
§ 1026.37(a)(11), labeled ‘‘Loan Type.’’ (D) The dollar amount disclosed pur-
(v) Loan identification number. The in- suant to paragraph (h)(3) of this sec-
formation required to be disclosed tion, labeled ‘‘Lender Credits’’; and
under § 1026.37(a)(12), labeled ‘‘Loan ID (E) A statement referring the con-
#.’’ sumer to the tables disclosed pursuant
(vi) Mortgage insurance case number. to paragraphs (f) and (g) of this section
The case number for any mortgage in- for details.
surance policy, if required by the cred- (ii) Labeled ‘‘Cash to Close,’’ the sum
itor, labeled ‘‘MIC #.’’ of the dollar amounts calculated in ac-
(b) Loan terms. A separate table under cordance with paragraph (i)(9)(ii) of
the heading ‘‘Loan Terms’’ that in- this section, together with:
cludes the information required by (A) A statement that the amount dis-
§ 1026.37(b). closed pursuant to paragraph (d)(1)(ii)
(c) Projected payments. A separate of this section includes the amount dis-
jspears on DSK121TN23PROD with CFR
table, under the heading ‘‘Projected closed pursuant to paragraph (d)(1)(i) of
Payments,’’ that includes and satisfies this section; and
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
(B) A statement referring the con- with a statement of whether this
sumer to the table required pursuant amount increased or decreased; or
to paragraph (i) of this section for de- (B) If the amount disclosed under
tails. paragraph (e)(1)(i) of this section is
(2) Alternative table for transactions equal to the amount disclosed under
without a seller or for simultaneous subor- paragraph (e)(1)(ii) of this section a
dinate financing. For transactions that statement of that fact.
do not involve a seller or for simulta- (2) Total closing costs. Labeled ‘‘Total
neous subordinate financing, if the Closing Costs’’:
creditor disclosed the optional alter- (i) Under the subheading ‘‘Loan Esti-
native table under § 1026.37(d)(2), the mate,’’ the amount disclosed on the
creditor shall disclose, with the label Loan Estimate under § 1026.37(h)(2)(ii);
‘‘Cash to Close,’’ instead of the sum of (ii) Under the subheading ‘‘Final,’’
the dollar amounts described in para- the amount disclosed under paragraph
graph (d)(1)(ii) of this section: (h)(1) of this section, disclosed as a neg-
(i) The amount calculated in accord- ative number if the amount disclosed
ance with paragraph (e)(5)(ii) of this under paragraph (h)(1) of this section is
section; a positive number and disclosed as a
(ii) A statement of whether the dis- positive number if the amount dis-
closed amount is due from or to the closed under paragraph (h)(1) of this
consumer; and section is a negative number; and
(iii) A statement referring the con- (iii) Disclosed more prominently
sumer to the table required pursuant than the other disclosures under this
to paragraph (e) of this section for de- paragraph (e)(2)(i) and (ii) of this sec-
tails. tion, under the subheading ‘‘Did this
(e) Alternative calculating cash to close change?’’:
table for transactions without a seller or (A) If the amount disclosed under
for simultaneous subordinate financing. paragraph (e)(2)(ii) of this section is
For transactions that do not involve a different than the amount disclosed
seller or for simultaneous subordinate under paragraph (e)(2)(i) of this section
financing, if the creditor disclosed the (unless the difference is due to round-
optional alternative table under ing):
§ 1026.37(h)(2), the creditor shall dis- (1) A statement of that fact;
close, instead of the table described in (2) If the difference in the amounts
paragraph (i) of this section, in a sepa- disclosed under paragraphs (e)(2)(i) and
rate table, under the heading ‘‘Calcu- (e)(2)(ii) is attributable to differences
lating Cash to Close,’’ together with in itemized charges that are included
the statement ‘‘Use this table to see in either or both subtotals, a state-
what has changed from your Loan Esti- ment that the consumer should see the
mate’’: total loan costs and total other costs
(1) Loan amount. Labeled ‘‘Loan subtotals disclosed under paragraphs
Amount’’: (f)(4) and (g)(5) of this section (together
(i) Under the subheading ‘‘Loan Esti- with references to such disclosures), as
mate,’’ the loan amount disclosed on applicable; and
the Loan Estimate under § 1026.37(b)(1); (3) If the increase exceeds the limita-
(ii) Under the subheading ‘‘Final,’’ tions on increases in closing costs
the loan amount disclosed under para- under § 1026.19(e)(3), a statement that
graph (b) of this section; such increase exceeds the legal limits
(iii) Disclosed more prominently by the dollar amount of the excess and,
than the other disclosures under para- if any refund is provided under
graph (e)(1)(i) and (ii) of this section, § 1026.19(f)(2)(v), a statement directing
under the subheading ‘‘Did this the consumer to the disclosure re-
change?’’: quired under paragraph (h)(3) of this
(A) If the amount disclosed under section or, if applicable, a statement
paragraph (e)(1)(ii) of this section is directing the consumer to the principal
different than the amount disclosed reduction disclosure under paragraph
under paragraph (e)(1)(i) of this section (t)(5)(vii)(B) of this section. Such dollar
jspears on DSK121TN23PROD with CFR
(unless the difference is due to round- amount shall equal the sum total of all
ing), a statement of that fact along excesses of the limitations on increases
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Consumer Financial Protection Bureau § 1026.38
in closing costs under § 1026.19(e)(3), paragraph (e)(4)(i) and (ii), under the
taking into account the different meth- subheading ‘‘Did this change?’’:
ods of calculating excesses of the limi- (A) If the amount disclosed under
tations on increases in closing costs paragraph (e)(4)(ii) of this section is
under § 1026.19(e)(3)(i) and (ii). different than the amount disclosed
(B) If the amount disclosed under under paragraph (e)(4)(i) of this section
paragraph (e)(2)(i) of this section is (unless the difference is due to round-
equal to the amount disclosed under ing), a statement of that fact along
paragraph (e)(2)(ii) of this section, a with a reference to the table disclosed
statement of that fact. under paragraph (t)(5)(vii)(B) of this
(3) Closing costs paid before closing. La- section; or
beled ‘‘Closing Costs Paid Before Clos- (B) If the amount disclosed under
ing:’’ paragraph (e)(4)(ii) of this section is
(i) Under the subheading ‘‘Loan Esti- equal to the amount disclosed under
mate,’’ the amount of $0; paragraph (e)(4)(i) of this section, a
(ii) Under the subheading ‘‘Final,’’ statement of that fact.
any amount designated as borrower- (5) Cash to or from consumer. Labeled
paid before closing under paragraph ‘‘Cash to Close:’’
(h)(2) of this section, disclosed as a
(i) Under the subheading ‘‘Loan Esti-
positive number; and
mate,’’ the estimated cash to close on
(iii) Disclosed more prominently
the Loan Estimate together with the
than the other disclosures under this
statement of whether the estimated
paragraph (e)(3)(i) and (ii) of this sec-
amount is due from or to the consumer
tion, under the subheading ‘‘Did this
change?’’: as disclosed under § 1026.37(h)(2)(iv);
(A) If the amount disclosed under (ii) Under the subheading ‘‘Final,’’
paragraph (e)(3)(ii) of this section is the amount due from or to the con-
different than the amount disclosed sumer, calculated by the sum of the
under paragraph (e)(3)(i) of this section amounts disclosed under paragraphs
(unless the difference is due to round- (e)(1)(ii), (e)(2)(ii), (e)(3)(ii), and
ing), a statement of that fact, along (e)(4)(ii) of this section, disclosed as a
with a statement that the consumer positive number, together with a state-
paid such amounts prior to consumma- ment of whether the disclosed amount
tion of the transaction; or is due from or to the consumer.
(B) If the amount disclosed under (6) Closing costs financed. Labeled
paragraph (e)(3)(ii) of this section is ‘‘Closing Costs Financed (Paid from
equal to the amount disclosed under your Loan Amount),’’ the sum of the
paragraph (e)(3)(i) of this section, a amounts disclosed under paragraphs
statement of that fact. (e)(1)(ii) and (e)(4)(ii) of this section,
(4) Payoffs and payments. Labeled but only to the extent that the sum is
‘‘Total Payoffs and Payments,’’ greater than zero and less than or
(i) Under the subheading ‘‘Loan Esti- equal to the sum disclosed under para-
mate,’’ the total payoffs and payments graph (h)(1) of this section minus the
disclosed on the Loan Estimate under sum disclosed under paragraph (h)(2) of
§ 1026.37(h)(2)(iii); this section designated borrower-paid
(ii) Under the subheading ‘‘Final,’’ before closing.
the total amount of payoffs and pay- (f) Closing cost details; loan costs.
ments made to third parties disclosed Under the master heading ‘‘Closing
under paragraph (t)(5)(vii)(B) of this Cost Details’’ with columns stating
section, to the extent known, disclosed whether the charge was borrower-paid
as a negative number if the total at or before closing, seller-paid at or
amount disclosed under paragraph before closing, or paid by others, all
(t)(5)(vii)(B) of this section is a positive loan costs associated with the trans-
number and disclosed as a positive action, listed in a table under the head-
number if the total amount disclosed ing ‘‘Loan Costs.’’ The table shall con-
under paragraph (t)(5)(vii)(B) of this tain the items and amounts listed
section is a negative number; under four subheadings, described in
jspears on DSK121TN23PROD with CFR
(iii) Disclosed more prominently paragraphs (f)(1) through (5) of this sec-
than the other disclosures under this tion.
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
(1) Origination charges. Under the sub- did not select a settlement service pro-
heading ‘‘Origination Charges,’’ and in vider contained on that written list.
the applicable columns as described in (4) Total loan costs. Under the sub-
paragraph (f) of this section, an heading ‘‘Total Loan Costs (Borrower-
itemization of each amount paid for Paid),’’ the sum of the amounts dis-
charges described in § 1026.37(f)(1), the closed as borrower-paid pursuant to
amount of compensation paid by the paragraph (f)(5) of this section.
creditor to a third-party loan origi- (5) Subtotal of loan costs. The sum of
nator along with the name of the loan loan costs, calculated by totaling the
originator ultimately receiving the amounts described in paragraphs (f)(1)
payment, and the total of all such through (3) of this section for costs des-
itemized amounts that are designated ignated borrower-paid at or before clos-
borrower-paid at or before closing. ing, labeled ‘‘Loan Costs Subtotals.’’
(2) Services borrower did not shop for. (g) Closing cost details; other costs.
Under the subheading ‘‘Services Bor- Under the master heading ‘‘Closing
rower Did Not Shop For’’ and in the ap- Cost Details’’ disclosed pursuant to
plicable columns as described in para- paragraph (f) of this section, with col-
graph (f) of this section, an itemization umns stating whether the charge was
of the services and corresponding costs borrower-paid at or before closing, sell-
for each of the settlement services re- er-paid at or before closing, or paid by
quired by the creditor for which the others, all costs in connection with the
consumer did not shop in accordance transaction, other than those disclosed
with § 1026.19(e)(1)(vi)(A) and that are under paragraph (f) of this section, list-
provided by persons other than the ed in a table with a heading disclosed
creditor or mortgage broker, the name as ‘‘Other Costs.’’ The table shall con-
of the person ultimately receiving the tain the items and amounts listed
payment for each such amount, and the under five subheadings, described in
total of all such itemized amounts that paragraphs (g)(1) through (6) of this
are designated borrower-paid at or be- section.
fore closing. Items that were disclosed (1) Taxes and other government fees.
pursuant to § 1026.37(f)(3) must be dis- Under the subheading ‘‘Taxes and
closed under this paragraph (f)(2) if the Other Government Fees,’’ an
consumer was provided a written list of itemization of each amount that is ex-
settlement service providers under pected to be paid to State and local
§ 1026.19(e)(1)(vi)(C) and the consumer governments for taxes and government
selected a settlement service provider fees and the total of all such itemized
contained on that written list. amounts that are designated borrower-
(3) Services borrower did shop for. paid at or before closing, as follows:
Under the subheading ‘‘Services Bor- (i) On the first line:
rower Did Shop For’’ and in the appli- (A) Before the columns described in
cable column as described in paragraph paragraph (g) of this section, the total
(f) of this section, an itemization of the amount of fees for recording deeds and,
services and corresponding costs for separately, the total amount of fees for
each of the settlement services re- recording security instruments; and
quired by the creditor for which the (B) In the applicable column as de-
consumer shopped in accordance with scribed in paragraph (g) of this section,
§ 1026.19(e)(1)(vi)(A) and that are pro- the total amounts paid for recording
vided by persons other than the cred- fees (including, but not limited to, the
itor or mortgage broker, the name of amounts in paragraph (g)(1)(i)(A) of
the person ultimately receiving the this section); and
payment for each such amount, and the (ii) On subsequent lines, in the appli-
total of all such itemized costs that are cable column as described in paragraph
designated borrower-paid at or before (g) of this section, an itemization of
closing. Items that were disclosed pur- transfer taxes, with the name of the
suant to § 1026.37(f)(3) must be disclosed government entity assessing the trans-
under this paragraph (f)(3) if the con- fer tax.
sumer was provided a written list of (2) Prepaids. Under the subheading
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settlement service providers under ‘‘Prepaids’’ and in the applicable col-
§ 1026.19(e)(1)(vi)(C) and the consumer umn as described in paragraph (g) of
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Consumer Financial Protection Bureau § 1026.38
this section, an itemization of each (6) Subtotal of costs. The sum of other
amount for charges described in costs, calculated by totaling the costs
§ 1026.37(g)(2), the name of the person disclosed in paragraphs (g)(1) through
ultimately receiving the payment or (4) of this section designated borrower-
government entity assessing the prop- paid at or before closing, labeled
erty tax, provided that the person ulti- ‘‘Other Costs Subtotals.’’
mately receiving the payment need not (h) Closing cost totals. (1) The sum of
be disclosed for the disclosure required the costs disclosed as borrower-paid
by § 1026.37(g)(2)(iii) when disclosed pur- pursuant to paragraph (h)(2) of this
suant to this paragraph, and the total section and the amount disclosed in
of all such itemized amounts that are paragraph (h)(3) of this section, under
designated borrower-paid at or before the subheading ‘‘Total Closing Costs
closing. (Borrower-Paid).’’
(3) Initial escrow payment at closing. (2) The sum of the amounts disclosed
Under the subheading ‘‘Initial escrow in paragraphs (f)(5) and (g)(6) of this
payment at closing’’ and in the appli- section, designated borrower-paid at or
cable column as described in paragraph before closing, and the sum of the costs
(g) of this section, an itemization of designated seller-paid at or before clos-
each amount for charges described in ing or paid by others disclosed pursu-
§ 1026.37(g)(3), the applicable aggregate ant to paragraphs (f) and (g) of this sec-
adjustment pursuant to 12 CFR tion, labeled ‘‘Closing Costs Sub-
1024.17(d)(2) along with the label ‘‘ag- totals.’’
gregate adjustment,’’ and the total of (3) The amount of lender credits as a
all such itemized amounts that are des- negative number, labeled ‘‘Lender
ignated borrower-paid at or before clos- Credits’’ and designated borrower-paid
ing. at closing, and if a refund is provided
(4) Other. Under the subheading pursuant to § 1026.19(f)(2)(v), a state-
ment that this amount includes a cred-
‘‘Other’’ and in the applicable column
it for an amount that exceeds the limi-
as described in paragraph (g) of this
tations on increases in closing costs
section, an itemization of each amount
under § 1026.19(e)(3), and the amount of
for charges in connection with the
such credit under § 1026.19(f)(2)(v).
transaction that are in addition to the
(4) The services and costs disclosed
charges disclosed under paragraphs (f)
pursuant to paragraphs (f) and (g) of
and (g)(1) through (3) for services that
this section on the Closing Disclosure
are required or obtained in the real es-
shall be labeled using terminology that
tate closing by the consumer, the sell-
describes the item disclosed, in a man-
er, or other party, the name of the per-
ner that is consistent with the descrip-
son ultimately receiving the payment, tions or prescribed labels, as applica-
and the total of all such itemized ble, used for such items on the Loan
amounts that are designated borrower- Estimate pursuant to § 1026.37. The
paid at or before closing. creditor must also list the items on the
(i) For any cost that is a component Closing Disclosure in the same sequen-
of title insurance services, the intro- tial order as on the Loan Estimate pur-
ductory description ‘‘Title —’’ shall ap- suant to § 1026.37.
pear at the beginning of the label for (i) Calculating cash to close. In a sepa-
that actual cost. rate table, under the heading ‘‘Calcu-
(ii) The parenthetical description lating Cash to Close,’’ together with
‘‘(optional)’’ shall appear at the end of the statement ‘‘Use this table to see
the label for costs designated borrower- what has changed from your Loan Esti-
paid at or before closing for any pre- mate’’:
miums paid for separate insurance, (1) Total closing costs. (i) Under the
warranty, guarantee, or event-coverage subheading ‘‘Loan Estimate,’’ the
products. ‘‘Total Closing Costs’’ disclosed on the
(5) Total other costs. Under the sub- Loan Estimate under § 1026.37(h)(1)(i),
heading ‘‘Total Other Costs (Borrower- labeled using that term.
Paid),’’ the sum of the amounts dis- (ii) Under the subheading ‘‘Final,’’
jspears on DSK121TN23PROD with CFR
closed as borrower-paid pursuant to the amount disclosed under paragraph
paragraph (g)(6) of this section. (h)(1) of this section.
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
(iii) Under the subheading ‘‘Did this than the other disclosures under this
change?,’’ disclosed more prominently paragraph (i)(2):
than the other disclosures under this (A) If the amount disclosed under
paragraph (i)(1): paragraph (i)(2)(ii) of this section is dif-
(A) If the amount disclosed under ferent than the amount disclosed under
paragraph (i)(1)(ii) of this section is dif- paragraph (i)(2)(i) of this section (un-
ferent than the amount disclosed under less the difference is due to rounding),
paragraph (i)(1)(i) of this section (un- a statement of that fact, along with a
less the difference is due to rounding): statement that the consumer paid such
(1) A statement of that fact; amounts prior to consummation of the
(2) If the difference in the ‘‘Total transaction; or
Closing Costs’’ is attributable to dif- (B) If the amount disclosed under
ferences in itemized charges that are paragraph (i)(2)(ii) of this section is
included in either or both subtotals, a equal to the amount disclosed under
statement that the consumer should paragraph (i)(2)(i) of this section, a
see the total loan costs and total other statement of that fact.
costs subtotals disclosed under para- (3) Closing costs financed. (i) Under the
graphs (f)(4) and (g)(5) of this section subheading ‘‘Loan Estimate,’’ the
(together with references to such dis- amount disclosed under
closures), as applicable; and § 1026.37(h)(1)(ii), labeled ‘‘Closing Costs
Financed (Paid from your Loan
(3) If the increase exceeds the limita-
Amount).’’
tions on increases in closing costs
(ii) Under the subheading ‘‘Final,’’
under § 1026.19(e)(3), a statement that
the actual amount of the closing costs
such increase exceeds the legal limits that are to be paid out of loan pro-
by the dollar amount of the excess, and ceeds, if any, stated as a negative num-
if any refund is provided under ber.
§ 1026.19(f)(2)(v), a statement directing (iii) Under the subheading ‘‘Did this
the consumer to the disclosure re- change?,’’ disclosed more prominently
quired under paragraph (h)(3) of this than the other disclosures under this
section or, if a principal reduction is paragraph (i)(3):
used to provide the refund, a statement (A) If the amount disclosed under
directing the consumer to the principal paragraph (i)(3)(ii) of this section is dif-
reduction disclosure under paragraph ferent than the amount disclosed under
(j)(1)(v) of this section. Such dollar paragraph (i)(3)(i) of this section (un-
amount shall equal the sum total of all less the difference is due to rounding),
excesses of the limitations on increases a statement of that fact, along with a
in closing costs under § 1026.19(e)(3), statement that the consumer included
taking into account the different meth- the closing costs in the loan amount,
ods of calculating excesses of the limi- which increased the loan amount; or
tations on increases in closing costs (B) If the amount disclosed under
under § 1026.19(e)(3)(i) and (ii). paragraph (i)(3)(ii) of this section is
(B) If the amount disclosed under equal to the amount disclosed under
paragraph (i)(1)(ii) of this section is paragraph (i)(3)(i) of this section, a
equal to the amount disclosed under statement of that fact.
paragraph (i)(1)(i) of this section, a (4) Down payment/funds from borrower.
statement of that fact. (i) Under the subheading ‘‘Loan Esti-
(2) Closing costs paid before closing. (i) mate,’’ the amount disclosed under
Under the subheading ‘‘Loan Esti- § 1026.37(h)(1)(iii), labeled ‘‘Down Pay-
mate,’’ the dollar amount ‘‘$0,’’ labeled ment/Funds from Borrower.’’
‘‘Closing Costs Paid Before Closing.’’ (ii) Under the subheading ‘‘Final’’:
(ii) Under the subheading ‘‘Final,’’ (A)(1) In a purchase transaction as
the amount of ‘‘Total Closing Costs’’ defined in § 1026.37(a)(9)(i), the amount
disclosed under paragraph (h)(2) of this determined by subtracting the sum of
section and designated as borrower- the loan amount disclosed under para-
paid before closing, stated as a nega- graph (b) of this section and any
tive number. amount of existing loans assumed or
jspears on DSK121TN23PROD with CFR
(iii) Under the subheading ‘‘Did this taken subject to that is disclosed under
change?,’’ disclosed more prominently paragraph (j)(2)(iv) of this section from
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Consumer Financial Protection Bureau § 1026.38
the sale price of the property disclosed than the other disclosures under this
under paragraph (a)(3)(vii)(A) of this paragraph (i)(5):
section, labeled ‘‘Down Payment/Funds (A) If the amount disclosed under
from Borrower,’’ except as required by paragraph (i)(5)(ii) of this section is dif-
paragraph (i)(4)(ii)(A)(2) of this section; ferent than the amount disclosed under
(2) In a purchase transaction as de- paragraph (i)(5)(i) of this section (un-
fined in § 1026.37(a)(9)(i) that is a simul- less the difference is due to rounding),
taneous subordinate financing trans- a statement of that fact, along with a
action or that involves improvements statement that the consumer increased
to be made on the property, or when or decreased this payment, as applica-
the sum of the loan amount disclosed ble, and that the consumer should see
under paragraph (b) of this section and the details disclosed under paragraph
any amount of existing loans assumed (j)(2)(ii) of this section; or
or taken subject to that is disclosed (B) If the amount disclosed under
under paragraph (j)(2)(iv) of this sec- paragraph (i)(5)(ii) of this section is
tion exceeds the sale price disclosed equal to the amount disclosed under
under paragraph (a)(3)(vii)(A) of this paragraph (i)(5)(i) of this section, a
section, the amount of funds from the statement of that fact.
consumer as determined in accordance (6) Funds for borrower. (i) Under the
with paragraph (i)(6)(iv) of this section subheading ‘‘Loan Estimate,’’ the
labeled ‘‘Down Payment/Funds from amount disclosed under
Borrower;’’ or § 1026.37(h)(1)(v), labeled ‘‘Funds for
(B) In all transactions not subject to Borrower.’’
paragraph (i)(4)(ii)(A) of this section, (ii) Under the subheading ‘‘Final,’’
the amount of funds from the consumer the ‘‘Funds for Borrower,’’ labeled
as determined in accordance with para- using that term, as determined in ac-
graph (i)(6)(iv) of this section, labeled cordance with paragraph (i)(6)(iv) of
‘‘Down Payment/Funds from Bor- this section.
rower.’’ (iii) Under the subheading ‘‘Did this
(iii) Under the subheading ‘‘Did this change?,’’ disclosed more prominently
change?,’’ disclosed more prominently than the other disclosures under this
than the other disclosures under this paragraph (i)(6):
paragraph (i)(4): (A) If the amount disclosed under
(A) If the amount disclosed under paragraph (i)(6)(ii) of this section is dif-
paragraph (i)(4)(ii) of this section is dif- ferent than the amount disclosed under
ferent than the amount disclosed under paragraph (i)(6)(i) of this section (un-
paragraph (i)(4)(i) of this section (un- less the difference is due to rounding),
less the difference is due to rounding), a statement of that fact, along with a
a statement of that fact, along with a statement that the consumer’s avail-
statement that the consumer increased able funds from the loan amount have
or decreased this payment and that the increased or decreased, as applicable;
consumer should see the details dis- or
closed under paragraph (j)(1) or (j)(2) of (B) If the amount disclosed under
this section, as applicable; or paragraph (i)(6)(ii) of this section is
(B) If the amount disclosed under equal to the amount disclosed under
paragraph (i)(4)(ii) of this section is paragraph (i)(6)(i) of this section, a
equal to the amount disclosed under statement of that fact.
paragraph (i)(4)(i) of this section, a (iv) The ‘‘Down Payment/Funds from
statement of that fact. Borrower’’ to be disclosed under para-
(5) Deposit. (i) Under the subheading graph (i)(4)(ii)(A)(2) or (B) of this sec-
‘‘Loan Estimate,’’ the amount dis- tion, as applicable, and ‘‘Funds for Bor-
closed under § 1026.37(h)(1)(iv), labeled rower’’ to be disclosed under paragraph
‘‘Deposit.’’ (i)(6)(ii) of this section are determined
(ii) Under the subheading ‘‘Final,’’ by subtracting the sum of the loan
the amount disclosed under paragraph amount disclosed under paragraph (b)
(j)(2)(ii) of this section, stated as a neg- of this section and any amount for ex-
ative number. isting loans assumed or taken subject
jspears on DSK121TN23PROD with CFR
(iii) Under the subheading ‘‘Did this to that is disclosed under paragraph
change?,’’ disclosed more prominently (j)(2)(iv) of this section (excluding any
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
closing costs financed disclosed under (B) If the amount disclosed under
paragraph (i)(3)(ii) of this section) from paragraph (i)(7)(ii) of this section is
the total amount of all existing debt equal to the amount disclosed under
being satisfied in the transaction dis- paragraph (i)(7)(i) of this section, a
closed under paragraphs (j)(1)(ii), (iii), statement of that fact.
and (v) of this section. (8) Adjustments and other credits. (i)
(A) If the calculation under this para- Under the subheading ‘‘Loan Esti-
graph (i)(6)(iv) yields an amount that is mate,’’ the amount disclosed on the
a positive number, such amount shall Loan Estimate under § 1026.37(h)(1)(vii),
be disclosed under paragraph labeled ‘‘Adjustments and Other Cred-
(i)(4)(ii)(A)(2) or (B) of this section, as its.’’
applicable, and $0 shall be disclosed (ii) Under the subheading ‘‘Final,’’
under paragraph (i)(6)(ii) of this sec- the amount equal to the total of the
tion. amounts disclosed under paragraphs
(B) If the calculation under this para- (j)(1)(iii) and (v) of this section, to the
graph (i)(6)(iv) yields an amount that is extent amounts in paragraphs (j)(1)(iii)
a negative number, such amount shall and (v) were not included in the cal-
be disclosed under paragraph (i)(6)(ii) culation required by paragraph (i)(4) or
of this section, stated as a negative (6) of this section, and paragraphs
number, and $0 shall be disclosed under (j)(1)(vi) through (x) of this section, re-
paragraph (i)(4)(ii)(A)(2) or (i)(4)(ii)(B) duced by the total of the amounts dis-
of this section, as applicable. closed under paragraphs (j)(2)(vi)
through (xi) of this section.
(C) If the calculation under this para-
(iii) Under the subheading ‘‘Did this
graph (i)(6)(iv) yields $0, $0 shall be dis-
change?,’’ disclosed more prominently
closed under paragraph (i)(4)(ii)(A)(2)
than the other disclosures under this
or (i)(4)(ii)(B) of this section, as appli-
paragraph (i)(8):
cable, and under paragraph (i)(6)(ii) of
(A) If the amount disclosed under
this section.
paragraph (i)(8)(ii) of this section is dif-
(7) Seller credits. (i) Under the sub-
ferent than the amount disclosed under
heading ‘‘Loan Estimate,’’ the amount
paragraph (i)(8)(i) of this section (un-
disclosed under § 1026.37(h)(1)(vi), la-
less the difference is due to rounding),
beled ‘‘Seller Credits.’’
a statement of that fact, along with a
(ii) Under the subheading ‘‘Final,’’ statement that the consumer should
the amount disclosed under paragraph see the details disclosed under para-
(j)(2)(v) of this section, stated as a neg- graphs (j)(1)(iii) and (v) through (x) and
ative number. (j)(2)(vi) through (xi) of this section, as
(iii) Under the subheading ‘‘Did this applicable; or
change?,’’ disclosed more prominently (B) If the amount disclosed under
than the other disclosures under this paragraph (i)(8)(ii) of this section is
paragraph (i)(7): equal to the amount disclosed under
(A) If the amount disclosed under paragraph (i)(8)(i) of this section, a
paragraph (i)(7)(ii) of this section is dif- statement of that fact.
ferent than the amount disclosed under (9) Cash to close. (i) Under the sub-
paragraph (i)(7)(i) of this section (un- heading ‘‘Loan Estimate,’’ the amount
less the difference is due to rounding), disclosed on the Loan Estimate under
a statement of that fact, along with a § 1026.37(h)(1)(viii), labeled ‘‘Cash to
statement that the consumer should Close’’ and disclosed more prominently
see the details disclosed: than the other disclosures under this
(1) Under paragraph (j)(2)(v) of this paragraph (i).
section and in the seller-paid column (ii) Under the subheading ‘‘Final,’’
under paragraphs (f) and (g) of this sec- the sum of the amounts disclosed under
tion; or paragraphs (i)(1) through (i)(8) of this
(2) Under either paragraph (j)(2)(v) of section under the subheading ‘‘Final,’’
this section or in the seller-paid col- and disclosed more prominently than
umn under paragraphs (f) or (g) of this the other disclosures under this para-
section, if the details are only dis- graph (i).
jspears on DSK121TN23PROD with CFR
closed under paragraph (j)(2)(v) or (j) Summary of borrower’s transaction.
paragraph (f) or (g); or Under the heading ‘‘Summaries of
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Consumer Financial Protection Bureau § 1026.38
Transactions,’’ with a statement to closing, and the time period cor-
‘‘Use this table to see a summary of responding to that amount, labeled
your transaction,’’ two separate tables ‘‘County Taxes’’;
are disclosed. The first table shall in- (ix) The prorated amount of any pre-
clude, under the subheading ‘‘Bor- paid assessments due from the con-
rower’s Transaction,’’ the following in- sumer to reimburse the seller at the
formation and shall satisfy the fol- real estate closing, and the time period
lowing requirements: corresponding to that amount, labeled
(1) Itemization of amounts due from bor- ‘‘Assessments’’; and
rower. (i) The total amount due from (x) A description and the amount of
the consumer at closing, calculated as any additional items paid by the seller
the sum of items required to be dis- prior to the real estate closing that are
closed by paragraph (j)(1)(ii) through due from the consumer at the real es-
(x) of this section, excluding items paid tate closing.
from funds other than closing funds as (2) Itemization of amounts already paid
described in paragraph (j)(4)(i) of this by or on behalf of borrower. (i) The sum
section, labeled ‘‘Due from Borrower at of the amounts disclosed in this para-
Closing’’; graphs (j)(2)(ii) through (xi) of this sec-
(ii) The amount of the contract sales tion, excluding items paid from funds
price of the property being sold in a other than closing funds as described in
purchase real estate transaction, ex-
paragraph (j)(4)(i) of this section, la-
cluding the price of any tangible per-
beled ‘‘Paid Already by or on Behalf of
sonal property if the consumer and
Borrower at Closing’’;
seller have agreed to a separate price
for such items, labeled ‘‘Sale Price of (ii) Any amount that is paid to the
Property’’; seller or held in trust or escrow by an
(iii) The amount of the sales price of attorney or other party under the
any tangible personal property ex- terms of the agreement for the sale of
cluded from the contract sales price the property, labeled ‘‘Deposit’’;
pursuant to paragraph (j)(1)(ii) of this (iii) The amount of the consumer’s
section, labeled ‘‘Sale Price of Any new loan amount or first user loan as
Personal Property Included in Sale’’; disclosed pursuant to paragraph (b) of
(iv) The total amount of closing costs this section, labeled ‘‘Loan Amount’’;
disclosed that are designated borrower- (iv) The amount of any existing loans
paid at closing, as the sum of the that the consumer is assuming, or any
amounts calculated pursuant to para- loans subject to which the consumer is
graphs (h)(2) and (3) of this section, la- taking title to the property, labeled
beled ‘‘Closing Costs Paid at Closing’’; ‘‘Existing Loan(s) Assumed or Taken
(v) A description and the amount of Subject to’’;
any additional items that the seller (v) The total amount of money that
has paid prior to the real estate clos- the seller will provide at the real es-
ing, but reimbursed by the consumer at tate closing as a lump sum not other-
the real estate closing, and a descrip- wise itemized to pay for loan costs as
tion and the amount of any other items determined by paragraph (f) of this sec-
owed by the consumer at the real es- tion and other costs as determined by
tate closing not otherwise disclosed paragraph (g) of this section and any
pursuant to paragraph (f), (g), or (j) of other obligations of the seller to be
this section; paid directly to the consumer, labeled
(vi) The description ‘‘Adjustments for ‘‘Seller Credit’’;
Items Paid by Seller in Advance’’; (vi) Descriptions and amounts of
(vii) The prorated amount of any pre- other items paid by or on behalf of the
paid taxes due from the consumer to consumer and not otherwise disclosed
reimburse the seller at the real estate under paragraphs (f), (g), (h), and (j)(2)
closing, and the time period cor- of this section, labeled ‘‘Other Cred-
responding to that amount, labeled its,’’ and descriptions and the amounts
‘‘City/Town Taxes’’; of any additional amounts owed the
(viii) The prorated amount of any consumer but payable to the seller be-
jspears on DSK121TN23PROD with CFR
prepaid taxes due from the consumer to fore the real estate closing, under the
reimburse the seller at the real estate heading ‘‘Adjustments’’;
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
(vii) The description ‘‘Adjustments (k) Summary of seller’s transaction.
for Items Unpaid by Seller’’; Under the heading ‘‘Summaries of
(viii) The prorated amount of any un- Transactions’’ required by paragraph
paid taxes due from the seller to reim- (j) of this section, a separate table
burse the consumer at the real estate under the subheading ‘‘Seller’s Trans-
closing, and the time period cor- action,’’ that includes the following in-
responding to that amount, labeled formation and satisfies the following
’’City/Town Taxes’’; requirements:
(ix) The prorated amount of any un- (1) Itemization of amounts due to seller.
paid taxes due from the seller to reim- (i) The total amount due to the seller
burse the consumer at the real estate at the real estate closing, calculated as
closing, and the time period cor- the sum of items required to be dis-
responding to that amount, labeled closed pursuant to paragraphs (k)(1)(ii)
‘‘County Taxes’’; through (ix) of this section, excluding
(x) The prorated amount of any un- items paid from funds other than clos-
paid assessments due from the seller to ing funds as described in paragraph
reimburse the consumer at the real es- (k)(4)(i) of this section, labeled ‘‘Due to
tate closing, and the time period cor- Seller at Closing’’;
responding to that amount, labeled (ii) The amount of the contract sales
‘‘Assessments’’; and price of the property being sold, ex-
cluding the price of any tangible per-
(xi) A description and the amount of
sonal property if the consumer and
any additional items which have not
seller have agreed to a separate price
yet been paid and which the consumer
for such items, labeled ‘‘Sale Price of
is expected to pay after the real estate
Property’’;
closing, but which are attributable in
(iii) The amount of the sales price of
part to a period of time prior to the
any tangible personal property ex-
real estate closing.
cluded from the contract sales price
(3) Calculation of borrower’s trans- pursuant to paragraph (k)(1)(ii) of this
action. Under the label ‘‘Calculation’’: section, labeled ‘‘Sale Price of Any
(i) The amount disclosed pursuant to Personal Property Included in Sale’’;
paragraph (j)(1)(i) of this section, la- (iv) A description and the amount of
beled ‘‘Total Due from Borrower at other items paid to the seller by the
Closing’’; consumer pursuant to the contract of
(ii) The amount disclosed pursuant to sale or other agreement, such as
paragraph (j)(2)(i) of this section, if charges that were not disclosed pursu-
any, disclosed as a negative number, ant to § 1026.37 on the Loan Estimate or
labeled ‘‘Total Paid Already by or on items paid by the seller prior to the
Behalf of Borrower at Closing’’; and real estate closing but reimbursed by
(iii) A statement that the disclosed the consumer at the real estate clos-
amount is due from or to the con- ing;
sumer, and the amount due from or to (v) The description ‘‘Adjustments for
the consumer at the real estate clos- Items Paid by Seller in Advance’’;
ing, calculated by the sum of the (vi) The prorated amount of any pre-
amounts disclosed under paragraphs paid taxes due from the consumer to
(j)(3)(i) and (ii) of this section, labeled reimburse the seller at the real estate
‘‘Cash to Close.’’ closing, and the time period cor-
(4) Items paid outside of closing funds. responding to that amount, labeled
(i) Costs that are not paid from closing ‘‘City/Town Taxes’’;
funds but that would otherwise be dis- (vii) The prorated amount of any pre-
closed in the table required pursuant to paid taxes due from the consumer to
paragraph (j) of this section, should be reimburse the seller at the real estate
marked with the phrase ‘‘Paid Outside closing, and the time period cor-
of Closing’’ or the abbreviation responding to that amount, labeled
‘‘P.O.C.’’ and include the name of the ‘‘County Taxes’’;
party making the payment. (viii) The prorated amount of any
(ii) For purposes of this paragraph (j), prepaid assessments due from the con-
jspears on DSK121TN23PROD with CFR
‘‘closing funds’’ means funds collected sumer to reimburse the seller at the
and disbursed at real estate closing. real estate closing, and the time period
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Consumer Financial Protection Bureau § 1026.38
corresponding to that amount, labeled (x) The prorated amount of any un-
‘‘Assessments’’; and paid taxes due from the seller to reim-
(ix) A description and the amount of burse the consumer at the real estate
additional items paid by the seller closing, and the time period cor-
prior to the real estate closing that are responding to that amount, labeled
reimbursed by the consumer at the real ‘‘City/Town Taxes’’;
estate closing. (xi) The prorated amount of any un-
(2) Itemization of amounts due from paid taxes due from the seller to the
seller. (i) The total amount due from consumer at the real estate closing,
the seller at the real estate closing, and the time period corresponding to
calculated as the sum of items required that amount, labeled ‘‘County Taxes’’;
to be disclosed pursuant to paragraphs
(xii) The prorated amount of any un-
(k)(2)(ii) through (xiii) of this section,
paid assessments due from the seller to
excluding items paid from funds other
reimburse the consumer at the real es-
than closing funds as described in para-
tate closing, and the time period cor-
graph (k)(4)(i) of this section, labeled
responding to that amount, labeled
‘‘Due from Seller at Closing’’;
(ii) The amount of any excess deposit ‘‘Assessments’’; and
disbursed to the seller prior to the real (xiii) A description and the amount
estate closing, labeled ‘‘Excess De- of any additional items which have not
posit’’; yet been paid and which the consumer
(iii) The amount of closing costs des- is expected to pay after the real estate
ignated seller-paid at closing disclosed closing, but which are attributable in
pursuant to paragraph (h)(2) of this part to a period of time prior to the
section, labeled ‘‘Closing Costs Paid at real estate closing.
Closing’’; (3) Calculation of seller’s transaction.
(iv) The amount of any existing loans Under the label ‘‘Calculation’’:
that the consumer is assuming, or any (i) The amount described in para-
loans subject to which the consumer is graph (k)(1)(i) of this section, labeled
taking title to the property, labeled ‘‘Total Due to Seller at Closing’’;
‘‘Existing Loan(s) Assumed or Taken (ii) The amount described in para-
Subject to’’; graph (k)(2)(i) of this section, disclosed
(v) The amount of any loan secured as a negative number, labeled ‘‘Total
by a first lien on the property that will Due from Seller at Closing’’; and
be paid off as part of the real estate (iii) A statement that the disclosed
closing, labeled ‘‘Payoff of First Mort- amount is due from or to the seller,
gage Loan’’; and the amount due from or to the sell-
(vi) The amount of any loan secured er at closing, calculated by the sum of
by a second lien on the property that the amounts disclosed pursuant to
will be paid off as part of the real es- paragraphs (k)(3)(i) and (ii) of this sec-
tate closing, labeled ‘‘Payoff of Second tion, labeled ‘‘Cash.’’
Mortgage Loan’’;
(4) Items paid outside of closing funds.
(vii) The total amount of money that
(i) Charges that are not paid from clos-
the seller will provide at the real es-
ing funds but that would otherwise be
tate closing as a lump sum not other-
wise itemized to pay for loan costs as disclosed in the table described in para-
determined by paragraph (f) of this sec- graph (k) of this section, should be
tion and other costs as determined by marked with the phrase ‘‘Paid Outside
paragraph (g) of this section and any of Closing’’ or the acronym ‘‘P.O.C.’’
other obligations of the seller to be and include a statement of the party
paid directly to the consumer, labeled making the payment.
‘‘Seller Credit’’; (ii) For purposes of this paragraph
(viii) A description and amount of (k), ‘‘closing funds’’ are defined as
any and all other obligations required funds collected and disbursed at real
to be paid by the seller at the real es- estate closing.
tate closing, including any lien-related (l) Loan disclosures. Under the master
payoffs, fees, or obligations; heading ‘‘Additional Information
jspears on DSK121TN23PROD with CFR
(ix) The description ‘‘Adjustments for About This Loan’’ and under the head-
Items Unpaid by Seller’’; ing ‘‘Loan Disclosures’’:
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
(1) Assumption. Under the subheading accepted, a statement that the cred-
‘‘Assumption,’’ the information re- itor, using the term ‘‘lender,’’ does not
quired by § 1026.37(m)(2). accept any partial payments; and
(2) Demand feature. Under the sub- (iv) A statement that, if the loan is
heading ‘‘Demand Feature,’’ a state- sold, the new creditor, using the term
ment of whether the legal obligation ‘‘lender,’’ may have a different policy.
permits the creditor to demand early (6) Security interest. Under the sub-
repayment of the loan and, if the state- heading ‘‘Security Interest,’’ a state-
ment is affirmative, a reference to the ment that the consumer is granting a
note or other loan contract for details. security interest in the property secur-
(3) Late payment. Under the sub- ing the transaction, the property ad-
heading ‘‘Late Payment,’’ the informa- dress including a zip code, and a state-
tion required by § 1026.37(m)(4). ment that the consumer may lose the
(4) Negative amortization. Under the property if the consumer does not
subheading ‘‘Negative Amortization make the required payments or satisfy
(Increase in Loan Amount),’’ a state- other requirements under the legal ob-
ment of whether the regular periodic ligation.
payments may cause the principal bal- (7) Escrow account. Under the sub-
ance to increase. heading ‘‘Escrow Account’’:
(i) If the regular periodic payments (i) Under the reference ‘‘For now,’’ a
do not cover all of the interest due, the statement that an escrow account may
creditor must provide a statement that also be called an impound or trust ac-
the principal balance will increase, count, a statement of whether the
such balance will likely become larger creditor has established or will estab-
than the original loan amount, and in- lish (at or before consummation) an es-
creases in such balance lower the con- crow account in connection with the
sumer’s equity in the property. transaction, and the information re-
(ii) If the consumer may make reg- quired under paragraphs (l)(7)(i)(A) and
ular periodic payments that do not (B) of this section:
cover all of the interest due, the cred- (A) A statement that the creditor
itor must provide a statement that, if may be liable for penalties and interest
the consumer chooses a monthly pay- if it fails to make a payment for any
ment option that does not cover all of cost for which the escrow account is es-
the interest due, the principal balance tablished, a statement that the con-
may become larger than the original sumer would have to pay such costs di-
loan amount and the increases in the rectly in the absence of the escrow ac-
principal balance lower the consumer’s count, and a table, titled ‘‘Escrow,’’
equity in the property. that contains, if an escrow account is
(5) Partial payment policy. Under the or will be established, an itemization
subheading ‘‘Partial Payments’’: of the amounts listed in paragraphs
(i) If periodic payments that are less (l)(7)(i)(A)(1) through (4) of this section;
than the full amount due are accepted, (1) The total amount the consumer
a statement that the creditor, using will be required to pay into an escrow
the term ‘‘lender,’’ may accept partial account over the first year after con-
payments and apply such payments to summation, labeled ‘‘Escrowed Prop-
the consumer’s loan; erty Costs over Year 1,’’ together with
(ii) If periodic payments that are less a descriptive name of each charge to be
than the full amount due are accepted paid (in whole or in part) from the es-
but not applied to a consumer’s loan crow account, calculated as the
until the consumer pays the remainder amount disclosed under paragraph
of the full amount due, a statement (l)(7)(i)(A)(4) of this section multiplied
that the creditor, using the term by the number of periodic payments
‘‘lender,’’ may hold partial payments scheduled to be made to the escrow ac-
in a separate account until the con- count during the first year after con-
sumer pays the remainder of the pay- summation;
ment and then apply the full periodic (2) The estimated amount the con-
payment to the consumer’s loan; sumer is likely to pay during the first
jspears on DSK121TN23PROD with CFR
(iii) If periodic payments that are year after consummation for the mort-
less than the full amount due are not gage-related obligations described in
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Consumer Financial Protection Bureau § 1026.38
§ 1026.43(b)(8) that are known to the (A) A statement that the consumer’s
creditor and that will not be paid using property costs may change and that, as
escrow account funds, labeled ‘‘Non- a result, the consumer’s escrow pay-
Escrowed Property Costs over Year 1,’’ ment may change;
together with a descriptive name of (B) A statement that the consumer
each such charge and a statement that may be able to cancel any escrow ac-
the consumer may have to pay other count that has been established, but
costs that are not listed; that the consumer is responsible for di-
(3) The total amount disclosed under rectly paying all property costs in the
paragraph (g)(3) of this section, a state- absence of an escrow account; and
ment that the payment is a cushion for (C) A description of the consequences
the escrow account, labeled ‘‘Initial Es- if the consumer fails to pay property
crow Payment,’’ and a reference to the costs, including the actions that a
information disclosed under paragraph State or local government may take if
(g)(3) of this section; property taxes are not paid and the ac-
(4) The amount the consumer will be tions the creditor may take if the con-
required to pay into the escrow ac- sumer does not pay some or all prop-
count with each periodic payment dur- erty costs, such as adding amounts to
ing the first year after consummation, the loan balance, adding an escrow ac-
labeled ‘‘Monthly Escrow Payment.’’ count to the loan, or purchasing a
(5) A creditor complies with the re- property insurance policy on the con-
quirements of paragraphs (l)(7)(i)(A)(1) sumer’s behalf that may be more ex-
and (4) of this section if the creditor pensive and provide fewer benefits than
bases the numerical disclosures re- what the consumer could obtain di-
quired by those paragraphs on amounts rectly.
derived from the escrow account anal- (m) Adjustable payment table. Under
ysis required under Regulation X, 12 the master heading ‘‘Additional Infor-
CFR 1024.17. mation About This Loan’’ required by
(B) A statement of whether the con- paragraph (l) of this section, and under
sumer will not have an escrow account, the heading ‘‘Adjustable Payment (AP)
the reason why an escrow account will Table,’’ the table required to be dis-
not be established, a statement that closed by § 1026.37(i).
the consumer must pay all property (n) Adjustable interest rate table. Under
costs, such as taxes and homeowner’s the master heading ‘‘Additional Infor-
insurance, directly, a statement that mation About This Loan’’ required by
the consumer may contact the creditor paragraph (l) of this section, and under
to inquire about the availability of an the heading ‘‘Adjustable Interest Rate
escrow account, and a table, titled ‘‘No (AIR) Table,’’ the table required to be
Escrow,’’ that contains, if an escrow disclosed by § 1026.37(j).
account will not be established, an (o) Loan calculations. In a separate
itemization of the following: table under the heading ‘‘Loan Calcula-
(1) The estimated total amount the tions’’:
consumer will pay directly for the (1) Total of payments. The ‘‘Total of
mortgage-related obligations described Payments,’’ using that term and ex-
in § 1026.43(b)(8) during the first year pressed as a dollar amount, and a
after consummation that are known to statement that the disclosure is the
the creditor and a statement that, total the consumer will have paid after
without an escrow account, the con- making all payments of principal, in-
sumer must pay the identified costs, terest, mortgage insurance, and loan
possibly in one or two large payments, costs, as scheduled. The disclosed total
labeled ‘‘Property Costs over Year 1’’; of payments shall be treated as accu-
and rate if the amount disclosed as the
(2) The amount of any fee the cred- total of payments:
itor imposes on the consumer for not (i) Is understated by no more than
establishing an escrow account in con- $100; or
nection with the transaction, labeled (ii) Is greater than the amount re-
‘‘Escrow Waiver Fee.’’ quired to be disclosed.
jspears on DSK121TN23PROD with CFR
(ii) Under the reference ‘‘In the fu- (2) Finance charge. The ‘‘Finance
ture’’: Charge,’’ using that term and expressed
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
as a dollar amount, and the following may accelerate the maturity of the ob-
statement: ‘‘The dollar amount the ligation, and prepayment rebates and
loan will cost you.’’ The disclosed fi- penalties, under the subheading ‘‘Con-
nance charge and other disclosures af- tract Details.’’
fected by the disclosed financed charge (3) Liability after foreclosure. A brief
(including the amount financed and the statement of whether, and the condi-
annual percentage rate) shall be treat- tions under which, the consumer may
ed as accurate if the amount disclosed remain responsible for any deficiency
as the finance charge: after foreclosure under applicable
(i) Is understated by no more than State law, a brief statement that cer-
$100; or tain protections may be lost if the con-
(ii) Is greater than the amount re- sumer refinances or incurs additional
quired to be disclosed. debt on the property, and a statement
(3) Amount financed. The ‘‘Amount that the consumer should consult an
Financed,’’ using that term and ex- attorney for additional information,
pressed as a dollar amount, and the fol- under the subheading ‘‘Liability after
lowing statement: ‘‘The loan amount Foreclosure.’’
available after paying your upfront fi- (4) Refinance. Under the subheading
nance charge.’’ ‘‘Refinance,’’ the statement required
(4) Annual percentage rate. The ‘‘An- by § 1026.37(m)(5).
nual Percentage Rate,’’ using that (5) Tax deductions. Under the sub-
term and the abbreviation ‘‘APR’’ and heading ‘‘Tax Deductions,’’ a state-
expressed as a percentage, and the fol- ment that, if the extension of credit ex-
lowing statement: ‘‘Your costs over the ceeds the fair market value of the prop-
loan term expressed as a rate. This is erty, the interest on the portion of the
not your interest rate.’’ credit extension that is greater than
(5) Total interest percentage. The the fair market value of the property is
‘‘Total Interest Percentage,’’ using not tax deductible for Federal income
that term and the abbreviation ‘‘TIP’’ tax purposes and a statement that the
and expressed as a percentage, and the consumer should consult a tax adviser
following statement: ‘‘The total for further information.
amount of interest that you will pay (q) Questions notice. In a separate no-
over the loan term as a percentage of tice labeled ‘‘Questions?’’:
your loan amount.’’ (1) A statement directing the con-
(p) Other disclosures. Under the head- sumer to use the contact information
ing ‘‘Other Disclosures’’: disclosed under paragraph (r) of this
(1) Appraisal. For transactions sub- section if the consumer has any ques-
ject to 15 U.S.C. 1639h or 1691(e), as im- tions about the disclosures required
plemented in this part or Regulation B, pursuant to § 1026.19(f);
12 CFR part 1002, respectively, under (2) A reference to the Bureau’s Web
the subheading ‘‘Appraisal,’’ that: site to obtain more information or to
(i) If there was an appraisal of the submit a complaint; and the link or
property in connection with the loan, uniform resource locator address to the
the creditor is required to provide the Web site: www.consumerfinance.gov/
consumer with a copy at no additional mortgage-closing; and
cost to the consumer at least three (3) A prominent question mark.
days prior to consummation; and (r) Contact information. In a separate
(ii) If the consumer has not yet re- table, under the heading ‘‘Contact In-
ceived a copy of the appraisal, the con- formation,’’ the following information
sumer should contact the creditor for each creditor (under the subheading
using the information disclosed pursu- ‘‘Lender’’), mortgage broker (under the
ant to paragraph (r) of this section. subheading ‘‘Mortgage Broker’’), con-
(2) Contract details. A statement that sumer’s real estate broker (under the
the consumer should refer to the appro- subheading ‘‘Real Estate Broker (B)’’),
priate loan document and security in- seller’s real estate broker (under the
strument for information about non- subheading ‘‘Real Estate Broker (S)’’),
payment, what constitutes a default and settlement agent (under the sub-
jspears on DSK121TN23PROD with CFR
under the legal obligation, cir- heading ‘‘Settlement Agent’’) partici-
cumstances under which the creditor pating in the transaction:
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Consumer Financial Protection Bureau § 1026.38
(1) Name of the person, labeled The disclosures also shall be grouped
‘‘Name’’; together and segregated from every-
(2) Address, using that label; thing else.
(3) Nationwide Mortgage Licensing (ii) Except as provided in paragraph
System & Registry (NMLSR ID) identi- (t)(5), the disclosures shall contain
fication number, labeled ‘‘NMLS ID,’’ only the information required by para-
or, if none, license number or other graphs (a) through (s) of this section
unique identifier issued by the applica- and shall be made in the same order,
ble jurisdiction or regulating body with and positioned relative to the master
which the person is licensed and/or reg- headings, headings, subheadings, la-
istered, labeled ‘‘License ID,’’ with the bels, and similar designations in the
abbreviation for the State of the appli- same manner, as shown in form H–25,
cable jurisdiction or regulatory body set forth in appendix H to this part.
stated before the word ‘‘License’’ in the (2) Headings and labels. If a master
label, for the persons identified in heading, heading, subheading, label, or
paragraph (r)(1) of this section; similar designation contains the word
(4) Name of the natural person who is ‘‘estimated’’ or a capital letter des-
the primary contact for the consumer ignation in form H–25, set forth in ap-
with the person identified in paragraph pendix H to this part, that heading,
(r)(1) of this section, labeled ‘‘Con- label, or similar designation shall con-
tact’’; tain the word ‘‘estimated’’ and the ap-
(5) NMLSR ID, labeled ‘‘Contact plicable capital letter designation.
NMLS ID,’’ or, if none, license number (3) Form. Except as provided in para-
or other unique identifier issued by the graph (t)(5) of this section:
applicable jurisdiction or regulating (i) For a transaction subject to
body with which the person is licensed § 1026.19(f) that is a federally related
and/or registered, labeled ‘‘Contact Li- mortgage loan, as defined in Regula-
cense ID,’’ with the abbreviation for tion X, 12 CFR 1024.2, the disclosures
the State of the applicable jurisdiction must be made using form H–25, set
or regulatory body stated before the forth in appendix H to this part.
word ‘‘License’’ in the label, for the (ii) For any other transaction subject
natural person identified in paragraph to this section, the disclosures must be
(r)(4) of this section, made with headings, content, and for-
(6) Email address for the person iden- mat substantially similar to form H–25,
tified in paragraph (r)(4) of this sec- set forth in appendix H to this part.
tion, labeled ‘‘Email’’; and (iii) The disclosures required by this
(7) Telephone number for the person section may be provided to the con-
identified in paragraph (r)(4) of this sumer in electronic form, subject to
section, labeled ‘‘Phone.’’ compliance with the consumer consent
(s) Signature statement. (1) At the and other applicable provisions of the
creditor’s option, under the heading Electronic Signatures in Global and
‘‘Confirm Receipt,’’ a line for the sig- National Commerce Act (15 U.S.C. 7001
natures of the consumers in the trans- et seq.).
action. If the creditor provides a line (4) Rounding—(i) Nearest dollar. The
for the consumer’s signature, the cred- following dollar amounts are required
itor must disclose above the signature to be rounded to the nearest whole dol-
line the statement required to be dis- lar:
closed under § 1026.37(n)(1). (A) The dollar amounts required to
(2) If the creditor does not provide a be disclosed by paragraph (b) of this
line for the consumer’s signature, the section that are required to be rounded
statement required to be disclosed by § 1026.37(o)(4)(i)(A) when disclosed
under § 1026.37(n)(2) under the heading under § 1026.37(b)(6) and (7);
‘‘Other Disclosures’’ required by para- (B) The dollar amounts required to be
graph (p) of this section. disclosed by paragraph (c) of this sec-
(t) Form of disclosures—(1) General re- tion that are required to be rounded by
quirements. (i) The creditor shall make § 1026.37(o)(4)(i)(A) when disclosed under
the disclosures required by this section § 1026.37(c)(1)(iii);
jspears on DSK121TN23PROD with CFR
clearly and conspicuously in writing, (C) The dollar amounts required to be
in a form that the consumer may keep. disclosed by paragraphs (e) and (i) of
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§ 1026.38 12 CFR Ch. X (1–1–25 Edition)
this section under the subheading that are not used may be deleted and
‘‘Loan Estimate’’; the deleted line numbers added to the
(D) The dollar amounts required to space provided for any other of those
be disclosed by paragraph (m) of this paragraphs as necessary to accommo-
section; and date the disclosure of additional items.
(E) The dollar amounts required to be (B) Two pages. To the extent that
disclosed by paragraph (c) of this sec- adding or deleting line numbers pro-
tion that are required to be rounded by vided on form H–25 of appendix H to
§ 1026.37(o)(4)(i)(C) when disclosed under this part, as permitted by paragraph
§ 1026.37(c)(2)(iv). (t)(5)(iv)(A) of this section, does not ac-
(ii) Percentages. The percentage commodate an itemization of all infor-
amounts required to be disclosed under mation required to be disclosed by
paragraphs (b), (f)(1), (n), and (o)(4) and
paragraphs (f) through (h) on one page,
(5) of this section shall be disclosed by
the information required to be dis-
rounding the exact amounts to three
closed by paragraphs (f) through (h) of
decimal places and then dropping any
this section may be disclosed on two
trailing zeros to the right of the dec-
imal point. pages, provided that the information
(iii) Loan amount. The dollar amount required by paragraph (f) is disclosed
required to be disclosed by paragraph on a page separate from the informa-
(b) of this section as required by tion required by paragraph (g). The in-
§ 1026.37(b)(1) shall be disclosed as an formation required by paragraph (g), if
unrounded number, except that if the disclosed on a page separate from para-
amount is a whole number then the graph (f), shall be disclosed on the
amount disclosed shall be truncated at same page as the information required
the decimal point. by paragraph (h).
(5) Exceptions—(i) Unit-period. Wher- (v) Separation of consumer and seller
ever the form or this section uses information. The creditor or settlement
‘‘monthly’’ to describe the frequency of agent preparing the form may use form
any payments or uses ‘‘month’’ to de- H–25 of appendix H to this part for the
scribe the applicable unit-period, the disclosure provided to both the con-
creditor shall substitute the appro- sumer and the seller, with the fol-
priate term to reflect the fact that the lowing modifications to separate the
transaction’s terms provide for other information of the consumer and seller,
than monthly periodic payments, such as necessary:
as bi-weekly or quarterly payments. (A) The information required to be
(ii) Lender credits. The amount re- disclosed by paragraphs (j) and (k) of
quired to be disclosed by paragraph this section may be disclosed on sepa-
(d)(1)(i)(D) of this section may be omit- rate pages to the consumer and the
ted from the form if the amount is seller, respectively, with the informa-
zero.
tion required by the other paragraph
(iii) Administrative information. The
left blank. The information disclosed
creditor may insert at the bottom of
to the consumer pursuant to paragraph
each page under the disclosures re-
quired by this section as illustrated by (j) of this section must be disclosed on
form H–25 of appendix H to this part, the same page as the information re-
any administrative information, text, quired by paragraph (i) of this section.
or codes that assist in identification of (B) The information required to be
the form or the information disclosed disclosed by paragraphs (f) and (g) of
on the form, provided that the space this section with respect to costs paid
provided on form H–25 for any of the in- by the consumer may be left blank on
formation required by this section is the disclosure provided to the seller.
not altered. (C) The information required by para-
(iv) Closing cost details—(A) Additional graphs (a)(2), (a)(4)(iii), (a)(5), (b)
line numbers. Line numbers provided on through (d), (i), (l) through (p), (r) with
form H–25 of appendix H to this part for respect to the creditor and mortgage
the disclosure of the information re- broker, and (s)(2) of this section may be
jspears on DSK121TN23PROD with CFR
quired by paragraphs (f)(1) through (3) left blank on the disclosure provided to
and (g)(1) through (4) of this section the seller.
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Consumer Financial Protection Bureau § 1026.39
(vi) Modified version of the form for a mation used locally in real estate set-
seller or third-party. The information re- tlements.
quired by paragraphs (a)(2), (a)(4)(iii), [78 FR 80120, Dec. 31, 2013, as amended at 80
(a)(5), (b) through (d), (f), and (g) with FR 8776, Feb. 19, 2015; 80 FR 43920, July 24,
respect to costs paid by the consumer, 2015; 82 FR 37770, Aug. 11, 2017]
(i), (j), (l) through (p), (q)(1), and (r)
with respect to the creditor and mort- § 1026.39 Mortgage transfer disclo-
gage broker, and (s) of this section may sures.
be deleted from the form provided to (a) Scope. The disclosure require-
the seller or a third-party, as illus- ments of this section apply to any cov-
trated by form H–25(I) of appendix H to ered person except as otherwise pro-
this part. vided in this section. For purposes of
(vii) Transaction without a seller or si- this section:
multaneous subordinate financing trans- (1) A ‘‘covered person’’ means any per-
action. The following modifications to son, as defined in § 1026.2(a)(22), that be-
form H–25 of appendix H to this part comes the owner of an existing mort-
may be made for a transaction that gage loan by acquiring legal title to
does not involve a seller or for simulta- the debt obligation, whether through a
neous subordinate financing, and for purchase, assignment or other transfer,
which the alternative tables are dis- and who acquires more than one mort-
closed under paragraphs (d)(2) and (e) gage loan in any twelve-month period.
of this section, as illustrated by form For purposes of this section, a servicer
H–25(J) of appendix H to this part: of a mortgage loan shall not be treated
(A) The information required by as the owner of the obligation if the
paragraph (a)(4)(ii), and paragraphs (f), servicer holds title to the loan, or title
(g), and (h) of this section with respect is assigned to the servicer, solely for
to costs paid by the seller, may be de- the administrative convenience of the
leted. servicer in servicing the obligation.
(B) A table under the master heading (2) A ‘‘mortgage loan’’ means:
‘‘Closing Cost Details’’ required by (i) An open-end consumer credit
paragraph (f) of this section may be transaction that is secured by the prin-
added with the heading ‘‘Payoffs and cipal dwelling of a consumer; and
Payments’’ that itemizes the amounts (ii) A closed-end consumer credit
of payments made at closing to other transaction secured by a dwelling or
parties from the credit extended to the real property.
consumer or funds provided by the con- (b) Disclosure required. Except as pro-
sumer in connection with the trans- vided in paragraph (c) of this section,
action, including designees of the con- each covered person is subject to the
sumer; the payees and a description of requirements of this section and shall
the purpose of such disbursements mail or deliver the disclosures required
under the subheading ‘‘To’’; and the by this section to the consumer on or
total amount of such payments labeled before the 30th calendar day following
‘‘Total Payoffs and Payments.’’ the date of transfer.
(C) The tables required to be dis- (1) Form of disclosures. The disclosures
closed by paragraphs (j) and (k) of this required by this section shall be pro-
section may be deleted. vided clearly and conspicuously in
(viii) Translation. The form may be writing, in a form that the consumer
translated into languages other than may keep. The disclosures required by
English, and creditors may modify this section may be provided to the
form H–25 of appendix H to this part to consumer in electronic form, subject to
the extent that translation prevents compliance with the consumer consent
the headings, labels, designations, and and other applicable provisions of the
required disclosure items under this Electronic Signatures in Global and
section from fitting in the space pro- National Commerce Act (E-Sign Act)
vided on form H–25. (15 U.S.C. 7001 et seq.).
(ix) Customary recitals and informa- (2) The date of transfer. For purposes
tion. An additional page may be at- of this section, the date of transfer to
jspears on DSK121TN23PROD with CFR
tached to the form for the purpose of the covered person may, at the covered
including customary recitals and infor- person’s option, be either the date of
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§ 1026.39 12 CFR Ch. X (1–1–25 Edition)
acquisition recognized in the books and ferred, and state the following, except
records of the acquiring party, or the that the information required by para-
date of transfer recognized in the books graph (d)(5) of this section shall be
and records of the transferring party. stated only for a mortgage loan that is
(3) Multiple consumers. If more than a closed-end consumer credit trans-
one consumer is liable on the obliga- action secured by a dwelling or real
tion, a covered person may mail or de- property other than a reverse mortgage
liver the disclosures to any consumer transaction subject to § 1026.33 of this
who is primarily liable. part:
(4) Multiple transfers. If a mortgage (1) The name, address, and telephone
loan is acquired by a covered person number of the covered person.
and subsequently sold, assigned, or (i) If a single disclosure is provided
otherwise transferred to another cov- on behalf of more than one covered per-
ered person, a single disclosure may be son, the information required by this
provided on behalf of both covered per- paragraph shall be provided for each of
sons if the disclosure satisfies the tim- them unless paragraph (d)(1)(ii) of this
ing and content requirements applica- section applies.
ble to each covered person. (ii) If a single disclosure is provided
(5) Multiple covered persons. If an ac- on behalf of more than one covered per-
quisition involves multiple covered son and one of them has been author-
persons who jointly acquire the loan, a ized in accordance with paragraph
single disclosure must be provided on (d)(3) of this section to receive the con-
behalf of all covered persons. sumer’s notice of the right to rescind
(c) Exceptions. Notwithstanding para- and resolve issues concerning the con-
graph (b) of this section, a covered per- sumer’s payments on the loan, the in-
son is not subject to the requirements formation required by paragraph (d)(1)
of this section with respect to a par- of this section may be provided only
ticular mortgage loan if: for that covered person.
(1) The covered person sells, or other- (2) The date of transfer.
wise transfers or assigns legal title to (3) The name, address and telephone
the mortgage loan on or before the 30th number of an agent or party authorized
calendar day following the date that to receive notice of the right to rescind
the covered person acquired the mort- and resolve issues concerning the con-
gage loan which shall be the date of sumer’s payments on the loan. How-
transfer recognized for purposes of ever, no information is required to be
paragraph (b)(2) of this section; provided under this paragraph if the
(2) The mortgage loan is transferred consumer can use the information pro-
to the covered person in connection vided under paragraph (d)(1) of this sec-
with a repurchase agreement that obli- tion for these purposes.
gates the transferor to repurchase the (4) Where transfer of ownership of the
loan. However, if the transferor does debt to the covered person is or may be
not repurchase the loan, the covered recorded in public records, or, alter-
person must provide the disclosures re- natively, that the transfer of owner-
quired by this section within 30 days ship has not been recorded in public
after the date that the transaction is records at the time the disclosure is
recognized as an acquisition on its provided.
books and records; or (5) Partial payment policy. Under the
(3) The covered person acquires only subheading ‘‘Partial Payment’’:
a partial interest in the loan and the (i) If periodic payments that are less
party authorized to receive the con- than the full amount due are accepted,
sumer’s notice of the right to rescind a statement that the covered person,
and resolve issues concerning the con- using the term ‘‘lender,’’ may accept
sumer’s payments on the loan does not partial payments and apply such pay-
change as a result of the transfer of the ments to the consumer’s loan;
partial interest. (ii) If periodic payments that are less
(d) Content of required disclosures. The than the full amount due are accepted
disclosures required by this section but not applied to a consumer’s loan
jspears on DSK121TN23PROD with CFR
shall identify the mortgage loan that until the consumer pays the remainder
was sold, assigned or otherwise trans- of the full amount due, a statement
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Consumer Financial Protection Bureau § 1026.40
that the covered person, using the term be provided on the application form or
‘‘lender,’’ may hold partial payments on a separate form. The disclosure de-
in a separate account until the con- scribed in paragraph (d)(4)(iii), the
sumer pays the remainder of the pay- itemization of third-party fees de-
ment and then apply the full periodic scribed in paragraph (d)(8), and the
payment to the consumer’s loan; variable-rate information described in
(iii) If periodic payments that are paragraph (d)(12) of this section may be
less than the full amount due are not provided separately from the other re-
accepted, a statement that the covered quired disclosures.
person, using the term ‘‘lender,’’ does (2) Precedence of certain disclosures.
not accept any partial payments; and The disclosures described in paragraph
(iv) A statement that, if the loan is (d)(1) through (4)(ii) of this section
sold, the new covered person, using the shall precede the other required disclo-
term ‘‘lender,’’ may have a different sures.
policy. (3) For an application that is
(e) Optional disclosures. In addition to accessed by the consumer in electronic
the information required to be dis- form, the disclosures required under
closed under paragraph (d) of this sec- this section may be provided to the
tion, a covered person may, at its op- consumer in electronic form on or with
tion, provide any other information re- the application.
garding the transaction. (b) Time of disclosures. The disclosures
(f) Successor in interest. If, upon con- and brochure required by paragraphs
firmation, a servicer provides a con- (d) and (e) of this section shall be pro-
firmed successor in interest who is not vided at the time an application is pro-
liable on the mortgage loan obligation vided to the consumer. The disclosures
with a written notice and acknowledg- and the brochure may be delivered or
ment form in accordance with Regula- placed in the mail not later than three
tion X, § 1024.32(c)(1) of this chapter, business days following receipt of a
the servicer is not required to provide consumer’s application in the case of
to the confirmed successor in interest applications contained in magazines or
any written disclosure required by other publications, or when the appli-
paragraph (b) of this section unless and cation is received by telephone or
until the confirmed successor in inter- through an intermediary agent or
est either assumes the mortgage loan broker.
obligation under State law or has pro- (c) Duties of third parties. Persons
vided the servicer an executed ac- other than the creditor who provide ap-
knowledgment in accordance with Reg- plications to consumers for home eq-
ulation X, § 1024.32(c)(1)(iv) of this chap- uity plans must provide the brochure
ter, that the confirmed successor in in- required under paragraph (e) of this
terest has not revoked. section at the time an application is
[76 FR 79772, Dec. 22, 2011, as amended at 78 provided. If such persons have the dis-
FR 80130, Dec. 31, 2013; 81 FR 72388, Oct. 19, closures required under paragraph (d)
2016] of this section for a creditor’s home eq-
uity plan, they also shall provide the
§ 1026.40 Requirements for home eq- disclosures at such time. The disclo-
uity plans. sures and the brochure may be deliv-
The requirements of this section ered or placed in the mail not later
apply to open-end credit plans secured than three business days following re-
by the consumer’s dwelling. For pur- ceipt of a consumer’s application in the
poses of this section, an annual per- case of applications contained in maga-
centage rate is the annual percentage zines or other publications, or when
rate corresponding to the periodic rate the application is received by tele-
as determined under § 1026.14(b). phone or through an intermediary
(a) Form of disclosures—(1) General. agent or broker.
The disclosures required by paragraph (d) Content of disclosures. The creditor
(d) of this section shall be made clearly shall provide the following disclosures,
and conspicuously and shall be grouped as applicable:
jspears on DSK121TN23PROD with CFR
together and segregated from all unre- (1) Retention of information. A state-
lated information. The disclosures may ment that the consumer should make
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§ 1026.40 12 CFR Ch. X (1–1–25 Edition)
or otherwise retain a copy of the dis- balloon payment may result. A balloon
closures. payment results if paying the min-
(2) Conditions for disclosed terms. (i) A imum periodic payments does not fully
statement of the time by which the amortize the outstanding balance by a
consumer must submit an application specified date or time, and the con-
to obtain specific terms disclosed and sumer must repay the entire out-
an identification of any disclosed term standing balance at such time.
that is subject to change prior to open- (iii) An example, based on a $10,000
ing the plan. outstanding balance and a recent an-
(ii) A statement that, if a disclosed nual percentage rate, showing the min-
term changes (other than a change due
imum periodic payment, any balloon
to fluctuations in the index in a vari-
payment, and the time it would take to
able-rate plan) prior to opening the
plan and the consumer therefore elects repay the $10,000 outstanding balance if
not to open the plan, the consumer the consumer made only those pay-
may receive a refund of all fees paid in ments and obtained no additional ex-
connection with the application. tensions of credit. For fixed-rate plans,
(3) Security interest and risk to home. A a recent annual percentage rate is a
statement that the creditor will ac- rate that has been in effect under the
quire a security interest in the con- plan within the twelve months pre-
sumer’s dwelling and that loss of the ceding the date the disclosures are pro-
dwelling may occur in the event of de- vided to the consumer. For variable-
fault. rate plans, a recent annual percentage
(4) Possible actions by creditor. (i) A rate is the most recent rate provided in
statement that, under certain condi- the historical example described in
tions, the creditor may terminate the paragraph (d)(12)(xi) of this section or a
plan and require payment of the out- rate that has been in effect under the
standing balance in full in a single pay- plan since the date of the most recent
ment and impose fees upon termi- rate in the table.
nation; prohibit additional extensions (6) Annual percentage rate. For fixed-
of credit or reduce the credit limit; rate plans, a recent annual percentage
and, as specified in the initial agree- rate imposed under the plan and a
ment, implement certain changes in
statement that the rate does not in-
the plan.
clude costs other than interest. A re-
(ii) A statement that the consumer
cent annual percentage rate is a rate
may receive, upon request, information
about the conditions under which such that has been in effect under the plan
actions may occur. within the twelve months preceding
(iii) In lieu of the disclosure required the date the disclosures are provided to
under paragraph (d)(4)(ii) of this sec- the consumer.
tion, a statement of such conditions. (7) Fees imposed by creditor. An
(5) Payment terms. The payment terms itemization of any fees imposed by the
of the plan. If different payment terms creditor to open, use, or maintain the
may apply to the draw and any repay- plan, stated as a dollar amount or per-
ment period, or if different payment centage, and when such fees are pay-
terms may apply within either period, able.
the disclosures shall reflect the dif- (8) Fees imposed by third parties to open
ferent payment terms. The payment a plan. A good faith estimate, stated as
terms of the plan include: a single dollar amount or range, of any
(i) The length of the draw period and fees that may be imposed by persons
any repayment period. other than the creditor to open the
(ii) An explanation of how the min- plan, as well as a statement that the
imum periodic payment will be deter- consumer may receive, upon request, a
mined and the timing of the payments. good faith itemization of such fees. In
If paying only the minimum periodic
lieu of the statement, the itemization
payments may not repay any of the
of such fees may be provided.
principal or may repay less than the
jspears on DSK121TN23PROD with CFR
outstanding balance, a statement of (9) Negative amortization. A statement
this fact, as well as a statement that a that negative amortization may occur
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Consumer Financial Protection Bureau § 1026.40
and that negative amortization in- that may be imposed under each pay-
creases the principal balance and re- ment option.
duces the consumer’s equity in the (x) The minimum periodic payment
dwelling. required when the maximum annual
(10) Transaction requirements. Any percentage rate for each payment op-
limitations on the number of exten- tion is in effect for a $10,000 out-
sions of credit and the amount of credit standing balance, and a statement of
that may be obtained during any time the earliest date or time the maximum
period, as well as any minimum out- rate may be imposed.
standing balance and minimum draw (xi) An historical example, based on a
requirements, stated as dollar amounts $10,000 extension of credit, illustrating
or percentages. how annual percentage rates and pay-
(11) Tax implications. A statement ments would have been affected by
that the consumer should consult a tax index value changes implemented ac-
advisor regarding the deductibility of cording to the terms of the plan. The
interest and charges under the plan. historical example shall be based on
(12) Disclosures for variable-rate plans. the most recent 15 years of index val-
For a plan in which the annual per- ues (selected for the same time period
centage rate is variable, the following each year) and shall reflect all signifi-
disclosures, as applicable: cant plan terms, such as negative am-
(i) The fact that the annual percent- ortization, rate carryover, rate dis-
age rate, payment, or term may change counts, and rate and payment limita-
due to the variable-rate feature. tions, that would have been affected by
(ii) A statement that the annual per- the index movement during the period.
centage rate does not include costs (xii) A statement that rate informa-
other than interest. tion will be provided on or with each
(iii) The index used in making rate periodic statement.
adjustments and a source of informa- (e) Brochure. The home equity bro-
tion about the index. chure entitled ‘‘What You Should
(iv) An explanation of how the an- Know About Home Equity Lines of
nual percentage rate will be deter- Credit’’ or a suitable substitute shall
mined, including an explanation of how be provided.
the index is adjusted, such as by the (f) Limitations on home equity plans.
addition of a margin. No creditor may, by contract or other-
(v) A statement that the consumer wise:
should ask about the current index (1) Change the annual percentage
value, margin, discount or premium, rate unless:
and annual percentage rate. (i) Such change is based on an index
(vi) A statement that the initial an- that is not under the creditor’s control;
nual percentage rate is not based on and
the index and margin used to make (ii) Such index is available to the
later rate adjustments, and the period general public.
of time such initial rate will be in ef- (2) Terminate a plan and demand re-
fect. payment of the entire outstanding bal-
(vii) The frequency of changes in the ance in advance of the original term
annual percentage rate. (except for reverse mortgage trans-
(viii) Any rules relating to changes in actions that are subject to paragraph
the index value and the annual per- (f)(4) of this section) unless:
centage rate and resulting changes in (i) There is fraud or material mis-
the payment amount, including, for ex- representation by the consumer in con-
ample, an explanation of payment limi- nection with the plan;
tations and rate carryover. (ii) The consumer fails to meet the
(ix) A statement of any annual or repayment terms of the agreement for
more frequent periodic limitations on any outstanding balance;
changes in the annual percentage rate (iii) Any action or inaction by the
(or a statement that no annual limita- consumer adversely affects the credi-
jspears on DSK121TN23PROD with CFR
tion exists), as well as a statement of tor’s security for the plan, or any right
the maximum annual percentage rate of the creditor in such security; or
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§ 1026.40 12 CFR Ch. X (1–1–25 Edition)
(iv) Federal law dealing with credit index is newly established and there-
extended by a depository institution to fore does not have any rate history, it
its executive officers specifically re- may be used if the replacement index
quires that as a condition of the plan value in effect on October 18, 2021, and
the credit shall become due and pay- the replacement margin will produce
able on demand, provided that the an annual percentage rate substan-
creditor includes such a provision in tially similar to the rate calculated
the initial agreement. using the LIBOR index value in effect
(3) Change any term, except that a on October 18, 2021, and the margin
creditor may: that applied to the variable rate imme-
(i) Provide in the initial agreement diately prior to the replacement of the
that it may prohibit additional exten- LIBOR index used under the plan. If
sions of credit or reduce the credit the replacement index is not published
limit during any period in which the on October 18, 2021, the creditor gen-
maximum annual percentage rate is erally must use the next calendar day
reached. A creditor also may provide in for which both the LIBOR index and
the initial agreement that specified the replacement index are published as
changes will occur if a specified event the date for selecting indices values in
takes place (for example, that the an- determining whether the annual per-
nual percentage rate will increase a centage rate based on the replacement
specified amount if the consumer index is substantially similar to the
leaves the creditor’s employment). rate based on the LIBOR index. The
(ii)(A) Change the index and margin one exception is that if the replace-
used under the plan if the original ment index is the Board-selected
index is no longer available, the re- benchmark replacement for consumer
placement index has historical fluctua- loans to replace the 1-month, 3-month,
tions substantially similar to that of 6-month, or 12-month U.S. Dollar
the original index, and the replacement LIBOR index, the creditor must use the
index and replacement margin would index value on June 30, 2023, for the
have resulted in an annual percentage LIBOR index and, for the Board-se-
rate substantially similar to the rate lected benchmark replacement for con-
in effect at the time the original index sumer loans, must use the index value
became unavailable. If the replacement on the first date that index is pub-
index is newly established and there- lished, in determining whether the an-
fore does not have any rate history, it nual percentage rate based on the re-
may be used if it and the replacement placement index is substantially simi-
margin will produce an annual percent- lar to the rate based on the LIBOR
age rate substantially similar to the index.
rate in effect when the original index
(iii) Make a specified change if the
became unavailable; or
consumer specifically agrees to it in
(B) If a variable rate on the plan is
writing at that time.
calculated using a LIBOR index,
change the LIBOR index and the mar- (iv) Make a change that will un-
gin for calculating the variable rate on equivocally benefit the consumer
or after April 1, 2022, to a replacement throughout the remainder of the plan.
index and a replacement margin, as (v) Make an insignificant change to
long as historical fluctuations in the terms.
LIBOR index and replacement index (vi) Prohibit additional extensions of
were substantially similar, and as long credit or reduce the credit limit appli-
as the replacement index value in ef- cable to an agreement during any pe-
fect on October 18, 2021, and replace- riod in which:
ment margin will produce an annual (A) The value of the dwelling that se-
percentage rate substantially similar cures the plan declines significantly
to the rate calculated using the LIBOR below the dwelling’s appraised value
index value in effect on October 18, for purposes of the plan;
2021, and the margin that applied to (B) The creditor reasonably believes
the variable rate immediately prior to that the consumer will be unable to
jspears on DSK121TN23PROD with CFR
the replacement of the LIBOR index fulfill the repayment obligations under
used under the plan. If the replacement the plan because of a material change
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Consumer Financial Protection Bureau § 1026.41
in the consumer’s financial cir- § 1026.41 Periodic statements for resi-
cumstances; dential mortgage loans.
(C) The consumer is in default of any (a) In general—(1) Scope. This section
material obligation under the agree- applies to a closed-end consumer credit
ment; transaction secured by a dwelling, un-
(D) The creditor is precluded by gov- less an exemption in paragraph (e) of
ernment action from imposing the an- this section applies. A closed-end con-
nual percentage rate provided for in sumer credit transaction secured by a
the agreement; dwelling is referred to as a mortgage
(E) The priority of the creditor’s se- loan for purposes of this section.
curity interest is adversely affected by (2) Periodic statements. A servicer of a
government action to the extent that transaction subject to this section
shall provide the consumer, for each
the value of the security interest is
billing cycle, a periodic statement
less than 120 percent of the credit line; meeting the requirements of para-
or graphs (b), (c), and (d) of this section. If
(F) The creditor is notified by its reg- a mortgage loan has a billing cycle
ulatory agency that continued ad- shorter than a period of 31 days (for ex-
vances constitute an unsafe and un- ample, a bi-weekly billing cycle), a
sound practice. periodic statement covering an entire
(4) For reverse mortgage transactions month may be used. For the purposes
that are subject to § 1026.33, terminate of this section, servicer includes the
a plan and demand repayment of the creditor, assignee, or servicer, as appli-
entire outstanding balance in advance cable. A creditor or assignee that does
of the original term except: not currently own the mortgage loan
(i) In the case of default; or the mortgage servicing rights is not
(ii) If the consumer transfers title to subject to the requirement in this sec-
the property securing the note; tion to provide a periodic statement.
(b) Timing of the periodic statement.
(iii) If the consumer ceases using the
The periodic statement must be deliv-
property securing the note as the pri-
ered or placed in the mail within a rea-
mary dwelling; or
sonably prompt time after the payment
(iv) Upon the consumer’s death. due date or the end of any courtesy pe-
(g) Refund of fees. A creditor shall re- riod provided for the previous billing
fund all fees paid by the consumer to cycle.
anyone in connection with an applica- (c) Form of the periodic statement. The
tion if any term required to be dis- servicer must make the disclosures re-
closed under paragraph (d) of this sec- quired by this section clearly and con-
tion changes (other than a change due spicuously in writing, or electronically
to fluctuations in the index in a vari- if the consumer agrees, and in a form
able-rate plan) before the plan is that the consumer may keep. Sample
opened and, as a result, the consumer forms for periodic statements are pro-
elects not to open the plan. vided in appendix H–30. Proper use of
(h) Imposition of nonrefundable fees. these forms complies with the require-
Neither a creditor nor any other person ments of this paragraph (c) and the
may impose a nonrefundable fee in con- layout requirements in paragraph (d) of
nection with an application until three this section.
business days after the consumer re- (d) Content and layout of the periodic
statement. The periodic statement re-
ceives the disclosures and brochure re-
quired by this section shall include:
quired under this section. If the disclo-
(1) Amount due. Grouped together in
sures and brochure are mailed to the close proximity to each other and lo-
consumer, the consumer is considered cated at the top of the first page of the
to have received them three business statement:
days after they are mailed. (i) The payment due date;
[76 FR 79772, Dec. 22, 2011, as amended at 86 (ii) The amount of any late payment
fee, and the date on which that fee will
jspears on DSK121TN23PROD with CFR
FR 69781, Dec. 8, 2021; 88 FR 30622, May 11,
2023] be imposed if payment has not been re-
ceived; and
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§ 1026.41 12 CFR Ch. X (1–1–25 Edition)
(iii) The amount due, shown more funds to be applied. The information
prominently than other disclosures on must be on the front page of the state-
the page and, if the transaction has ment or, alternatively, may be in-
multiple payment options, the amount cluded on a separate page enclosed
due under each of the payment options. with the periodic statement or in a sep-
(2) Explanation of amount due. The fol- arate letter.
lowing items, grouped together in close (6) Contact information. A toll-free
proximity to each other and located on telephone number and, if applicable, an
the first page of the statement: electronic mailing address that may be
(i) The monthly payment amount, in- used by the consumer to obtain infor-
cluding a breakdown showing how
mation about the consumer’s account,
much, if any, will be applied to prin-
located on the front page of the state-
cipal, interest, and escrow and, if a
mortgage loan has multiple payment ment.
options, a breakdown of each of the (7) Account information. The following
payment options along with informa- information:
tion on whether the principal balance (i) The amount of the outstanding
will increase, decrease, or stay the principal balance;
same for each option listed; (ii) The current interest rate in effect
(ii) The total sum of any fees or for the mortgage loan;
charges imposed since the last state- (iii) The date after which the interest
ment; and rate may next change;
(iii) Any payment amount past due. (iv) The existence of any prepayment
(3) Past payment breakdown. The fol- penalty, as defined in § 1026.32(b)(6)(i),
lowing items, grouped together in close that may be charged;
proximity to each other and located on (v) The Web site to access either the
the first page of the statement: Bureau list or the HUD list of home-
(i) The total of all payments received
ownership counselors and counseling
since the last statement, including a
organizations and the HUD toll-free
breakdown showing the amount, if any,
that was applied to principal, interest, telephone number to access contact in-
escrow, fees and charges, and the formation for homeownership coun-
amount, if any, sent to any suspense or selors or counseling organizations; and
unapplied funds account; and (8) Delinquency information. If the
(ii) The total of all payments re- consumer is more than 45 days delin-
ceived since the beginning of the cur- quent, the following items, grouped to-
rent calendar year, including a break- gether in close proximity to each other
down of that total showing the and located on the first page of the
amount, if any, that was applied to statement or, alternatively, on a sepa-
principal, interest, escrow, fees and rate page enclosed with the periodic
charges, and the amount, if any, cur- statement or in a separate letter:
rently held in any suspense or (i) The length of the consumer’s de-
unapplied funds account. linquency;
(4) Transaction activity. A list of all (ii) A notification of possible risks,
the transaction activity that occurred such as foreclosure, and expenses, that
since the last statement. For purposes may be incurred if the delinquency is
of this paragraph (d)(4), transaction ac- not cured;
tivity means any activity that causes a
(iii) An account history showing, for
credit or debit to the amount currently
the previous six months or the period
due. This list must include the date of
the transaction, a brief description of since the last time the account was
the transaction, and the amount of the current, whichever is shorter, the
transaction for each activity on the amount remaining past due from each
list. billing cycle or, if any such payment
(5) Partial payment information. If a was fully paid, the date on which it was
statement reflects a partial payment credited as fully paid;
that was placed in a suspense or (iv) A notice indicating any loss
jspears on DSK121TN23PROD with CFR
unapplied funds account, information mitigation program to which the con-
explaining what must be done for the sumer has agreed, if applicable;
146
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Consumer Financial Protection Bureau § 1026.41
(v) A notice of whether the servicer all of which the servicer (or an affil-
has made the first notice or filing re- iate) is the creditor or assignee;
quired by applicable law for any judi- (B) Is a Housing Finance Agency, as
cial or non-judicial foreclosure process, defined in 24 CFR 266.5; or
if applicable; (C) Is a nonprofit entity that services
(vi) The total payment amount need- 5,000 or fewer mortgage loans, includ-
ed to bring the account current; and ing any mortgage loans serviced on be-
(vii) A reference to the homeowner- half of associated nonprofit entities,
ship counselor information disclosed for all of which the servicer or an asso-
pursuant to paragraph (d)(7)(v) of this ciated nonprofit entity is the creditor.
section. For purposes of this paragraph
(e) Exemptions—(1) Reverse mortgages. (e)(4)(ii)(C), the following definitions
Reverse mortgage transactions, as de- apply:
fined by § 1026.33(a), are exempt from (1) The term ‘‘nonprofit entity’’
the requirements of this section. means an entity having a tax exemp-
(2) Timeshare plans. Transactions se- tion ruling or determination letter
cured by consumers’ interests in from the Internal Revenue Service
timeshare plans, as defined by 11 U.S.C. under section 501(c)(3) of the Internal
101(53D), are exempt from the require- Revenue Code of 1986 (26 U.S.C.
ments of this section. 501(c)(3); 26 CFR 1.501(c)(3)–1), and;
(3) Coupon books. The requirements of (2) The term ‘‘associated nonprofit
paragraph (a) of this section do not entities’’ means nonprofit entities that
apply to fixed-rate loans if the by agreement operate using a common
servicer: name, trademark, or servicemark to
(i) Provides the consumer with a cou- further and support a common chari-
pon book that includes on each coupon table mission or purpose.
the information listed in paragraph (iii) Small servicer determination. In de-
(d)(1) of this section; termining whether a servicer satisfies
(ii) Provides the consumer with a paragraph (e)(4)(ii)(A) of this section,
coupon book that includes anywhere in the servicer is evaluated based on the
the coupon book: mortgage loans serviced by the servicer
(A) The account information listed in and any affiliates as of January 1 and
paragraph (d)(7) of this section; for the remainder of the calendar year.
(B) The contact information for the In determining whether a servicer sat-
servicer, listed in paragraph (d)(6) of isfies paragraph (e)(4)(ii)(C) of this sec-
this section; and tion, the servicer is evaluated based on
(C) Information on how the consumer the mortgage loans serviced by the
can obtain the information listed in servicer as of January 1 and for the re-
paragraph (e)(3)(iii) of this section; mainder of the calendar year. A
(iii) Makes available upon request to servicer that ceases to qualify as a
the consumer by telephone, in writing, small servicer will have six months
in person, or electronically, if the con- from the time it ceases to qualify or
sumer consents, the information listed until the next January 1, whichever is
in paragraph (d)(2) through (5) of this later, to comply with any requirements
section; and from which the servicer is no longer ex-
(iv) Provides the consumer the infor- empt as a small servicer. The following
mation listed in paragraph (d)(8) of this mortgage loans are not considered in
section in writing, for any billing cycle determining whether a servicer quali-
during which the consumer is more fies as a small servicer:
than 45 days delinquent. (A) Mortgage loans voluntarily serv-
(4) Small servicers—(i) Exemption. A iced by the servicer for a non-affiliate
creditor, assignee, or servicer is ex- of the servicer and for which the
empt from the requirements of this servicer does not receive any com-
section for mortgage loans serviced by pensation or fees.
a small servicer. (B) Reverse mortgage transactions.
(ii) Small servicer defined. A small (C) Mortgage loans secured by con-
servicer is a servicer that: sumers’ interests in timeshare plans.
jspears on DSK121TN23PROD with CFR
(A) Services, together with any affili- (D) Transactions serviced by the
ates, 5,000 or fewer mortgage loans, for servicer for a seller financer that
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§ 1026.41 12 CFR Ch. X (1–1–25 Edition)
meets all of the criteria identified in ing the servicer to cease providing a
§ 1026.36(a)(5). periodic statement or coupon book.
(5) Certain consumers in bankruptcy— (iii) Exclusive address. A servicer may
(i) Exemption. Except as provided in establish an address that a consumer
paragraph (e)(5)(ii) of this section, a must use to submit a written request
servicer is exempt from the require- under paragraph (e)(5)(i)(B)(1) or
ments of this section with regard to a (e)(5)(ii) of this section, provided that
mortgage loan if: the servicer notifies the consumer of
(A) Any consumer on the mortgage the address in a manner that is reason-
loan is a debtor in bankruptcy under ably designed to inform the consumer
title 11 of the United States Code or of the address. If a servicer designates
has discharged personal liability for a specific address for requests under
the mortgage loan pursuant to 11 paragraph (e)(5)(i)(B)(1) or (e)(5)(ii) of
U.S.C. 727, 1141, 1228, or 1328; and this section, the servicer shall des-
(B) With regard to any consumer on ignate the same address for purposes of
the mortgage loan: both paragraphs (e)(5)(i)(B)(1) and
(1) The consumer requests in writing (e)(5)(ii) of this section.
that the servicer cease providing a (iv) Timing of compliance following
periodic statement or coupon book; transition—(A) Triggering events for
(2) The consumer’s bankruptcy plan transitioning to modified and unmodified
provides that the consumer will sur- periodic statements. A servicer transi-
render the dwelling securing the mort- tions to providing a periodic statement
gage loan, provides for the avoidance of or coupon book with the modifications
the lien securing the mortgage loan, or set forth in paragraph (f) of this sec-
otherwise does not provide for, as ap- tion or to providing a periodic state-
plicable, the payment of pre-bank- ment or coupon book without such
ruptcy arrearage or the maintenance of modifications when one of the fol-
payments due under the mortgage
lowing three events occurs:
loan;
(1) A mortgage loan becomes subject
(3) A court enters an order in the
to the requirements of paragraph (f) of
bankruptcy case providing for the
this section;
avoidance of the lien securing the
mortgage loan, lifting the automatic (2) A mortgage loan ceases to be sub-
stay pursuant to 11 U.S.C. 362 with re- ject to the requirements of paragraph
gard to the dwelling securing the mort- (f) of this section; or
gage loan, or requiring the servicer to (3) A servicer ceases to qualify for an
cease providing a periodic statement or exemption pursuant to paragraph
coupon book; or (e)(5)(i) of this section with respect to a
(4) The consumer files with the court mortgage loan.
overseeing the bankruptcy case a (B) Single-statement exemption. As of
statement of intention pursuant to 11 the date on which one of the events
U.S.C. 521(a) identifying an intent to listed in paragraph (e)(5)(iv)(A) of this
surrender the dwelling securing the section occurs, a servicer is exempt
mortgage loan and a consumer has not from the requirements of this section
made any partial or periodic payment with respect to the next periodic state-
on the mortgage loan after the com- ment or coupon book that would other-
mencement of the consumer’s bank- wise be required but thereafter must
ruptcy case. provide modified or unmodified peri-
(ii) Reaffirmation or consumer request odic statements or coupon books that
to receive statement or coupon book. A comply with the requirements of this
servicer ceases to qualify for an exemp- section.
tion pursuant to paragraph (e)(5)(i) of (6) Charged-off loans. (i) A servicer is
this section with respect to a mortgage exempt from the requirements of this
loan if the consumer reaffirms personal section for a mortgage loan if the
liability for the loan or any consumer servicer:
on the loan requests in writing that the (A) Has charged off the loan in ac-
servicer provide a periodic statement cordance with loan-loss provisions and
jspears on DSK121TN23PROD with CFR
or coupon book, unless a court enters will not charge any additional fees or
an order in the bankruptcy case requir- interest on the account; and
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Consumer Financial Protection Bureau § 1026.41
(B) Provides, within 30 days of other disclosures on the page shall not
charge-off or the most recent periodic apply.
statement, a periodic statement, clear- (2) Bankruptcy notices. The periodic
ly and conspicuously labeled ‘‘Suspen- statement must include the following:
sion of Statements & Notice of Charge (i) A statement identifying the con-
Off—Retain This Copy for Your sumer’s status as a debtor in bank-
Records.’’ The periodic statement must ruptcy or the discharged status of the
clearly and conspicuously explain that, mortgage loan; and
as applicable, the mortgage loan has (ii) A statement that the periodic
been charged off and the servicer will statement is for informational pur-
not charge any additional fees or inter- poses only.
est on the account; the servicer will no (3) Chapter 12 and chapter 13 con-
longer provide the consumer a periodic sumers. In addition to any other provi-
statement for each billing cycle; the sions of this paragraph (f) that may
lien on the property remains in place apply, with regard to a mortgage loan
and the consumer remains liable for for which any consumer with primary
the mortgage loan obligation and any liability is a debtor in a chapter 12 or
obligations arising from or related to chapter 13 bankruptcy case, the re-
the property, which may include prop- quirements of this section are subject
erty taxes; the consumer may be re- to the following modifications:
quired to pay the balance on the ac-
(i) Requirements not applicable. In ad-
count in the future, for example, upon
dition to omitting the information set
sale of the property; the balance on the
forth in paragraph (f)(1) of this section,
account is not being canceled or for-
the periodic statement may also omit
given; and the loan may be purchased,
the information set forth in paragraphs
assigned, or transferred.
(d)(8)(iii), (iv), (vi), and (vii) of this sec-
(ii) Resuming compliance. (A) If a
tion.
servicer fails at any time to treat a
(ii) Amount due. The amount due in-
mortgage loan that is exempt under
formation set forth in paragraph (d)(1)
paragraph (e)(6)(i) of this section as
of this section may be limited to the
charged off or charges any additional
date and amount of the post-petition
fees or interest on the account, the ob-
payments due and any post-petition
ligation to provide a periodic state-
fees and charges imposed by the
ment pursuant to this section resumes.
servicer.
(B) Prohibition on retroactive fees. A
servicer may not retroactively assess (iii) Explanation of amount due. The
fees or interest on the account for the explanation of amount due information
period of time during which the exemp- set forth in paragraph (d)(2) of this sec-
tion in paragraph (e)(6)(i) of this sec- tion may be limited to:
tion applied. (A) The monthly post-petition pay-
(f) Modified periodic statements and ment amount, including a breakdown
coupon books for certain consumers in showing how much, if any, will be ap-
bankruptcy. While any consumer on a plied to principal, interest, and escrow;
mortgage loan is a debtor in bank- (B) The total sum of any post-peti-
ruptcy under title 11 of the United tion fees or charges imposed since the
States Code, or if such consumer has last statement; and
discharged personal liability for the (C) Any post-petition payment
mortgage loan pursuant to 11 U.S.C. amount past due.
727, 1141, 1228, or 1328, the requirements (iv) Transaction activity. The trans-
of this section are subject to the fol- action activity information set forth in
lowing modifications with regard to paragraph (d)(4) of this section must
that mortgage loan: include all payments the servicer has
(1) Requirements not applicable. The received since the last statement, in-
periodic statement may omit the infor- cluding all post-petition and pre-peti-
mation set forth in paragraphs (d)(1)(ii) tion payments and payments of post-
and (d)(8)(i), (ii), and (v) of this section. petition fees and charges, and all post-
The requirement in paragraph (d)(1)(iii) petition fees and charges the servicer
jspears on DSK121TN23PROD with CFR
of this section that the amount due has imposed since the last statement.
must be shown more prominently than The brief description of the activity
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§ 1026.42 12 CFR Ch. X (1–1–25 Edition)
need not identify the source of any (5) Coupon books. A servicer that pro-
payments. vides a coupon book instead of a peri-
(v) Pre-petition arrearage. If applica- odic statement under paragraph (e)(3)
ble, a servicer must disclose, grouped of this section must include in the cou-
in close proximity to each other and lo- pon book the disclosures set forth in
cated on the first page of the state- paragraphs (f)(2) and (f)(3)(vi) of this
ment or, alternatively, on a separate section, as applicable. The servicer
page enclosed with the periodic state- may include these disclosures any-
ment or in a separate letter: where in the coupon book provided to
(A) The total of all pre-petition pay- the consumer or on a separate page en-
ments received since the last state- closed with the coupon book. The
ment; servicer must make available upon re-
(B) The total of all pre-petition pay- quest to the consumer by telephone, in
ments received since the beginning of writing, in person, or electronically, if
the consumer’s bankruptcy case; and the consumer consents, the informa-
(C) The current balance of the con- tion listed in paragraph (f)(3)(v) of this
sumer’s pre-petition arrearage. section, as applicable. The modifica-
(vi) Additional disclosures. The peri- tions set forth in paragraphs (f)(1) and
odic statement must include, as appli- (f)(3)(i) through (iv) and (vi) of this sec-
cable: tion apply to a coupon book and other
(A) A statement that the amount due information a servicer provides to the
includes only post-petition payments consumer under paragraph (e)(3) of this
and does not include other payments section.
that may be due under the terms of the (g) Successor in interest. If, upon con-
consumer’s bankruptcy plan; firmation, a servicer provides a con-
(B) If the consumer’s bankruptcy firmed successor in interest who is not
plan requires the consumer to make liable on the mortgage loan obligation
the post-petition mortgage payments with a written notice and acknowledg-
directly to a bankruptcy trustee, a ment form in accordance with Regula-
statement that the consumer should tion X, § 1024.32(c)(1) of this chapter,
send the payment to the trustee and the servicer is not required to provide
not to the servicer; to the confirmed successor in interest
(C) A statement that the information any written disclosure required by this
disclosed on the periodic statement section unless and until the confirmed
may not include payments the con- successor in interest either assumes
sumer has made to the trustee and may the mortgage loan obligation under
not be consistent with the trustee’s State law or has provided the servicer
records; an executed acknowledgment in ac-
(D) A statement that encourages the cordance with Regulation X,
consumer to contact the consumer’s § 1024.32(c)(1)(iv) of this chapter, that
attorney or the trustee with questions the confirmed successor in interest has
regarding the application of payments; not revoked.
and
(E) If the consumer is more than 45 [78 FR 11007, Feb. 14, 2013, as amended at 78
days delinquent on post-petition pay- FR 44718, July 24, 2013; 78 FR 63005, Oct. 23,
2013; 79 FR 65322, Nov. 3, 2014; 81 FR 72388,
ments, a statement that the servicer
Oct. 19, 2016; 83 FR 10559, Mar. 12, 2018]
has not received all the payments that
became due since the consumer filed § 1026.42 Valuation independence.
for bankruptcy.
(4) Multiple obligors. If this paragraph (a) Scope. This section applies to any
(f) applies in connection with a mort- consumer credit transaction secured by
gage loan with more than one primary the consumer’s principal dwelling.
obligor, the servicer may provide the (b) Definitions. For purposes of this
modified statement to any or all of the section:
primary obligors, even if a primary ob- (1) ‘‘Covered person’’ means a cred-
ligor to whom the servicer provides the itor with respect to a covered trans-
jspears on DSK121TN23PROD with CFR
modified statement is not a debtor in action or a person that provides ‘‘set-
bankruptcy. tlement services,’’ as defined in 12
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Consumer Financial Protection Bureau § 1026.42
U.S.C. 2602(3) and implementing regula- consumer’s principal dwelling at or
tions, in connection with a covered above a certain amount;
transaction. (C) Implying to a person that pre-
(2) ‘‘Covered transaction’’ means an pares valuations that current or future
extension of consumer credit that is or retention of the person depends on the
will be secured by the consumer’s prin- amount at which the person estimates
cipal dwelling, as defined in the value of the consumer’s principal
§ 1026.2(a)(19). dwelling;
(3) ‘‘Valuation’’ means an estimate of (D) Excluding a person that prepares
the value of the consumer’s principal a valuation from consideration for fu-
dwelling in written or electronic form, ture engagement because the person re-
other than one produced solely by an ports a value for the consumer’s prin-
automated model or system. cipal dwelling that does not meet or
(4) ‘‘Valuation management func- exceed a predetermined threshold; and
tions’’ means: (E) Conditioning the compensation
(i) Recruiting, selecting, or retaining paid to a person that prepares a valu-
a person to prepare a valuation; ation on consummation of the covered
(ii) Contracting with or employing a transaction.
person to prepare a valuation; (2) Mischaracterization of value—(i)
(iii) Managing or overseeing the proc- Misrepresentation. In connection with a
ess of preparing a valuation, including covered transaction, no person that
by providing administrative services prepares valuations shall materially
such as receiving orders for and receiv- misrepresent the value of the con-
ing a valuation, submitting a com- sumer’s principal dwelling in a valu-
pleted valuation to creditors and un- ation. A misrepresentation is material
derwriters, collecting fees from credi- for purposes of this paragraph (c)(2)(i)
tors and underwriters for services pro- if it is likely to significantly affect the
vided in connection with a valuation, value assigned to the consumer’s prin-
and compensating a person that pre- cipal dwelling. A bona fide error shall
pares valuations; or not be a misrepresentation.
(iv) Reviewing or verifying the work (ii) Falsification or alteration. In con-
of a person that prepares valuations. nection with a covered transaction, no
(c) Valuation of consumer’s principal covered person shall falsify and no cov-
dwelling—(1) Coercion. In connection ered person other than a person that
with a covered transaction, no covered prepares valuations shall materially
person shall or shall attempt to di- alter a valuation. An alteration is ma-
rectly or indirectly cause the value as- terial for purposes of this paragraph
signed to the consumer’s principal (c)(2)(ii) if it is likely to significantly
dwelling to be based on any factor affect the value assigned to the con-
other than the independent judgment sumer’s principal dwelling.
of a person that prepares valuations, (iii) Inducement of mischaracterization.
through coercion, extortion, induce- In connection with a covered trans-
ment, bribery, or intimidation of, com- action, no covered person shall induce
pensation or instruction to, or collu- a person to violate paragraph (c)(2)(i)
sion with a person that prepares valu- or (ii) of this section.
ations or performs valuation manage- (3) Permitted actions. Examples of ac-
ment functions. tions that do not violate paragraph
(i) Examples of actions that violate (c)(1) or (c)(2) include:
paragraph (c)(1) include: (i) Asking a person that prepares a
(A) Seeking to influence a person valuation to consider additional, ap-
that prepares a valuation to report a propriate property information, includ-
minimum or maximum value for the ing information about comparable
consumer’s principal dwelling; properties, to make or support a valu-
(B) Withholding or threatening to ation;
withhold timely payment to a person (ii) Requesting that a person that
that prepares a valuation or performs prepares a valuation provide further
jspears on DSK121TN23PROD with CFR
valuation management functions be- detail, substantiation, or explanation
cause the person does not value the for the person’s conclusion about the
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§ 1026.42 12 CFR Ch. X (1–1–25 Edition)
value of the consumer’s principal not part of the creditor’s loan produc-
dwelling; tion function, as defined in paragraph
(iii) Asking a person that prepares a (d)(5)(i) of this section, and whose com-
valuation to correct errors in the valu- pensation is not based on the closing of
ation; the transaction to which the valuation
(iv) Obtaining multiple valuations relates; and
for the consumer’s principal dwelling (iii) No employee, officer or director
to select the most reliable valuation; in the creditor’s loan production func-
(v) Withholding compensation due to tion, as defined in paragraph (d)(5)(i) of
breach of contract or substandard per- this section, is directly or indirectly
formance of services; and involved in selecting, retaining, recom-
(vi) Taking action permitted or re- mending or influencing the selection of
quired by applicable Federal or state the person to prepare a valuation or
statute, regulation, or agency guid- perform valuation management func-
ance. tions, or to be included in or excluded
(d) Prohibition on conflicts of interest— from a list of approved persons who
(1)(i) In general. No person preparing a prepare valuations or perform valu-
valuation or performing valuation ation management functions.
management functions for a covered (3) Employees and affiliates of creditors
transaction may have a direct or indi- with assets of $250 million or less for ei-
rect interest, financial or otherwise, in ther of the past two calendar years. For
the property or transaction for which any covered transaction in which the
the valuation is or will be performed. creditor had assets of $250 million or
(ii) Employees and affiliates of credi- less as of December 31st for either of
tors; providers of multiple settlement serv- the past two calendar years, a person
ices. In any covered transaction, no subject to paragraph (d)(1)(i) of this
person violates paragraph (d)(1)(i) of section who is employed by or affili-
this section based solely on the fact
ated with the creditor does not have a
that the person:
conflict of interest in violation of para-
(A) Is an employee or affiliate of the
graph (d)(1)(i) of this section based on
creditor; or
the person’s employment or affiliate
(B) Provides a settlement service in
relationship with the creditor if:
addition to preparing valuations or
performing valuation management (i) The compensation of the person
functions, or based solely on the fact preparing a valuation or performing
that the person’s affiliate performs an- valuation management functions is not
other settlement service. based on the value arrived at in any
(2) Employees and affiliates of creditors valuation; and
with assets of more than $250 million for (ii) The creditor requires that any
both of the past two calendar years. For employee, officer or director of the
any covered transaction in which the creditor who orders, performs, or re-
creditor had assets of more than $250 views a valuation for a covered trans-
million as of December 31st for both of action abstain from participating in
the past two calendar years, a person any decision to approve, not approve,
subject to paragraph (d)(1)(i) of this or set the terms of that transaction.
section who is employed by or affili- (4) Providers of multiple settlement serv-
ated with the creditor does not have a ices. For any covered transaction, a
conflict of interest in violation of para- person who prepares a valuation or per-
graph (d)(1)(i) of this section based on forms valuation management functions
the person’s employment or affiliate in addition to performing another set-
relationship with the creditor if: tlement service for the transaction, or
(i) The compensation of the person whose affiliate performs another set-
preparing a valuation or performing tlement service for the transaction,
valuation management functions is not does not have a conflict of interest in
based on the value arrived at in any violation of paragraph (d)(1)(i) of this
valuation; section as a result of the person or the
(ii) The person preparing a valuation person’s affiliate performing another
jspears on DSK121TN23PROD with CFR
or performing valuation management settlement service for the transaction
functions reports to a person who is if:
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Consumer Financial Protection Bureau § 1026.42
(i) The creditor had assets of more of paragraph (f) of this section,
than $250 million as of December 31st ‘‘agents’’ of the creditor do not include
for both of the past two calendar years any fee appraiser as defined in para-
and the conditions in paragraph graph (f)(4)(i) of this section.
(d)(2)(i)-(iii) are met; or (2) Presumption of compliance. A cred-
(ii) The creditor had assets of $250 itor and its agents shall be presumed to
million or less as of December 31st for comply with paragraph (f)(1) of this
either of the past two calendar years section if:
and the conditions in paragraph (i) The creditor or its agents com-
(d)(3)(i)-(ii) are met. pensate the fee appraiser in an amount
(5) Definitions. For purposes of this that is reasonably related to recent
paragraph (d), the following definitions rates paid for comparable appraisal
apply: services performed in the geographic
(i) Loan production function. The term market of the property being ap-
‘‘loan production function’’ means an praised. In determining this amount, a
employee, officer, director, depart- creditor or its agents shall review the
ment, division, or other unit of a cred- factors below and make any adjust-
itor with responsibility for generating ments to recent rates paid in the rel-
covered transactions, approving cov- evant geographic market necessary to
ered transactions, or both. ensure that the amount of compensa-
(ii) Settlement service. The term ‘‘set- tion is reasonable:
tlement service’’ has the same meaning (A) The type of property,
as in the Real Estate Settlement Pro- (B) The scope of work,
cedures Act, 12 U.S.C. 2601 et seq. (C) The time in which the appraisal
(iii) Affiliate. The term ‘‘affiliate’’ services are required to be performed,
has the same meaning as in Regulation (D) Fee appraiser qualifications,
Y of the Board of Governors of the Fed- (E) Fee appraiser experience and pro-
eral Reserve System, 12 CFR 225.2(a). fessional record, and
(e) When extension of credit prohibited. (F) Fee appraiser work quality; and
In connection with a covered trans- (ii) The creditor and its agents do not
action, a creditor that knows, at or be- engage in any anticompetitive acts in
fore consummation, of a violation of violation of state or Federal law that
paragraph (c) or (d) of this section in affect the compensation paid to fee ap-
connection with a valuation shall not praisers, including:
extend credit based on the valuation, (A) Entering into any contracts or
unless the creditor documents that it engaging in any conspiracies to re-
has acted with reasonable diligence to strain trade through methods such as
determine that the valuation does not price fixing or market allocation, as
materially misstate or misrepresent prohibited under section 1 of the Sher-
the value of the consumer’s principal man Antitrust Act, 15 U.S.C. 1, or any
dwelling. For purposes of this para- other relevant antitrust laws; or
graph (e), a valuation materially mis- (B) Engaging in any acts of monopo-
states or misrepresents the value of the lization such as restricting any person
consumer’s principal dwelling if the from entering the relevant geographic
valuation contains a misstatement or market or causing any person to leave
misrepresentation that affects the the relevant geographic market, as
credit decision or the terms on which prohibited under section 2 of the Sher-
credit is extended. man Antitrust Act, 15 U.S.C. 2, or any
(f) Customary and reasonable com- other relevant antitrust laws.
pensation—(1) Requirement to provide (3) Alternative presumption of compli-
customary and reasonable compensation ance. A creditor and its agents shall be
to fee appraisers. In any covered trans- presumed to comply with paragraph
action, the creditor and its agents shall (f)(1) of this section if the creditor or
compensate a fee appraiser for per- its agents determine the amount of
forming appraisal services at a rate compensation paid to the fee appraiser
that is customary and reasonable for by relying on information about rates
comparable appraisal services per- that:
jspears on DSK121TN23PROD with CFR
formed in the geographic market of the (i) Is based on objective third-party
property being appraised. For purposes information, including fee schedules,
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§ 1026.42, Nt. 12 CFR Ch. X (1–1–25 Edition)
studies, and surveys prepared by inde- (C) Manage the process of having an
pendent third parties such as govern- appraisal performed, including pro-
ment agencies, academic institutions, viding administrative services such as
and private research firms; receiving appraisal orders and ap-
(ii) Is based on recent rates paid to a praisal reports, submitting completed
representative sample of providers of appraisal reports to creditors and un-
appraisal services in the geographic derwriters, collecting fees from credi-
market of the property being appraised tors and underwriters for services pro-
or the fee schedules of those providers; vided, and compensating fee appraisers
and for services performed; or
(iii) In the case of information based (D) Review and verify the work of fee
on fee schedules, studies, and surveys, appraisers.
such fee schedules, studies, or surveys, (g) Mandatory reporting—(1) Reporting
or the information derived therefrom, required. Any covered person that rea-
excludes compensation paid to fee ap- sonably believes an appraiser has not
praisers for appraisals ordered by ap- complied with the Uniform Standards
praisal management companies, as de- of Professional Appraisal Practice or
fined in paragraph (f)(4)(iii) of this sec- ethical or professional requirements
tion. for appraisers under applicable state or
(4) Definitions. For purposes of this Federal statutes or regulations shall
paragraph (f), the following definitions refer the matter to the appropriate
apply: state agency if the failure to comply is
(i) Fee appraiser. The term ‘‘fee ap- material. For purposes of this para-
praiser’’ means: graph (g)(1), a failure to comply is ma-
terial if it is likely to significantly af-
(A) A natural person who is a state-
fect the value assigned to the con-
licensed or state-certified appraiser
sumer’s principal dwelling.
and receives a fee for performing an ap-
(2) Timing of reporting. A covered per-
praisal, but who is not an employee of
son shall notify the appropriate state
the person engaging the appraiser; or
agency within a reasonable period of
(B) An organization that, in the ordi-
time after the person determines that
nary course of business, employs state-
there is a reasonable basis to believe
licensed or state-certified appraisers to
that a failure to comply required to be
perform appraisals, receives a fee for
reported under paragraph (g)(1) of this
performing appraisals, and is not sub-
section has occurred.
ject to the requirements of section 1124
(3) Definition. For purposes of this
of the Financial Institutions Reform,
paragraph (g), ‘‘state agency’’ means
Recovery, and Enforcement Act of 1989
‘‘state appraiser certifying and licens-
(12 U.S.C. 3353).
ing agency’’ under 12 U.S.C. 3350(1) and
(ii) Appraisal services. The term ‘‘ap- any implementing regulations. The ap-
praisal services’’ means the services re- propriate state agency to which a cov-
quired to perform an appraisal, includ- ered person must refer a matter under
ing defining the scope of work, inspect- paragraph (g)(1) of this section is the
ing the property, reviewing necessary agency for the state in which the con-
and appropriate public and private data sumer’s principal dwelling is located.
sources (for example, multiple listing
(h) The Bureau issued a joint rule to
services, tax assessment records and
implement the appraisal management
public land records), developing and
company minimum requirements in
rendering an opinion of value, and pre-
the Financial Institutions Reform, Re-
paring and submitting the appraisal re-
covery, and Enforcement Act, as
port.
amended by section 1473 of the Dodd-
(iii) Appraisal management company. Frank Wall Street Reform and Con-
The term ‘‘appraisal management com- sumer Protection Act. See 12 CFR part
pany’’ means any person authorized to 34.
perform one or more of the following
actions on behalf of the creditor: [76 FR 79772, Dec. 22, 2011, as amended at 80
(A) Recruit, select, and retain fee ap- FR 32687, June 9, 2015]
jspears on DSK121TN23PROD with CFR
praisers;(B) Contract with fee apprais- EFFECTIVE DATE NOTE: At 89 FR 64577, Aug.
ers to perform appraisal services; 7, 2024, § 1026.42 was amended by revising
154
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Consumer Financial Protection Bureau § 1026.42, Nt.
paragraph (a) and adding paragraph (i), effec- tion with its potential sale or transfer to a
tive Oct. 1, 2025. For the convenience of the secondary market issuer; or
user, the added and revised text is set forth (B) Structuring, preparing disclosures for,
as follows: or marketing initial offerings of mortgage-
backed securitizations.
§ 1026.42 Valuation independence. (iv) Credit decision means a decision regard-
(a) Scope. Except for paragraph (i) of this ing whether and under what terms to origi-
section, this section applies to any consumer nate, modify, terminate, or make other
credit transaction secured by the consumer’s changes to a mortgage, including a decision
principal dwelling. Paragraph (i) of this sec- whether to extend new or additional credit
tion applies to any mortgage, as defined in or change the credit limit on a line of credit.
paragraph (i)(2)(v) of this section, secured by (v) Mortgage means a transaction in which
the consumer’s principal dwelling, even if a mortgage, deed of trust, purchase money
the mortgage is primarily for business, com- security interest arising under an install-
mercial, agricultural, or organizational pur- ment sales contract, or equivalent consen-
poses. sual security interest is created or retained
in a consumer’s principal dwelling.
(vi) Mortgage originator means:
* * * * * (A) Any person who, for direct or indirect
(i) Quality Control Standards for Automated compensation or gain, or in the expectation
Valuation Models—(1) Scope. The purpose of of direct or indirect compensation or gain—
this paragraph (i) is to implement quality (1) Takes a mortgage application;
control standards for the use of automated (2) Assists a consumer in obtaining or ap-
valuation models in determining the value of plying to obtain a mortgage; or
collateral in connection with making a cred- (3) Offers or negotiates terms of a mort-
it decision or covered securitization deter- gage;
mination regarding a mortgage or mortgage- (B) Includes any person who represents to
backed security. This paragraph (i) applies the public, through advertising or other
to the use of automated valuation models by means of communicating or providing infor-
any mortgage originator or secondary mar- mation (including the use of business cards,
ket issuer, other than either a financial in- stationery, brochures, signs, rate lists, or
stitution as defined in 12 U.S.C. 3350(7), or a other promotional items), that such person
subsidiary owned and controlled by such a fi- can or will provide any of the services or per-
nancial institution and regulated by one of form any of the activities described in para-
the Federal financial institutions regulatory graph (A) of this definition;
agencies as defined in 12 U.S.C. 3350(6). This (C) Does not include any person who is not
paragraph (i) does not apply to the use of otherwise described in paragraph (A) or (B)
automated valuation models in: of this definition and who performs purely
(i) Monitoring of the quality or perform- administrative or clerical tasks on behalf of
ance of mortgages or mortgage-backed secu- a person who is described in any such para-
rities; graph;
(ii) Reviews of the quality of already com- (D) Does not include a retailer of manufac-
pleted determinations of the value of collat- tured or modular homes or an employee of
eral; or the retailer if the retailer or employee, as
(iii) The development of an appraisal by a applicable—
certified or licensed appraiser as defined in (1) Does not receive compensation or gain
§ 1026.35(c)(1)(i). for engaging in activities described in para-
(2) Definitions. As used in this paragraph graph (A) of this definition that is in excess
(i): of any compensation or gain received in a
(i) Automated valuation model means any comparable cash transaction;
computerized model used by mortgage origi- (2) Discloses to the consumer in writing
nators and secondary market issuers to de- any corporate affiliation with any creditor
termine the value of a consumer’s principal and, if the retailer has a corporate affiliation
dwelling collateralizing a mortgage. with any creditor, at least 1 unaffiliated
(ii) Control systems means the functions creditor; and
(such as internal and external audits, risk (3) Does not directly negotiate with the
review, quality control, and quality assur- consumer or lender on loan terms (including
ance) and information systems that are used rates, fees, and other costs);
to measure performance, make decisions (E) Does not include a person or entity
about risk, and assess the effectiveness of that only performs real estate brokerage ac-
processes and personnel, including with re- tivities and is licensed or registered in ac-
spect to compliance with statutes and regu- cordance with applicable State law, unless
lations. such person or entity is compensated by a
(iii) Covered securitization determination lender, a mortgage broker, or other mort-
jspears on DSK121TN23PROD with CFR
means a determination regarding: gage originator or by any agent of such lend-
(A) Whether to waive an appraisal require- er, mortgage broker, or other mortgage
ment for a mortgage origination in connec- originator;
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
(F) Does not include a person that meets (iv) An extension of credit made pur-
the criteria for seller financers provided in suant to a program administered by a
§ 1026.36(a)(4) and (5); and Housing Finance Agency, as defined
(G) Does not include a servicer or servicer
employees, agents and contractors, including
under 24 CFR 266.5;
but not limited to those who offer or nego- (v) An extension of credit made by:
tiate terms of a mortgage for purposes of re- (A) A creditor designated as a Com-
negotiating, modifying, replacing and subor- munity Development Financial Insti-
dinating principal of existing mortgages tution, as defined under 12 CFR
where borrowers are behind in their pay- 1805.104(h);
ments, in default or have a reasonable likeli- (B) A creditor designated as a Down-
hood of being in default or falling behind. payment Assistance through Sec-
(vii) Secondary market issuer means any
party that creates, structures, or organizes a
ondary Financing Provider, pursuant
mortgage-backed securities transaction. to 24 CFR 200.194(a), operating in ac-
(3) Quality control standards. Mortgage cordance with regulations prescribed
originators and secondary market issuers by the U.S. Department of Housing and
that engage in credit decisions or covered Urban Development applicable to such
securitization determinations themselves, or persons;
through or in cooperation with a third-party (C) A creditor designated as a Com-
or affiliate, must adopt and maintain poli-
munity Housing Development Organi-
cies, practices, procedures, and control sys-
tems to ensure that automated valuation zation provided that the creditor has
models used in these transactions adhere to entered into a commitment with a par-
quality control standards designed to: ticipating jurisdiction and is under-
(i) Ensure a high level of confidence in the taking a project under the HOME pro-
estimates produced; gram, pursuant to the provisions of 24
(ii) Protect against the manipulation of CFR 92.300(a), and as the terms commu-
data; nity housing development organiza-
(iii) Seek to avoid conflicts of interest;
(iv) Require random sample testing and re-
tion, commitment, participating juris-
views; and diction, and project are defined under
(v) Comply with applicable nondiscrimina- 24 CFR 92.2; or
tion laws. (D) A creditor with a tax exemption
ruling or determination letter from the
§ 1026.43 Minimum standards for Internal Revenue Service under section
transactions secured by a dwelling. 501(c)(3) of the Internal Revenue Code
(a) Scope. This section applies to any of 1986 (26 U.S.C. 501(c)(3); 26 CFR
consumer credit transaction that is se- 1.501(c)(3)–1), provided that:
cured by a dwelling, as defined in (1) During the calendar year pre-
§ 1026.2(a)(19), including any real prop- ceding receipt of the consumer’s appli-
erty attached to a dwelling, other cation, the creditor extended credit se-
than: cured by a dwelling no more than 200
(1) A home equity line of credit sub- times, except as provided in paragraph
ject to § 1026.40; (a)(3)(vii) of this section;
(2) A mortgage transaction secured (2) During the calendar year pre-
by a consumer’s interest in a timeshare ceding receipt of the consumer’s appli-
plan, as defined in 11 U.S.C. 101(53(D)); cation, the creditor extended credit se-
or cured by a dwelling only to consumers
(3) For purposes of paragraphs (c) with income that did not exceed the
through (f) of this section: low- and moderate-income household
(i) A reverse mortgage subject to limit as established pursuant to sec-
§ 1026.33; tion 102 of the Housing and Community
(ii) A temporary or ‘‘bridge’’ loan Development Act of 1974 (42 U.S.C.
with a term of 12 months or less, such 5302(a)(20)) and amended from time to
as a loan to finance the purchase of a time by the U.S. Department of Hous-
new dwelling where the consumer plans ing and Urban Development, pursuant
to sell a current dwelling within 12 to 24 CFR 570.3;
months or a loan to finance the initial (3) The extension of credit is to a
construction of a dwelling; consumer with income that does not
(iii) A construction phase of 12 exceed the household limit specified in
jspears on DSK121TN23PROD with CFR
months or less of a construction-to- paragraph (a)(3)(v)(D)(2) of this section;
permanent loan; and
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Consumer Financial Protection Bureau § 1026.43
(4) The creditor determines, in ac- (3) A bona fide and reasonable fee for
cordance with written procedures, that housing counseling services; and
the consumer has a reasonable ability (F) The creditor complies with all
to repay the extension of credit. other applicable requirements of this
(vi) An extension of credit made pur- part in connection with the trans-
suant to a program authorized by sec- action.
tions 101 and 109 of the Emergency Eco- (b) Definitions. For purposes of this
nomic Stabilization Act of 2008 (12 section:
U.S.C. 5211; 5219); (1) Covered transaction means a con-
(vii) Consumer credit transactions sumer credit transaction that is se-
that meet the following criteria are cured by a dwelling, as defined in
not considered in determining whether § 1026.2(a)(19), including any real prop-
a creditor exceeds the credit extension erty attached to a dwelling, other than
limitation in paragraph (a)(3)(v)(D)(1) a transaction exempt from coverage
of this section: under paragraph (a) of this section.
(A) The transaction is secured by a (2) Fully amortizing payment means a
subordinate lien; periodic payment of principal and in-
(B) The transaction is for the purpose terest that will fully repay the loan
of: amount over the loan term.
(1) Downpayment, closing costs, or (3) Fully indexed rate means the inter-
other similar home buyer assistance, est rate calculated using the index or
such as principal or interest subsidies; formula that will apply after recast, as
(2) Property rehabilitation assist- determined at the time of consumma-
ance; tion, and the maximum margin that
(3) Energy efficiency assistance; or can apply at any time during the loan
(4) Foreclosure avoidance or preven- term.
tion; (4) Higher-priced covered transaction
(C) The credit contract does not re- means a covered transaction with an
quire payment of interest; annual percentage rate that exceeds
(D) The credit contract provides that the average prime offer rate for a com-
repayment of the amount of the credit parable transaction as of the date the
extended is: interest rate is set by 1.5 or more per-
(1) Forgiven either incrementally or centage points for a first-lien covered
in whole, at a date certain, and subject transaction, other than a qualified
only to specified ownership and occu- mortgage under paragraph (e)(5), (e)(6),
pancy conditions, such as a require- or (f) of this section; by 3.5 or more per-
ment that the consumer maintain the centage points for a first-lien covered
property as the consumer’s principal transaction that is a qualified mort-
dwelling for five years; gage under paragraph (e)(5), (e)(6), or
(2) Deferred for a minimum of 20 (f) of this section; or by 3.5 or more per-
years after consummation of the trans- centage points for a subordinate-lien
action; covered transaction. For purposes of a
(3) Deferred until sale of the property qualified mortgage under paragraph
securing the transaction; or (e)(2) of this section, for a loan for
(4) Deferred until the property secur- which the interest rate may or will
ing the transaction is no longer the change within the first five years after
principal dwelling of the consumer; the date on which the first regular
(E) The total of costs payable by the periodic payment will be due, the cred-
consumer in connection with the trans- itor must determine the annual per-
action at consummation is less than 1 centage rate for purposes of this para-
percent of the amount of credit ex- graph (b)(4) by treating the maximum
tended and includes no charges other interest rate that may apply during
than: that five-year period as the interest
(1) Fees for recordation of security rate for the full term of the loan.
instruments, deeds, and similar docu- (5) Loan amount means the principal
ments; amount the consumer will borrow as
jspears on DSK121TN23PROD with CFR
(2) A bona fide and reasonable appli- reflected in the promissory note or
cation fee; and loan contract.
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
(6) Loan term means the period of fined in § 1026.36(a)(2), or an agent of
time to repay the obligation in full. the creditor or mortgage broker;
(7) Maximum loan amount means the (ii) A copy of a tax return filed with
loan amount plus any increase in prin- the Internal Revenue Service or a
cipal balance that results from nega- State taxing authority;
tive amortization, as defined in (iii) A record the creditor maintains
§ 1026.18(s)(7)(v), based on the terms of for an account of the consumer held by
the legal obligation assuming: the creditor; or
(i) The consumer makes only the (iv) If the consumer is an employee of
minimum periodic payments for the the creditor or the mortgage broker, a
maximum possible time, until the con- document or other record maintained
sumer must begin making fully amor- by the creditor or mortgage broker re-
tizing payments; and garding the consumer’s employment
(ii) The maximum interest rate is status or employment income.
reached at the earliest possible time. (c) Repayment ability—(1) General re-
(8) Mortgage-related obligations mean quirement. A creditor shall not make a
property taxes; premiums and similar loan that is a covered transaction un-
charges identified in § 1026.4(b)(5), (7), less the creditor makes a reasonable
(8), and (10) that are required by the and good faith determination at or be-
creditor; fees and special assessments fore consummation that the consumer
imposed by a condominium, coopera- will have a reasonable ability to repay
tive, or homeowners association; the loan according to its terms.
ground rent; and leasehold payments. (2) Basis for determination. Except as
(9) Points and fees has the same mean- provided otherwise in paragraphs (d),
ing as in § 1026.32(b)(1). (e), and (f) of this section, in making
(10) Prepayment penalty has the same the repayment ability determination
meaning as in § 1026.32(b)(6). required under paragraph (c)(1) of this
(11) Recast means: section, a creditor must consider the
(i) For an adjustable-rate mortgage, following:
as defined in § 1026.18(s)(7)(i), the expi-
(i) The consumer’s current or reason-
ration of the period during which pay-
ably expected income or assets, other
ments based on the introductory fixed
than the value of the dwelling, includ-
interest rate are permitted under the
ing any real property attached to the
terms of the legal obligation;
dwelling, that secures the loan;
(ii) For an interest-only loan, as de-
(ii) If the creditor relies on income
fined in § 1026.18(s)(7)(iv), the expiration
from the consumer’s employment in
of the period during which interest-
determining repayment ability, the
only payments are permitted under the
consumer’s current employment sta-
terms of the legal obligation; and
tus;
(iii) For a negative amortization
loan, as defined in § 1026.18(s)(7)(v), the (iii) The consumer’s monthly pay-
expiration of the period during which ment on the covered transaction, cal-
negatively amortizing payments are culated in accordance with paragraph
permitted under the terms of the legal (c)(5) of this section;
obligation. (iv) The consumer’s monthly pay-
(12) Simultaneous loan means another ment on any simultaneous loan that
covered transaction or home equity the creditor knows or has reason to
line of credit subject to § 1026.40 that know will be made, calculated in ac-
will be secured by the same dwelling cordance with paragraph (c)(6) of this
and made to the same consumer at or section;
before consummation of the covered (v) The consumer’s monthly payment
transaction or, if to be made after con- for mortgage-related obligations;
summation, will cover closing costs of (vi) The consumer’s current debt ob-
the first covered transaction. ligations, alimony, and child support;
(13) Third-party record means: (vii) The consumer’s monthly debt-
(i) A document or other record pre- to-income ratio or residual income in
pared or reviewed by an appropriate accordance with paragraph (c)(7) of this
jspears on DSK121TN23PROD with CFR
person other than the consumer, the section; and
creditor, or the mortgage broker, as de- (viii) The consumer’s credit history.
158
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Consumer Financial Protection Bureau § 1026.43
(3) Verification using third-party (vii) Receipts from the consumer’s
records. A creditor must verify the in- use of check cashing services; and
formation that the creditor relies on in (viii) Receipts from the consumer’s
determining a consumer’s repayment use of a funds transfer service.
ability under § 1026.43(c)(2) using rea- (5) Payment calculation—(i) General
sonably reliable third-party records, rule. Except as provided in paragraph
except that: (c)(5)(ii) of this section, a creditor must
(i) For purposes of paragraph (c)(2)(i) make the consideration required under
of this section, a creditor must verify a paragraph (c)(2)(iii) of this section
consumer’s income or assets that the using:
creditor relies on in accordance with (A) The fully indexed rate or any in-
§ 1026.43(c)(4); troductory interest rate, whichever is
(ii) For purposes of paragraph greater; and
(c)(2)(ii) of this section, a creditor may (B) Monthly, fully amortizing pay-
verify a consumer’s employment status ments that are substantially equal.
orally if the creditor prepares a record (ii) Special rules for loans with a bal-
of the information obtained orally; and loon payment, interest-only loans, and
(iii) For purposes of paragraph negative amortization loans. A creditor
(c)(2)(vi) of this section, if a creditor must make the consideration required
relies on a consumer’s credit report to under paragraph (c)(2)(iii) of this sec-
verify a consumer’s current debt obli- tion for:
gations and a consumer’s application (A) A loan with a balloon payment,
states a current debt obligation not as defined in § 1026.18(s)(5)(i), using:
shown in the consumer’s credit report, (1) The maximum payment scheduled
the creditor need not independently during the first five years after the
verify such an obligation. date on which the first regular periodic
payment will be due for a loan that is
(4) Verification of income or assets. A
not a higher-priced covered trans-
creditor must verify the amounts of in-
action; or
come or assets that the creditor relies
(2) The maximum payment in the
on under § 1026.43(c)(2)(i) to determine a
payment schedule, including any bal-
consumer’s ability to repay a covered
loon payment, for a higher-priced cov-
transaction using third-party records
ered transaction;
that provide reasonably reliable evi-
(B) An interest-only loan, as defined
dence of the consumer’s income or as-
in § 1026.18(s)(7)(iv), using:
sets. A creditor may verify the con-
(1) The fully indexed rate or any in-
sumer’s income using a tax-return
troductory interest rate, whichever is
transcript issued by the Internal Rev-
greater; and
enue Service (IRS). Examples of other
(2) Substantially equal, monthly pay-
records the creditor may use to verify
ments of principal and interest that
the consumer’s income or assets in-
will repay the loan amount over the
clude:
term of the loan remaining as of the
(i) Copies of tax returns the con- date the loan is recast.
sumer filed with the IRS or a State (C) A negative amortization loan, as
taxing authority; defined in § 1026.18(s)(7)(v), using:
(ii) IRS Form W–2s or similar IRS (1) The fully indexed rate or any in-
forms used for reporting wages or tax troductory interest rate, whichever is
withholding; greater; and
(iii) Payroll statements, including (2) Substantially equal, monthly pay-
military Leave and Earnings State- ments of principal and interest that
ments; will repay the maximum loan amount
(iv) Financial institution records; over the term of the loan remaining as
(v) Records from the consumer’s em- of the date the loan is recast.
ployer or a third party that obtained (6) Payment calculation for simulta-
information from the employer; neous loans. For purposes of making
(vi) Records from a Federal, State, or the evaluation required under para-
local government agency stating the graph (c)(2)(iv) of this section, a cred-
jspears on DSK121TN23PROD with CFR
consumer’s income from benefits or en- itor must consider, taking into account
titlements; any mortgage-related obligations, a
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
consumer’s payment on a simultaneous (A) An adjustable-rate mortgage, as
loan that is: defined in § 1026.18(s)(7)(i), with an in-
(i) A covered transaction, by fol- troductory fixed interest rate for a pe-
lowing paragraph (c)(5)of this section; riod of one year or longer;
or (B) An interest-only loan, as defined
(ii) A home equity line of credit sub- in § 1026.18(s)(7)(iv); or
ject to § 1026.40, by using the periodic (C) A negative amortization loan, as
payment required under the terms of defined in § 1026.18(s)(7)(v).
the plan and the amount of credit to be (ii) Standard mortgage. The term
drawn at or before consummation of standard mortgage means a covered
the covered transaction. transaction:
(7) Monthly debt-to-income ratio or re- (A) That provides for regular periodic
sidual income—(i) Definitions. For pur- payments that do not:
poses of this paragraph (c)(7), the fol- (1) Cause the principal balance to in-
lowing definitions apply: crease;
(2) Allow the consumer to defer re-
(A) Total monthly debt obligations. The
payment of principal; or
term total monthly debt obligations
(3) Result in a balloon payment, as
means the sum of: the payment on the
defined in § 1026.18(s)(5)(i);
covered transaction, as required to be
(B) For which the total points and
calculated by paragraphs (c)(2)(iii) and
fees payable in connection with the
(c)(5) of this section; simultaneous
transaction do not exceed the amounts
loans, as required by paragraphs
specified in paragraph (e)(3) of this sec-
(c)(2)(iv) and (c)(6) of this section;
tion;
mortgage-related obligations, as re-
(C) For which the term does not ex-
quired by paragraph (c)(2)(v) of this
ceed 40 years;
section; and current debt obligations,
(D) For which the interest rate is
alimony, and child support, as required
fixed for at least the first five years
by paragraph (c)(2)(vi) of this section.
after consummation; and
(B) Total monthly income. The term (E) For which the proceeds from the
total monthly income means the sum of loan are used solely for the following
the consumer’s current or reasonably purposes:
expected income, including any income (1) To pay off the outstanding prin-
from assets, as required by paragraphs cipal balance on the non-standard
(c)(2)(i) and (c)(4) of this section. mortgage; and
(ii) Calculations—(A) Monthly debt-to- (2) To pay closing or settlement
income ratio. If a creditor considers the charges required to be disclosed under
consumer’s monthly debt-to-income the Real Estate Settlement Procedures
ratio under paragraph (c)(2)(vii) of this Act, 12 U.S.C. 2601 et seq.
section, the creditor must consider the (iii) Refinancing. The term refinancing
ratio of the consumer’s total monthly has the same meaning as in § 1026.20(a).
debt obligations to the consumer’s (2) Scope. The provisions of this para-
total monthly income. graph (d) apply to the refinancing of a
(B) Monthly residual income. If a cred- non-standard mortgage into a standard
itor considers the consumer’s monthly mortgage when the following condi-
residual income under paragraph tions are met:
(c)(2)(vii) of this section, the creditor (i) The creditor for the standard
must consider the consumer’s remain- mortgage is the current holder of the
ing income after subtracting the con- existing non-standard mortgage or the
sumer’s total monthly debt obligations servicer acting on behalf of the current
from the consumer’s total monthly in- holder;
come. (ii) The monthly payment for the
(d) Refinancing of non-standard mort- standard mortgage is materially lower
gages—(1) Definitions. For purposes of than the monthly payment for the non-
this paragraph (d), the following defini- standard mortgage, as calculated under
tions apply: paragraph (d)(5) of this section.
(i) Non-standard mortgage. The term (iii) The creditor receives the con-
jspears on DSK121TN23PROD with CFR
non-standard mortgage means a covered sumer’s written application for the
transaction that is: standard mortgage no later than two
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Consumer Financial Protection Bureau § 1026.43
months after the non-standard mort- the date on which the creditor receives
gage has recast. the consumer’s written application for
(iv) The consumer has made no more the standard mortgage;
than one payment more than 30 days (B) The term of the loan remaining
late on the non-standard mortgage dur- as of the date on which the recast oc-
ing the 12 months immediately pre- curs, assuming all scheduled payments
ceding the creditor’s receipt of the con- have been made up to the recast date
sumer’s written application for the and the payment due on the recast date
standard mortgage. is made and credited as of that date;
(v) The consumer has made no pay- and
ments more than 30 days late during (C) A remaining loan amount that is:
the six months immediately preceding (1) For an adjustable-rate mortgage
the creditor’s receipt of the consumer’s under paragraph (d)(1)(i)(A) of this sec-
written application for the standard tion, the outstanding principal balance
mortgage; and as of the date of the recast, assuming
(vi) If the non-standard mortgage was all scheduled payments have been
consummated on or after January 10, made up to the recast date and the
2014, the non-standard mortgage was payment due on the recast date is
made in accordance with paragraph (c) made and credited as of that date;
or (e) of this section, as applicable. (2) For an interest-only loan under
(3) Exemption from repayment ability paragraph (d)(1)(i)(B) of this section,
requirements. A creditor is not required the outstanding principal balance as of
to comply with the requirements of the date of the recast, assuming all
paragraph (c) of this section if: scheduled payments have been made up
(i) The conditions in paragraph (d)(2) to the recast date and the payment due
of this section are met; and on the recast date is made and credited
(ii) The creditor has considered as of that date; or
whether the standard mortgage likely (3) For a negative amortization loan
will prevent a default by the consumer under paragraph (d)(1)(i)(C) of this sec-
on the non-standard mortgage once the tion, the maximum loan amount, de-
loan is recast. termined after adjusting for the out-
(4) Offer of rate discounts and other fa- standing principal balance.
vorable terms. A creditor making a cov- (ii) Standard mortgage. For purposes
ered transaction under this paragraph of the comparison conducted pursuant
(d) may offer to the consumer rate dis- to paragraph (d)(2)(ii) of this section,
counts and terms that are the same as, the monthly payment for a standard
or better than, the rate discounts and mortgage must be based on substan-
terms that the creditor offers to new tially equal, monthly, fully amortizing
consumers, consistent with the credi- payments based on the maximum in-
tor’s documented underwriting prac- terest rate that may apply during the
tices and to the extent not prohibited first five years after consummation.
by applicable State or Federal law. (e) Qualified mortgages—(1) Safe harbor
(5) Payment calculations. For purposes and presumption of compliance—(i) Safe
of determining whether the consumer’s harbor for loans that are not higher-
monthly payment for a standard mort- priced covered transactions and for sea-
gage will be materially lower than the soned loans. A creditor or assignee of a
monthly payment for the non-standard qualified mortgage complies with the
mortgage, the following provisions repayment ability requirements of
shall be used: paragraph (c) of this section if:
(i) Non-standard mortgage. For pur- (A) The loan is a qualified mortgage
poses of the comparison conducted pur- as defined in paragraph (e)(2), (4), (5),
suant to paragraph (d)(2)(ii) of this sec- (6), or (f) of this section that is not a
tion, the creditor must calculate the higher-priced covered transaction, as
monthly payment for a non-standard defined in paragraph (b)(4) of this sec-
mortgage based on substantially equal, tion; or
monthly, fully amortizing payments of (B) The loan is a qualified mortgage
principal and interest using: as defined in paragraph (e)(7) of this
jspears on DSK121TN23PROD with CFR
(A) The fully indexed rate as of a rea- section, regardless of whether the loan
sonable period of time before or after is a higher-priced covered transaction.
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
(ii) Presumption of compliance for high- (ii) For which the loan term does not
er-priced covered transactions. (A) A exceed 30 years;
creditor or assignee of a qualified (iii) For which the total points and
mortgage, as defined in paragraph fees payable in connection with the
(e)(2), (e)(4), (e)(5), (e)(6), or (f) of this loan do not exceed the amounts speci-
section, that is a higher-priced covered fied in paragraph (e)(3) of this section;
transaction, as defined in paragraph (iv) For which the creditor under-
(b)(4) of this section, is presumed to writes the loan, taking into account
comply with the repayment ability re- the monthly payment for mortgage-re-
quirements of paragraph (c) of this sec- lated obligations, using:
tion. (A) The maximum interest rate that
(B) To rebut the presumption of com- may apply during the first five years
pliance described in paragraph after the date on which the first reg-
(e)(1)(ii)(A) of this section, it must be ular periodic payment will be due; and
proven that, despite meeting the pre- (B) Periodic payments of principal
requisites of paragraph (e)(2), (e)(4), and interest that will repay either:
(e)(5), (e)(6), or (f) of this section, the (1) The outstanding principal balance
creditor did not make a reasonable and over the remaining term of the loan as
good faith determination of the con- of the date the interest rate adjusts to
sumer’s repayment ability at the time the maximum interest rate set forth in
of consummation, by showing that the paragraph (e)(2)(iv)(A) of this section,
consumer’s income, debt obligations, assuming the consumer will have made
alimony, child support, and the con- all required payments as due prior to
sumer’s monthly payment (including that date; or
mortgage-related obligations) on the (2) The loan amount over the loan
covered transaction and on any simul- term;
taneous loans of which the creditor was (v) For which the creditor, at or be-
aware at consummation would leave fore consummation:
the consumer with insufficient residual (A) Considers the consumer’s current
income or assets other than the value or reasonably expected income or as-
of the dwelling (including any real sets other than the value of the dwell-
property attached to the dwelling) that ing (including any real property at-
secures the loan with which to meet tached to the dwelling) that secures
living expenses, including any recur- the loan, debt obligations, alimony,
ring and material non-debt obligations child support, and monthly debt-to-in-
of which the creditor was aware at the come ratio or residual income, using
time of consummation. the amounts determined from para-
(2) Qualified mortgage defined—general. graph (e)(2)(v)(B) of this section. For
Except as provided in paragraph (e)(4), purposes of this paragraph (e)(2)(v)(A),
(5), (6), (7), or (f) of this section, a the consumer’s monthly debt-to-in-
qualified mortgage is a covered trans- come ratio or residual income is deter-
action: mined in accordance with paragraph
(i) That provides for regular periodic (c)(7) of this section, except that the
payments that are substantially equal, consumer’s monthly payment on the
except for the effect that any interest covered transaction, including the
rate change after consummation has on monthly payment for mortgage-related
the payment in the case of an adjust- obligations, is calculated in accordance
able-rate or step-rate mortgage, that with paragraph (e)(2)(iv) of this sec-
do not: tion.
(A) Result in an increase of the prin- (B)(1) Verifies the consumer’s current
cipal balance; or reasonably expected income or as-
(B) Allow the consumer to defer re- sets other than the value of the dwell-
payment of principal, except as pro- ing (including any real property at-
vided in paragraph (f) of this section; tached to the dwelling) that secures
or the loan using third-party records that
(C) Result in a balloon payment, as provide reasonably reliable evidence of
defined in § 1026.18(s)(5)(i), except as the consumer’s income or assets, in ac-
jspears on DSK121TN23PROD with CFR
provided in paragraph (f) of this sec- cordance with paragraph (c)(4) of this
tion; section; and
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Consumer Financial Protection Bureau § 1026.43
(2) Verifies the consumer’s current (3) Limits on points and fees for quali-
debt obligations, alimony, and child fied mortgages. (i) Except as provided in
support using reasonably reliable paragraph (e)(3)(iii) of this section, a
third-party records in accordance with covered transaction is not a qualified
paragraph (c)(3) of this section. mortgage unless the transaction’s total
(vi) For which the annual percentage points and fees, as defined in
rate does not exceed the average prime § 1026.32(b)(1), do not exceed:
offer rate for a comparable transaction (A) For a loan amount greater than
as of the date the interest rate is set by or equal to $100,000 (indexed for infla-
the amounts specified in paragraphs tion): 3 percent of the total loan
(e)(2)(vi)(A) through (F) of this section. amount;
The amounts specified here shall be ad- (B) For a loan amount greater than
justed annually on January 1 by the or equal to $60,000 (indexed for infla-
annual percentage change in the Con- tion) but less than $100,000 (indexed for
sumer Price Index for All Urban Con- inflation): $3,000 (indexed for inflation);
sumers (CPI–U) that was reported on (C) For a loan amount greater than
the preceding June 1. For purposes of or equal to $20,000 (indexed for infla-
this paragraph (e)(2)(vi), the creditor tion) but less than $60,000 (indexed for
must determine the annual percentage inflation): 5 percent of the total loan
rate for a loan for which the interest amount;
rate may or will change within the (D) For a loan amount greater than
first five years after the date on which or equal to $12,500 (indexed for infla-
the first regular periodic payment will tion) but less than $20,000 (indexed for
be due by treating the maximum inter- inflation): $1,000 (indexed for inflation);
est rate that may apply during that (E) For a loan amount less than
five-year period as the interest rate for $12,500 (indexed for inflation): 8 percent
the full term of the loan. See the offi- of the total loan amount.
cial commentary to this paragraph (ii) The dollar amounts, including the
(e)(2)(vi) for the current dollar loan amounts, in paragraph (e)(3)(i) of
amounts. this section shall be adjusted annually
(A) For a first-lien covered trans- on January 1 by the annual percentage
action with a loan amount greater change in the Consumer Price Index for
than or equal to $110,260 (indexed for All Urban Consumers (CPI–U) that was
inflation), 2.25 or more percentage reported on the preceding June 1. See
points; the official commentary to this para-
(B) For a first-lien covered trans- graph (e)(3)(ii) for the current dollar
action with a loan amount greater amounts.
than or equal to $66,156 (indexed for in- (iii) For covered transactions con-
flation) but less than $110,260 (indexed summated on or before January 10,
for inflation), 3.5 or more percentage 2021, if the creditor or assignee deter-
points; mines after consummation that the
(C) For a first-lien covered trans- transaction’s total points and fees ex-
action with a loan amount less than ceed the applicable limit under para-
$66,156 (indexed for inflation), 6.5 or graph (e)(3)(i) of this section, the loan
more percentage points; is not precluded from being a qualified
(D) For a first-lien covered trans- mortgage, provided:
action secured by a manufactured (A) The loan otherwise meets the re-
home with a loan amount less than quirements of paragraphs (e)(2), (e)(4),
$110,260 (indexed for inflation), 6.5 or (e)(5), (e)(6), or (f) of this section, as ap-
more percentage points; plicable;
(E) For a subordinate-lien covered (B) The creditor or assignee pays to
transaction with a loan amount great- the consumer the amount described in
er than or equal to $66,156 (indexed for paragraph (e)(3)(iv) of this section
inflation), 3.5 or more percentage within 210 days after consummation
points; and prior to the occurrence of any of
(F) For a subordinate-lien covered the following events:
transaction with a loan amount less (1) The institution of any action by
jspears on DSK121TN23PROD with CFR
than $66,156 (indexed for inflation), 6.5 the consumer in connection with the
or more percentage points. loan;
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
(2) The receipt by the creditor, as- the loan, in accordance with para-
signee, or servicer of written notice graphs (c)(2)(i) and (c)(4) of this sec-
from the consumer that the trans- tion;
action’s total points and fees exceed (2) Considers and verifies at or before
the applicable limit under paragraph consummation the consumer’s current
(e)(3)(i) of this section; or debt obligations, alimony, and child
(3) The consumer becoming 60 days support in accordance with paragraphs
past due on the legal obligation; and (c)(2)(vi) and (c)(3) of this section;
(C) The creditor or assignee, as appli- (3) Considers at or before consumma-
cable, maintains and follows policies tion the consumer’s monthly debt-to-
and procedures for post-consummation income ratio or residual income and
review of points and fees and for mak- verifies the debt obligations and in-
ing payments to consumers in accord- come used to determine that ratio in
ance with paragraphs (e)(3)(iii)(B) and accordance with paragraph (c)(7) of this
(e)(3)(iv) of this section. section, except that the calculation of
(iv) For purposes of paragraph the payment on the covered trans-
(e)(3)(iii) of this section, the creditor or action for purposes of determining the
assignee must pay to the consumer an consumer’s total monthly debt obliga-
amount that is not less than the sum of tions in paragraph (c)(7)(i)(A) shall be
the following: determined in accordance with para-
(A) The dollar amount by which the graph (e)(2)(iv) of this section instead
transaction’s total points and fees ex- of paragraph (c)(5) of this section;
ceeds the applicable limit under para-
(C) That is not subject, at con-
graph (e)(3)(i) of this section; and
summation, to a commitment to be ac-
(B) Interest on the dollar amount de-
quired by another person, other than a
scribed in paragraph (e)(3)(iv)(A) of this
person that satisfies the requirements
section, calculated using the contract
of paragraph (e)(5)(i)(D) of this section;
interest rate applicable during the pe-
and
riod from consummation until the pay-
ment described in this paragraph (D) For which the creditor satisfies
(e)(3)(iv) is made to the consumer. the requirements stated in
(4) Qualified mortgage defined—other § 1026.35(b)(2)(iii)(B) and (C).
agencies. Notwithstanding paragraph (ii) A qualified mortgage extended
(e)(2) of this section, a qualified mort- pursuant to paragraph (e)(5)(i) of this
gage is a covered transaction that is section immediately loses its status as
defined as a qualified mortgage by the a qualified mortgage under paragraph
U.S. Department of Housing and Urban (e)(5)(i) if legal title to the qualified
Development under 24 CFR 201.7 and 24 mortgage is sold, assigned, or other-
CFR 203.19, the U.S. Department of wise transferred to another person ex-
Veterans Affairs under 38 CFR 36.4300 cept when:
and 38 CFR 36.4500, or the U.S. Depart- (A) The qualified mortgage is sold,
ment of Agriculture under 7 CFR assigned, or otherwise transferred to
3555.109. another person three years or more
(5) Qualified mortgage defined—small after consummation of the qualified
creditor portfolio loans. (i) Notwith- mortgage;
standing paragraph (e)(2) of this sec- (B) The qualified mortgage is sold,
tion, a qualified mortgage is a covered assigned, or otherwise transferred to a
transaction: creditor that satisfies the requirements
(A) That satisfies the requirements of of paragraph (e)(5)(i)(D) of this section;
paragraph (e)(2) of this section other (C) The qualified mortgage is sold,
than the requirements of paragraphs assigned, or otherwise transferred to
(e)(2)(v) and (vi) of this section; another person pursuant to a capital
(B) For which the creditor: restoration plan or other action under
(1) Considers and verifies at or before 12 U.S.C. 1831o, actions or instructions
consummation the consumer’s current of any person acting as conservator, re-
or reasonably expected income or as- ceiver, or bankruptcy trustee, an order
sets other than the value of the dwell- of a State or Federal government agen-
jspears on DSK121TN23PROD with CFR
ing (including any real property at- cy with jurisdiction to examine the
tached to the dwelling) that secures creditor pursuant to State or Federal
164
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Consumer Financial Protection Bureau § 1026.43
law, or an agreement between the cred- (A) The covered transaction is not
itor and such an agency; or subject, at consummation, to a com-
(D) The qualified mortgage is sold, mitment to be acquired by another per-
assigned, or otherwise transferred pur- son, except for a sale, assignment, or
suant to a merger of the creditor with transfer permitted by paragraph
another person or acquisition of the (e)(7)(iii)(B)(3) of this section; and
creditor by another person or of an- (B) Legal title to the covered trans-
other person by the creditor. action is not sold, assigned, or other-
(6) Qualified mortgage defined—tem- wise transferred to another person be-
porary balloon-payment qualified mort- fore the end of the seasoning period,
gage rules. (i) Notwithstanding para- except that:
graph (e)(2) of this section, a qualified
(1) The covered transaction may be
mortgage is a covered transaction:
sold, assigned, or otherwise transferred
(A) That satisfies the requirements of
to another person pursuant to a capital
paragraph (f) of this section other than
the requirements of paragraph restoration plan or other action under
(f)(1)(vi); and 12 U.S.C. 1831o, actions or instructions
(B) For which the creditor satisfies of any person acting as conservator, re-
the requirements stated in ceiver, or bankruptcy trustee, an order
§ 1026.35(b)(2)(iii)(B) and (C). of a State or Federal government agen-
(ii) The provisions of this paragraph cy with jurisdiction to examine the
(e)(6) apply only to covered trans- creditor pursuant to State or Federal
actions for which the application was law, or an agreement between the cred-
received before April 1, 2016. itor and such an agency;
(7) Qualified mortgage defined—sea- (2) The covered transaction may be
soned loans—(i) General. Notwith- sold, assigned, or otherwise transferred
standing paragraph (e)(2) of this sec- pursuant to a merger of the creditor
tion, and except as provided in para- with another person or acquisition of
graph (e)(7)(iv) of this section, a quali- the creditor by another person or of an-
fied mortgage is a first-lien covered other person by the creditor; or
transaction that: (3) The covered transaction may be
(A) Is a fixed-rate mortgage as de- sold, assigned, or otherwise transferred
fined in § 1026.18(s)(7)(iii) with fully am- once before the end of the seasoning pe-
ortizing payments as defined in para- riod, provided that the covered trans-
graph (b)(2) of this section; action is not securitized as part of the
(B) Satisfies the requirements in sale, assignment, or transfer or at any
paragraphs (e)(2)(i) through (v) of this other time before the end of the sea-
section; soning period as defined in
(C) Has met the requirements in § 1026.43(e)(7)(iv)(C).
paragraph (e)(7)(ii) of this section at (iv) Definitions. For purposes of para-
the end of the seasoning period as de- graph (e)(7) of this section:
fined in paragraph (e)(7)(iv)(C) of this
(A) Delinquency means the failure to
section;
make a periodic payment (in one full
(D) Satisfies the requirements in
payment or in two or more partial pay-
paragraph (e)(7)(iii) of this section; and
(E) Is not a high-cost mortgage as de- ments) sufficient to cover principal, in-
fined in § 1026.32(a). terest, and escrow (if applicable) for a
(ii) Performance requirements. To be a given billing cycle by the date the peri-
qualified mortgage under this para- odic payment is due under the terms of
graph (e)(7) of this section, the covered the legal obligation. Other amounts,
transaction must have no more than such as any late fees, are not consid-
two delinquencies of 30 or more days ered for this purpose.
and no delinquencies of 60 or more days (1) A periodic payment is 30 days de-
at the end of the seasoning period. linquent when it is not paid before the
(iii) Portfolio requirements. To be a due date of the following scheduled
qualified mortgage under this para- periodic payment.
graph (e)(7) of this section, the covered (2) A periodic payment is 60 days de-
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transaction must satisfy the following linquent if the consumer is more than
requirements: 30 days delinquent on the first of two
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
sequential scheduled periodic pay- paragraph (e)(7)(iv)(A)(3)(ii) of this sec-
ments and does not make both sequen- tion, payments from the following
tial scheduled periodic payments be- sources are not considered in assessing
fore the due date of the next scheduled delinquency under paragraph
periodic payment after the two sequen- (e)(7)(iv)(A) of this section:
tial scheduled periodic payments. (i) Funds in escrow in connection
(3) For any given billing cycle for with the covered transaction; or
which a consumer’s payment is less (ii) Funds paid on behalf of the con-
than the periodic payment due, a con- sumer by the creditor, servicer, or as-
sumer is not delinquent as defined in signee of the covered transaction, or
this paragraph (e)(7) if: any other person acting on behalf of
(i) The servicer chooses not to treat such creditor, servicer, or assignee.
the payment as delinquent for purposes (B) Qualifying change means an agree-
of any section of subpart C of Regula- ment that meets the following condi-
tion X, 12 CFR part 1024, if applicable; tions:
(ii) The payment is deficient by $50 or
(1) The agreement is entered into
less; and
during or after a temporary payment
(iii) There are no more than three
accommodation in connection with a
such deficient payments treated as not
disaster or pandemic-related national
delinquent during the seasoning period.
emergency as defined in paragraph
(4) The principal and interest used in
(e)(7)(iv)(D) of this section and ends
determining the date a periodic pay-
any pre-existing delinquency on the
ment sufficient to cover principal, in-
loan obligation upon taking effect;
terest, and escrow (if applicable) for a
(2) The amount of interest charged
given billing cycle becomes due and un-
over the full term of the loan does not
paid are the principal and interest pay-
increase as a result of the agreement;
ment amounts established by the terms
and payment schedule of the loan obli- (3) The servicer does not charge any
gation at consummation, except: fee in connection with the agreement;
(i) If a qualifying change as defined and
in paragraph (e)(7)(iv)(B) of this section (4) Promptly upon the consumer’s ac-
is made to the loan obligation, the ceptance of the agreement, the servicer
principal and interest used in deter- waives all late charges, penalties, stop
mining the date a periodic payment payment fees, or similar charges in-
sufficient to cover principal, interest, curred during a temporary payment ac-
and escrow (if applicable) for a given commodation in connection with a dis-
billing cycle becomes due and unpaid aster or pandemic-related national
are the principal and interest payment emergency, as well as all late charges,
amounts established by the terms and penalties, stop payment fees, or similar
payment schedule of the loan obliga- charges incurred during the delin-
tion at consummation as modified by quency that led to a temporary pay-
the qualifying change. ment accommodation in connection
(ii) If, due to reasons related to the with a disaster or pandemic-related na-
timing of delivery, set up, or avail- tional emergency.
ability for occupancy of the dwelling (C) Seasoning period means a period of
securing the obligation, the first pay- 36 months beginning on the date on
ment due date is modified before the which the first periodic payment is due
first payment due date in the legal ob- after consummation of the covered
ligation at consummation, the modi- transaction, except that:
fied first payment due date shall be (1) Notwithstanding any other provi-
considered in lieu of the first payment sion of this section, if there is a delin-
due date in the legal obligation at con- quency of 30 days or more at the end of
summation in determining the date a the 36th month of the seasoning period,
periodic payment sufficient to cover the seasoning period does not end until
principal, interest, and escrow (if appli- there is no delinquency; and
cable) for a given billing cycle becomes (2) The seasoning period does not in-
due and unpaid. clude any period during which the con-
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(5) Except for purposes of making up sumer is in a temporary payment ac-
the deficiency amount set forth in commodation extended in connection
166
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Consumer Financial Protection Bureau § 1026.43
with a disaster or pandemic-related na- expected income or assets other than
tional emergency, provided that during the dwelling that secures the loan;
or at the end of the temporary pay- (iii) The creditor:
ment accommodation there is a quali- (A) Considers and verifies at or before
fying change as defined in paragraph consummation the consumer’s current
(e)(7)(iv)(B) of this section or the con- or reasonably expected income or as-
sumer cures the loan’s delinquency sets other than the value of the dwell-
under its original terms. If during or at ing (including any real property at-
the end of the temporary payment ac- tached to the dwelling) that secures
commodation in connection with a dis- the loan, in accordance with para-
aster or pandemic-related national graphs (c)(2)(i) and (c)(4) of this sec-
emergency there is a qualifying change tion;
or the consumer cures the loan’s delin- (B) Considers and verifies at or before
quency under its original terms, the consummation the consumer’s current
seasoning period consists of the period debt obligations, alimony, and child
from the date on which the first peri- support in accordance with paragraphs
odic payment was due after consumma- (c)(2)(vi) and (c)(3) of this section;
tion of the covered transaction to the (C) Considers at or before consumma-
beginning of the temporary payment tion the consumer’s monthly debt-to-
accommodation and an additional pe- income ratio or residual income and
riod immediately after the temporary verifies the debt obligations and in-
payment accommodation ends, which come used to determine that ratio in
together must equal at least 36 accordance with paragraph (c)(7) of this
months. section, except that the calculation of
(D) Temporary payment accommodation the payment on the covered trans-
in connection with a disaster or pan- action for purposes of determining the
demic-related national emergency means consumer’s total monthly debt obliga-
temporary payment relief granted to a tions in (c)(7)(i)(A) shall be determined
consumer due to financial hardship in accordance with paragraph
(f)(1)(iv)(A) of this section, together
caused directly or indirectly by a presi-
with the consumer’s monthly pay-
dentially declared emergency or major
ments for all mortgage-related obliga-
disaster under the Robert T. Stafford
tions and excluding the balloon pay-
Disaster Relief and Emergency Assist-
ment;
ance Act (42 U.S.C. 5121 et seq.) or a
(iv) The legal obligation provides for:
presidentially declared pandemic-re-
(A) Scheduled payments that are sub-
lated national emergency under the
stantially equal, calculated using an
National Emergencies Act (50 U.S.C.
amortization period that does not ex-
1601 et seq.).
ceed 30 years;
(f) Balloon-payment qualified mortgages (B) An interest rate that does not in-
made by certain creditors—(1) Exemption. crease over the term of the loan; and
Notwithstanding paragraph (e)(2) of (C) A loan term of five years or
this section, a qualified mortgage may longer.
provide for a balloon payment, pro- (v) The loan is not subject, at con-
vided: summation, to a commitment to be ac-
(i) The loan satisfies the require- quired by another person, other than a
ments for a qualified mortgage in para- person that satisfies the requirements
graphs (e)(2)(i)(A) and (e)(2)(ii) and (iii) of paragraph (f)(1)(vi) of this section;
of this section; and
(ii) The creditor determines at or be- (vi) The creditor satisfies the re-
fore consummation that the consumer quirements stated in
can make all of the scheduled pay- § 1026.35(b)(2)(iii)(A), (B), and (C).
ments under the terms of the legal ob- (2) Post-consummation transfer of bal-
ligation, as described in paragraph loon-payment qualified mortgage. A bal-
(f)(1)(iv) of this section, together with loon-payment qualified mortgage, ex-
the consumer’s monthly payments for tended pursuant to paragraph (f)(1), im-
all mortgage-related obligations and mediately loses its status as a qualified
jspears on DSK121TN23PROD with CFR
excluding the balloon payment, from mortgage under paragraph (f)(1) if legal
the consumer’s current or reasonably title to the balloon-payment qualified
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§ 1026.43 12 CFR Ch. X (1–1–25 Edition)
mortgage is sold, assigned, or other- (A) 2 percent, if incurred during the
wise transferred to another person ex- first two years following consumma-
cept when: tion; and
(i) The balloon-payment qualified (B) 1 percent, if incurred during the
mortgage is sold, assigned, or other- third year following consummation.
wise transferred to another person (3) Alternative offer required. A cred-
three years or more after consumma- itor must not offer a consumer a cov-
tion of the balloon-payment qualified ered transaction with a prepayment
mortgage; penalty unless the creditor also offers
(ii) The balloon-payment qualified the consumer an alternative covered
mortgage is sold, assigned, or other- transaction without a prepayment pen-
wise transferred to a creditor that sat- alty and the alternative covered trans-
isfies the requirements of paragraph action:
(f)(1)(vi) of this section; (i) Has an annual percentage rate
(iii) The balloon-payment qualified that cannot increase after consumma-
mortgage is sold, assigned, or other- tion and has the same type of interest
wise transferred to another person pur- rate as the covered transaction with a
suant to a capital restoration plan or prepayment penalty; for purposes of
other action under 12 U.S.C. 1831o, ac- this paragraph (g), the term ‘‘type of
tions or instructions of any person act- interest rate’’ refers to whether a
ing as conservator, receiver or bank- transaction:
ruptcy trustee, an order of a State or (A) Is a fixed-rate mortgage, as de-
Federal governmental agency with ju- fined in § 1026.18(s)(7)(iii); or
risdiction to examine the creditor pur- (B) Is a step-rate mortgage, as de-
suant to State or Federal law, or an fined in § 1026.18(s)(7)(ii);
agreement between the creditor and (ii) Has the same loan term as the
such an agency; or loan term for the covered transaction
(iv) The balloon-payment qualified with a prepayment penalty;
mortgage is sold, assigned, or other- (iii) Satisfies the periodic payment
wise transferred pursuant to a merger conditions under paragraph (e)(2)(i) of
of the creditor with another person or this section;
acquisition of the creditor by another (iv) Satisfies the points and fees con-
person or of another person by the ditions under paragraph (e)(2)(iii) of
creditor. this section, based on the information
(g) Prepayment penalties—(1) When known to the creditor at the time the
permitted. A covered transaction must transaction is offered; and
not include a prepayment penalty un- (v) Is a transaction for which the
less: creditor has a good faith belief that the
consumer likely qualifies, based on the
(i) The prepayment penalty is other-
information known to the creditor at
wise permitted by law; and
the time the creditor offers the covered
(ii) The transaction: transaction without a prepayment pen-
(A) Has an annual percentage rate alty.
that cannot increase after consumma- (4) Offer through a mortgage broker. If
tion; the creditor offers a covered trans-
(B) Is a qualified mortgage under action with a prepayment penalty to
paragraph (e)(2), (e)(4), (e)(5), (e)(6), or the consumer through a mortgage
(f) of this section; and broker, as defined in § 1026.36(a)(2), the
(C) Is not a higher-priced mortgage creditor must:
loan, as defined in § 1026.35(a). (i) Present the mortgage broker an
(2) Limits on prepayment penalties. A alternative covered transaction with-
prepayment penalty: out a prepayment penalty that satis-
(i) Must not apply after the three- fies the requirements of paragraph
year period following consummation; (g)(3) of this section; and
and (ii) Establish by agreement that the
(ii) Must not exceed the following mortgage broker must present the con-
jspears on DSK121TN23PROD with CFR
percentages of the amount of the out- sumer an alternative covered trans-
standing loan balance prepaid: action without a prepayment penalty
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Consumer Financial Protection Bureau § 1026.46
that satisfies the requirements of para- loans as defined in § 1026.46(b)(5). A
graph (g)(3) of this section, offered by: creditor may, at its option, comply
(A) The creditor; or with the requirements of this subpart
(B) Another creditor, if the trans- for an extension of credit subject to
action offered by the other creditor has §§ 1026.17 and 1026.18 that is extended to
a lower interest rate or a lower total a consumer for expenses incurred after
dollar amount of discount points and graduation from a law, medical, dental,
origination points or fees. veterinary, or other graduate school
(5) Creditor that is a loan originator. If and related to relocation, study for a
the creditor is a loan originator, as de- bar or other examination, participation
fined in § 1026.36(a)(1), and the creditor in an internship or residency program,
presents the consumer a covered trans- or similar purposes.
action offered by a person to which the (1) Relation to other subparts in this
creditor would assign the covered part. Except as otherwise specifically
transaction after consummation, the provided, the requirements and limita-
creditor must present the consumer an tions of this subpart are in addition to
alternative covered transaction with- and not in lieu of those contained in
out a prepayment penalty that satis- other subparts of this part.
fies the requirements of paragraph (2) [Reserved]
(g)(3) of this section, offered by: (b) Definitions. For purposes of this
(i) The assignee; or subpart, the following definitions
(ii) Another person, if the trans- apply:
action offered by the other person has
(1) Covered educational institution
a lower interest rate or a lower total
means:
dollar amount of origination discount
points and points or fees. (i) An educational institution that
(6) Applicability. This paragraph (g) meets the definition of an institution
applies only if a covered transaction is of higher education, as defined in para-
consummated with a prepayment pen- graph (b)(2) of this section, without re-
alty and is not violated if: gard to the institution’s accreditation
(i) A covered transaction is con- status; and
summated without a prepayment pen- (ii) Includes an agent, officer, or em-
alty; or ployee of the institution of higher edu-
(ii) The creditor and consumer do not cation. An agent means an institution-
consummate a covered transaction. affiliated organization as defined by
(h) Evasion; open-end credit. In con- section 151 of the Higher Education Act
nection with credit secured by a con- of 1965 (20 U.S.C. 1019) or an officer or
sumer’s dwelling that does not meet employee of an institution-affiliated
the definition of open-end credit in organization.
§ 1026.2(a)(20), a creditor shall not struc- (2) Institution of higher education has
ture the loan as an open-end plan to the same meaning as in sections 101
evade the requirements of this section. and 102 of the Higher Education Act of
1965 (20 U.S.C. 1001–1002) and the imple-
[78 FR 6584, Jan. 30, 2013, as amended at 78 menting regulations published by the
FR 35502, June 12, 2013; 78 FR 44718, July 24,
2013; 78 FR 60442, Oct. 1, 2013; 78 FR 63005,
U.S. Department of Education.
Oct. 23, 2013; 79 FR 65323, Nov. 3, 2014; 80 FR (3) Postsecondary educational expenses
59968, Oct. 2, 2015; 85 FR 67958, Oct. 26, 2020; 85 means any of the expenses that are
FR 86394, 86452, Dec. 29, 2020; 86 FR 8283, Feb. listed as part of the cost of attendance,
5, 2021; 86 FR 60360, Nov. 2, 2021] as defined under section 472 of the
Higher Education Act of 1965 (20 U.S.C.
§§ 1026.44–1026.45 [Reserved] 1087ll), of a student at a covered edu-
cational institution. These expenses in-
Subpart F—Special Rules for clude tuition and fees, books, supplies,
Private Education Loans miscellaneous personal expenses, room
and board, and an allowance for any
§ 1026.46 Special disclosure require- loan fee, origination fee, or insurance
ments for private education loans. premium charged to a student or par-
jspears on DSK121TN23PROD with CFR
(a) Coverage. The requirements of this ent for a loan incurred to cover the
subpart apply to private education cost of the student’s attendance.
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§ 1026.46 12 CFR Ch. X (1–1–25 Edition)
(4) Preferred lender arrangement has closed under §§ 1026.47(b)(1)(i) and (c)(1),
the same meaning as in section 151 of shall be more conspicuous than any
the Higher Education Act of 1965 (20 other disclosure, except the creditor’s
U.S.C. 1019). identity under § 1026.18(a).
(5) Private education loan means an (3) Electronic disclosures. The disclo-
extension of credit that: sures required under §§ 1026.47(b) and (c)
(i) Is not made, insured, or guaran- may be provided to the consumer in
teed under title IV of the Higher Edu- electronic form, subject to compliance
cation Act of 1965 (20 U.S.C. 1070 et with the consumer consent and other
seq.); applicable provisions of the Electronic
(ii) Is extended to a consumer ex- Signatures in Global and National
pressly, in whole or in part, for post- Commerce Act (E-Sign Act) (15 U.S.C.
secondary educational expenses, re- 7001 et seq.). The disclosures required by
gardless of whether the loan is pro- § 1026.47(a) may be provided to the con-
vided by the educational institution sumer in electronic form on or with an
that the student attends; application or solicitation that is
(iii) Does not include open-end credit accessed by the consumer in electronic
or any loan that is secured by real form without regard to the consumer
property or a dwelling; and consent or other provisions of the E-
(iv) Does not include an extension of Sign Act. The form required to be re-
credit in which the covered educational ceived under § 1026.48(e) may be accept-
institution is the creditor if: ed by the creditor in electronic form as
(A) The term of the extension of cred- provided for in that section.
it is 90 days or less; or (d) Timing of disclosures—(1) Applica-
(B) an interest rate will not be ap- tion or solicitation disclosures. (i) The
plied to the credit balance and the disclosures required by § 1026.47(a) shall
term of the extension of credit is one be provided on or with any application
year or less, even if the credit is pay- or solicitation. For purposes of this
able in more than four installments. subpart, the term solicitation means
(c) Form of disclosures—(1) Clear and an offer of credit that does not require
conspicuous. The disclosures required the consumer to complete an applica-
by this subpart shall be made clearly tion. A ‘‘firm offer of credit’’ as defined
and conspicuously. in section 603(l) of the Fair Credit Re-
(2) Transaction disclosures. (i) The dis- porting Act (15 U.S.C. 1681a(l)) is a so-
closures required under §§ 1026.47(b) and licitation for purposes of this section.
(c) shall be made in writing, in a form (ii) The creditor may, at its option,
that the consumer may keep. The dis- disclose orally the information in
closures shall be grouped together, § 1026.47(a) in a telephone application or
shall be segregated from everything solicitation. Alternatively, if the cred-
else, and shall not contain any infor- itor does not disclose orally the infor-
mation not directly related to the dis- mation in § 1026.47(a), the creditor must
closures required under §§ 1026.47(b) and provide the disclosures or place them
(c), which include the disclosures re- in the mail no later than three busi-
quired under § 1026.18. ness days after the consumer has ap-
(ii) The disclosures may include an plied for the credit, except that, if the
acknowledgement of receipt, the date creditor either denies the consumer’s
of the transaction, and the consumer’s application or provides or places in the
name, address, and account number. mail the disclosures in § 1026.47(b) no
The following disclosures may be made later than three business days after the
together with or separately from other consumer requests the credit, the cred-
required disclosures: the creditor’s itor need not also provide the
identity under § 1026.18(a), insurance or § 1026.47(a) disclosures.
debt cancellation under § 1026.18(n), and (iii) Notwithstanding paragraph
certain security interest charges under (d)(1)(i) of this section, for a loan that
§ 1026.18(o). the consumer may use for multiple
(iii) The term ‘‘finance charge’’ and purposes including, but not limited to,
corresponding amount, when required postsecondary educational expenses,
jspears on DSK121TN23PROD with CFR
to be disclosed under § 1026.18(d), and the creditor need not provide the dis-
the interest rate required to be dis- closures required by § 1026.47(a).
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Consumer Financial Protection Bureau § 1026.47
(2) Approval disclosures. The creditor itor delivers the required disclosures,
shall provide the disclosures required the inaccuracy is not a violation of
by § 1026.47(b) before consummation on Regulation Z (12 CFR part 1026), al-
or with any notice of approval provided though new disclosures may be re-
to the consumer. If the creditor mails quired under § 1026.48(c).
notice of approval, the disclosures (2) Final disclosures. If a disclosure
must be mailed with the notice. If the under § 1026.47(c) becomes inaccurate
creditor communicates notice of ap- because of an event that occurs after
proval by telephone, the creditor must the creditor delivers the required dis-
mail the disclosures within three busi- closures, the inaccuracy is not a viola-
ness days of providing the notice of ap- tion of Regulation Z (12 CFR part 1026).
proval. If the creditor communicates
notice of approval electronically, the § 1026.47 Content of disclosures.
creditor may provide the disclosures in (a) Application or solicitation disclo-
electronic form in accordance with sures. A creditor shall provide the dis-
§ 1026.46(d)(3); otherwise the creditor closures required under paragraph (a)
must mail the disclosures within three of this section on or with a solicitation
business days of communicating the or an application for a private edu-
notice of approval. If the creditor com- cation loan.
municates approval in person, the cred- (1) Interest Rates. (i) The interest rate
itor must provide the disclosures to the or range of interest rates applicable to
consumer at that time. the loan and actually offered by the
(3) Final disclosures. The disclosures creditor at the time of application or
required by § 1026.47(c) shall be provided solicitation. If the rate will depend, in
after the consumer accepts the loan in part, on a later determination of the
accordance with § 1026.48(c)(1). consumer’s creditworthiness or other
(4) Receipt of mailed disclosures. If the factors, a statement that the rate for
disclosures under paragraphs (d)(1), which the consumer may qualify will
(d)(2) or (d)(3) of this section are mailed depend on the consumer’s creditworthi-
to the consumer, the consumer is con- ness and other factors, if applicable.
sidered to have received them three (ii) Whether the interest rates appli-
business days after they are mailed. cable to the loan are fixed or variable.
(e) Basis of disclosures and use of esti- (iii) If the interest rate may increase
mates—(1) Legal obligation. Disclosures after consummation of the transaction,
shall reflect the terms of the legal obli- any limitations on the interest rate ad-
gation between the parties. justments, or lack thereof; a statement
(2) Estimates. If any information nec- that the consumer’s actual rate could
essary for an accurate disclosure is un- be higher or lower than the rates dis-
known to the creditor, the creditor closed under paragraph (a)(1)(i) of this
shall make the disclosure based on the section, if applicable; and, if the limi-
best information reasonably available tation is determined by applicable law,
at the time the disclosure is provided, that fact.
and shall state clearly that the disclo- (iv) Whether the applicable interest
sure is an estimate. rates typically will be higher if the
(f) Multiple creditors; multiple con- loan is not co-signed or guaranteed.
sumers. If a transaction involves more (2) Fees and default or late payment
than one creditor, only one set of dis- costs. (i) An itemization of the fees or
closures shall be given and the credi- range of fees required to obtain the pri-
tors shall agree among themselves vate education loan.
which creditor will comply with the re- (ii) Any fees, changes to the interest
quirements that this part imposes on rate, and adjustments to principal
any or all of them. If there is more based on the consumer’s defaults or
than one consumer, the disclosures late payments.
may be made to any consumer who is (3) Repayment terms. (i) The term of
primarily liable on the obligation. the loan, which is the period during
(g) Effect of subsequent events—(1) Ap- which regularly scheduled payments of
proval disclosures. If a disclosure under principal and interest will be due.
jspears on DSK121TN23PROD with CFR
§ 1026.47(b) becomes inaccurate because (ii) A description of any payment de-
of an event that occurs after the cred- ferral options, or, if the consumer does
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§ 1026.47 12 CFR Ch. X (1–1–25 Edition)
not have the option to defer payments, will not change for 30 days except as a
that fact. result of adjustments to the interest
(iii) For each payment deferral op- rate and other changes permitted by
tion applicable while the student is en- law.
rolled at a covered educational institu- (8) Self-certification information. A
tion: statement that, before the loan may be
(A) Whether interest will accrue dur- consummated, the consumer must
ing the deferral period; and complete the self-certification form
(B) If interest accrues, whether pay- and that the form may be obtained
ment of interest may be deferred and from the institution of higher edu-
added to the principal balance. cation that the student attends.
(iv) A statement that if the consumer (b) Approval disclosures. On or with
files for bankruptcy, the consumer may any notice of approval provided to the
still be required to pay back the loan. consumer, the creditor shall disclose
(4) Cost estimates. An example of the the information required under § 1026.18
total cost of the loan calculated as the and the following information:
total of payments over the term of the (1) Interest rate. (i) The interest rate
loan: applicable to the loan.
(i) Using the highest rate of interest (ii) Whether the interest rate is fixed
disclosed under paragraph (a)(1) of this or variable.
section and including all finance (iii) If the interest rate may increase
charges applicable to loans at that after consummation of the transaction,
rate; any limitations on the rate adjust-
(ii) Using an amount financed of ments, or lack thereof.
$10,000, or $5000 if the creditor only of-
(2) Fees and default or late payment
fers loans of this type for less than
costs. (i) An itemization of the fees or
$10,000; and
range of fees required to obtain the pri-
(iii) Calculated for each payment op-
vate education loan.
tion.
(ii) Any fees, changes to the interest
(5) Eligibility. Any age or school en-
rate, and adjustments to principal
rollment eligibility requirements relat-
based on the consumer’s defaults or
ing to the consumer or cosigner.
late payments.
(6) Alternatives to private education
loans. (i) A statement that the con- (3) Repayment terms. (i) The principal
sumer may qualify for Federal student amount of the loan for which the con-
financial assistance through a program sumer has been approved.
under title IV of the Higher Education (ii) The term of the loan, which is the
Act of 1965 (20 U.S.C. 1070 et seq.). period during which regularly sched-
(ii) The interest rates available under uled payments of principal and interest
each program under title IV of the will be due.
Higher Education Act of 1965 (20 U.S.C. (iii) A description of the payment de-
1070 et seq.) and whether the rates are ferral option chosen by the consumer,
fixed or variable. if applicable, and any other payment
(iii) A statement that the consumer deferral options that the consumer
may obtain additional information may elect at a later time.
concerning Federal student financial (iv) Any payments required while the
assistance from the institution of high- student is enrolled at a covered edu-
er education that the student attends, cational institution, based on the de-
or at the Web site of the U.S. Depart- ferral option chosen by the consumer.
ment of Education, including an appro- (v) The amount of any unpaid inter-
priate Web site address. est that will accrue while the student
(iv) A statement that a covered edu- is enrolled at a covered educational in-
cational institution may have school- stitution, based on the deferral option
specific education loan benefits and chosen by the consumer.
terms not detailed on the disclosure (vi) A statement that if the consumer
form. files for bankruptcy, the consumer may
(7) Rights of the consumer. A state- still be required to pay back the loan.
jspears on DSK121TN23PROD with CFR
ment that if the loan is approved, the (vii) An estimate of the total amount
terms of the loan will be available and of payments calculated based on:
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Consumer Financial Protection Bureau § 1026.48
(A) The interest rate applicable to (ii) A statement that, except for
the loan. Compliance with § 1026.18(h) changes to the interest rate and other
constitutes compliance with this re- changes permitted by law, the rates
quirement. and terms of the loan may not be
(B) The maximum possible rate of in- changed by the creditor during the pe-
terest for the loan or, if a maximum riod described in paragraph (b)(5)(i) of
rate cannot be determined, a rate of this section.
25%. (c) Final disclosures. After the con-
(C) If a maximum rate cannot be de- sumer has accepted the loan in accord-
termined, the estimate of the total ance with § 1026.48(c)(1), the creditor
amount for repayment must include a shall disclose to the consumer the in-
statement that there is no maximum formation required by § 1026.18 and the
rate and that the total amount for re- following information:
payment disclosed under paragraph (1) Interest rate. Information required
(b)(3)(vii)(B) of this section is an esti- to be disclosed under § 1026.47(b)(1).
mate and will be higher if the applica- (2) Fees and default or late payment
ble interest rate increases. costs. Information required to be dis-
(viii) The maximum monthly pay- closed under § 1026.47(b)(2).
ment based on the maximum rate of in- (3) Repayment terms. Information re-
terest for the loan or, if a maximum quired to be disclosed under
rate cannot be determined, a rate of § 1026.47(b)(3).
25%. If a maximum cannot be deter- (4) Cancellation right. A statement
mined, a statement that there is no that:
maximum rate and that the monthly (i) The consumer has the right to
payment amount disclosed is an esti- cancel the loan, without penalty, at
mate and will be higher if the applica- any time before the cancellation period
ble interest rate increases. under § 1026.48(d) expires, and
(4) Alternatives to private education (ii) Loan proceeds will not be dis-
loans. (i) A statement that the con- bursed until after the cancellation pe-
sumer may qualify for Federal student riod under § 1026.48(d) expires. The
financial assistance through a program statement must include the specific
under title IV of the Higher Education date on which the cancellation period
Act of 1965 (20 U.S.C. 1070 et seq.). expires and state that the consumer
(ii) The interest rates available under may cancel by that date. The state-
each program under title IV of the ment must also specify the method or
Higher Education Act of 1965 (20 U.S.C. methods by which the consumer may
1070 et seq.), and whether the rates are cancel. If the creditor permits can-
fixed or variable. cellation by mail, the statement must
(iii) A statement that the consumer specify that the consumer’s mailed re-
may obtain additional information quest will be deemed timely if placed
concerning Federal student financial in the mail not later than the cancella-
assistance from the institution of high- tion date specified on the disclosure.
er education that the student attends, The disclosures required by this para-
or at the Web site of the U.S. Depart- graph (c)(4) must be made more con-
ment of Education, including an appro- spicuous than any other disclosure re-
priate Web site address. quired under this section, except for
(5) Rights of the consumer. (i) A state- the finance charge, the interest rate,
ment that the consumer may accept and the creditor’s identity, which must
the terms of the loan until the accept- be disclosed in accordance with the re-
ance period under § 1026.48(c)(1) has ex- quirements of § 1026.46(c)(2)(iii).
pired. The statement must include the
specific date on which the acceptance § 1026.48 Limitations on private edu-
period expires, based on the date upon cation loans.
which the consumer receives the dis- (a) Co-branding prohibited. (1) Except
closures required under this subsection as provided in paragraph (b) of this sec-
for the loan. The disclosure must also tion, a creditor, other than the covered
specify the method or methods by educational institution itself, shall not
jspears on DSK121TN23PROD with CFR
which the consumer may communicate use the name, emblem, mascot, or logo
acceptance. of a covered educational institution, or
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§ 1026.48 12 CFR Ch. X (1–1–25 Edition)
other words, pictures, or symbols iden- (c)(2) of this section, nothing in this
tified with a covered educational insti- section prevents the creditor from:
tution, in the marketing of private (A) Withdrawing an offer before con-
education loans in a way that implies summation of the transaction if the ex-
that the covered education institution tension of credit would be prohibited
endorses the creditor’s loans. by law or if the creditor has reason to
(2) A creditor’s marketing of private believe that the consumer has com-
education loans does not imply that mitted fraud in connection with the
the covered education institution en- loan application;
dorses the creditor’s loans if the mar- (B) Changing the interest rate based
keting includes a clear and conspicuous on adjustments to the index used for a
disclosure that is equally prominent loan;
and closely proximate to the reference (C) Changing the interest rate and
to the covered educational institution terms if the change will unequivocally
that the covered educational institu- benefit the consumer; or
tion does not endorse the creditor’s (D) Reducing the loan amount based
loans and that the creditor is not affili- upon a certification or other informa-
ated with the covered educational in- tion received from the covered edu-
stitution. cational institution, or from the con-
(b) Endorsed lender arrangements. If a sumer, indicating that the student’s
creditor and a covered educational in- cost of attendance has decreased or the
stitution have entered into an arrange- consumer’s other financial aid has in-
ment where the covered educational in- creased. A creditor may make cor-
stitution agrees to endorse the credi- responding changes to the rate and
tor’s private education loans, and such other terms only to the extent that the
arrangement is not prohibited by other consumer would have received the
applicable law or regulation, paragraph terms if the consumer had applied for
the reduced loan amount.
(a)(1) of this section does not apply if
(ii) If the creditor changes the rate or
the private education loan marketing
terms of the loan under this paragraph
includes a clear and conspicuous dis-
(c)(3), the creditor need not provide the
closure that is equally prominent and
disclosures required under § 1026.47(b)
closely proximate to the reference to
for the new loan terms, nor need the
the covered educational institution
creditor provide an additional 30-day
that the creditor’s loans are not offered
period to the consumer to accept the
or made by the covered educational in-
new terms of the loan under paragraph
stitution, but are made by the creditor.
(c)(1) of this section.
(c) Consumer’s right to accept. (1) The (4) Exceptions requiring re-disclosure.
consumer has the right to accept the (i) Notwithstanding paragraphs (c)(2)
terms of a private education loan at or (c)(3) of this section, nothing in this
any time within 30 calendar days fol- section prevents the creditor, at its op-
lowing the date on which the consumer tion, from changing the rate or terms
receives the disclosures required under of the loan to accommodate a specific
§ 1026.47(b). request by the consumer. For example,
(2) Except for changes permitted if the consumer requests a different re-
under paragraphs (c)(3) and (c)(4), the payment option, the creditor may, but
rate and terms of the private education need not, offer to provide the requested
loan that are required to be disclosed repayment option and make any other
under § 1026.47(b) and (c) may not be changes to the rate and terms.
changed by the creditor prior to the (ii) If the creditor changes the rate or
earlier of: terms of the loan under this paragraph
(i) The date of disbursement of the (c)(4), the creditor shall provide the
loan; or disclosures required under § 1026.47(b)
(ii) The expiration of the 30 calendar and shall provide the consumer the 30-
day period described in paragraph (c)(1) day period to accept the loan under
of this section if the consumer has not paragraph (c)(1) of this section. The
accepted the loan within that time. creditor shall not make further
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(3) Exceptions not requiring re-disclo- changes to the rates and terms of the
sure. (i) Notwithstanding paragraph loan, except as specified in paragraphs
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Consumer Financial Protection Bureau § 1026.51
(c)(3) and (4) of this section. Except as open a credit card account for a con-
permitted under § 1026.48(c)(3), unless sumer under an open-end (not home-se-
the consumer accepts the loan offered cured) consumer credit plan, or in-
by the creditor in response to the con- crease any credit limit applicable to
sumer’s request, the creditor may not such account, unless the card issuer
withdraw or change the rates or terms considers the consumer’s ability to
of the loan for which the consumer was make the required minimum periodic
approved prior to the consumer’s re- payments under the terms of the ac-
quest for a change in loan terms. count based on the consumer’s income
(d) Consumer’s right to cancel. The or assets and the consumer’s current
consumer may cancel a private edu- obligations.
cation loan, without penalty, until (ii) Reasonable policies and procedures.
midnight of the third business day fol- Card issuers must establish and main-
lowing the date on which the consumer tain reasonable written policies and
receives the disclosures required by procedures to consider the consumer’s
§ 1026.47(c). No funds may be disbursed ability to make the required minimum
for a private education loan until the payments under the terms of the ac-
three-business day period has expired. count based on a consumer’s income or
(e) Self-certification form. For a pri- assets and a consumer’s current obliga-
vate education loan intended to be used tions. Reasonable policies and proce-
for the postsecondary educational ex- dures include treating any income and
penses of a student while the student is assets to which the consumer has a
attending an institution of higher edu- reasonable expectation of access as the
cation, the creditor shall obtain from consumer’s income or assets, or lim-
the consumer or the institution of iting consideration of the consumer’s
higher education the form developed by income or assets to the consumer’s
the Secretary of Education under sec- independent income and assets. Rea-
tion 155 of the Higher Education Act of sonable policies and procedures also in-
1965, signed by the consumer, in writ- clude consideration of at least one of
ten or electronic form, before consum- the following: The ratio of debt obliga-
mating the private education loan. tions to income; the ratio of debt obli-
(f) Provision of information by preferred gations to assets; or the income the
lenders. A creditor that has a preferred consumer will have after paying debt
lender arrangement with a covered obligations. It would be unreasonable
educational institution shall provide to for a card issuer not to review any in-
the covered educational institution the formation about a consumer’s income
information required under or assets and current obligations, or to
§ 1026.47(a)(1) through (5), for each type issue a credit card to a consumer who
of private education loan that the lend-
does not have any income or assets.
er plans to offer to consumers for stu-
(2) Minimum periodic payments—(i)
dents attending the covered edu-
Reasonable method. For purposes of
cational institution for the period be-
paragraph (a)(1) of this section, a card
ginning July 1 of the current year and
issuer must use a reasonable method
ending June 30 of the following year.
for estimating the minimum periodic
The creditor shall provide the informa-
payments the consumer would be re-
tion annually by the later of the 1st
quired to pay under the terms of the
day of April, or within 30 days after en-
account.
tering into, or learning the creditor is
a party to, a preferred lender arrange- (ii) Safe harbor. A card issuer com-
ment. plies with paragraph (a)(2)(i) of this
section if it estimates required min-
imum periodic payments using the fol-
Subpart G—Special Rules Appli- lowing method:
cable to Credit Card Ac- (A) The card issuer assumes utiliza-
counts and Open-End Credit tion, from the first day of the billing
Offered to College Students cycle, of the full credit line that the
issuer is considering offering to the
§ 1026.51 Ability to Pay. consumer; and
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(a) General rule—(1)(i) Consideration of (B) The card issuer uses a minimum
ability to pay. A card issuer must not payment formula employed by the
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§ 1026.52 12 CFR Ch. X (1–1–25 Edition)
issuer for the product the issuer is con- creased limit consistent with para-
sidering offering to the consumer or, in graph (b)(1)(i) of this section; or
the case of an existing account, the (B) A cosigner, guarantor, or joint
minimum payment formula that cur- applicant who is at least 21 years old
rently applies to that account, pro- agrees in writing to assume liability
vided that: for any debt incurred on the account,
(1) If the applicable minimum pay- consistent with paragraph (b)(1)(ii) of
ment formula includes interest this section.
charges, the card issuer estimates (ii) If a credit card account has been
those charges using an interest rate opened pursuant to paragraph (b)(1)(ii)
that the issuer is considering offering of this section, no increase in the cred-
to the consumer for purchases or, in it limit may be made on such account
the case of an existing account, the in- before the consumer attains the age of
terest rate that currently applies to 21 unless the cosigner, guarantor, or
purchases; and joint accountholder who assumed li-
(2) If the applicable minimum pay- ability at account opening agrees in
ment formula includes mandatory fees, writing to assume liability on the in-
the card issuer must assume that such crease.
fees have been charged to the account. [76 FR 79772, Dec. 22, 2011, as amended at 78
(b) Rules affecting young consumers— FR 25837, May 3, 2013]
(1) Applications from young consumers. A
card issuer may not open a credit card § 1026.52 Limitations on fees.
account under an open-end (not home- (a) Limitations during first year after
secured) consumer credit plan for a account opening—(1) General rule. Ex-
consumer less than 21 years old, unless cept as provided in paragraph (a)(2) of
the consumer has submitted a written this section, the total amount of fees a
application and the card issuer has: consumer is required to pay with re-
(i) Financial information indicating spect to a credit card account under an
the consumer has an independent abil- open-end (not home-secured) consumer
ity to make the required minimum credit plan during the first year after
periodic payments on the proposed ex- account opening must not exceed 25
tension of credit in connection with percent of the credit limit in effect
the account; or when the account is opened. For pur-
(ii)(A) A signed agreement of a co- poses of this paragraph, an account is
signer, guarantor, or joint applicant considered open no earlier than the
who is at least 21 years old to be either date on which the account may first be
secondarily liable for any debt on the used by the consumer to engage in
account incurred by the consumer be- transactions.
fore the consumer has attained the age (2) Fees not subject to limitations. Para-
of 21 or jointly liable with the con- graph (a) of this section does not apply
sumer for any debt on the account; and to:
(B) Financial information indicating (i) Late payment fees, over-the-limit
such cosigner, guarantor, or joint ap- fees, and returned-payment fees; or
plicant has the ability to make the re- (ii) Fees that the consumer is not re-
quired minimum periodic payments on quired to pay with respect to the ac-
such debts, consistent with paragraph count.
(a) of this section. (3) Rule of construction. Paragraph (a)
(2) Credit line increases for young con- of this section does not authorize the
sumers. (i) If a credit card account has imposition or payment of fees or
been opened pursuant to paragraph charges otherwise prohibited by law.
(b)(1)(i) of this section, no increase in (b) Limitations on penalty fees. A card
the credit limit may be made on such issuer must not impose a fee for vio-
account before the consumer attains lating the terms or other requirements
the age of 21 unless: of a credit card account under an open-
(A) At the time of the contemplated end (not home-secured) consumer cred-
increase, the consumer has an inde- it plan unless the dollar amount of the
jspears on DSK121TN23PROD with CFR
pendent ability to make the required fee is consistent with paragraphs (b)(1)
minimum periodic payments on the in- and (b)(2) of this section.
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Consumer Financial Protection Bureau § 1026.52
(1) General rule. Except as provided in standing the limitation on the amount
paragraph (b)(2) of this section, a card of a late payment fee in paragraph
issuer may impose a fee for violating (b)(1)(ii) of this section.
the terms or other requirements of a (D) The amounts in paragraphs
credit card account under an open-end (b)(1)(ii)(A) and (B) of this section will
(not home-secured) consumer credit be adjusted annually by the Bureau to
plan if the dollar amount of the fee is reflect changes in the Consumer Price
consistent with either paragraph Index.
(b)(1)(i) or (b)(1)(ii) of this section. (E) A smaller card issuer, as defined
(i) Fees based on costs. A card issuer in paragraph (b)(3) of this section, may
may impose a fee for violating the impose a fee for a late payment on an
terms or other requirements of an ac- account if the dollar amount of the fee
count if the card issuer has determined does not exceed the amount in para-
that the dollar amount of the fee rep- graph (b)(1)(ii)(A) or (B) of this section,
resents a reasonable proportion of the as applicable, notwithstanding the lim-
total costs incurred by the card issuer itation on the amount of a late pay-
as a result of that type of violation. A ment fee in this paragraph (b)(1)(ii).
card issuer must reevaluate this deter- (2) Prohibited fees—(i) Fees that exceed
mination at least once every twelve dollar amount associated with violation—
months. If as a result of the reevalua- (A) Generally. A card issuer must not
tion the card issuer determines that a impose a fee for violating the terms or
lower fee represents a reasonable pro- other requirements of a credit card ac-
portion of the total costs incurred by count under an open-end (not home-se-
the card issuer as a result of that type cured) consumer credit plan that ex-
of violation, the card issuer must begin ceeds the dollar amount associated
imposing the lower fee within 45 days with the violation.
after completing the reevaluation. If as (B) No dollar amount associated with
a result of the reevaluation the card violation. A card issuer must not im-
issuer determines that a higher fee rep- pose a fee for violating the terms or
resents a reasonable proportion of the other requirements of a credit card ac-
total costs incurred by the card issuer count under an open-end (not home-se-
as a result of that type of violation, cured) consumer credit plan when there
the card issuer may begin imposing the is no dollar amount associated with the
higher fee after complying with the no- violation. For purposes of paragraph
tice requirements in § 1026.9. (b)(2)(i) of this section, there is no dol-
(ii) Safe harbors. Except as provided lar amount associated with the fol-
in paragraph (b)(1)(ii)(E) of this sec- lowing violations:
tion, a card issuer may impose a fee for (1) Transactions that the card issuer
a late payment on an account if the declines to authorize;
dollar amount of the fee does not ex- (2) Account inactivity; and
ceed $8. A card issuer may impose a fee (3) The closure or termination of an
for other types of violations of the account.
terms or other requirements of an ac- (ii) Multiple fees based on a single event
count if the dollar amount of the fee or transaction. A card issuer must not
does not exceed, as applicable: impose more than one fee for violating
(A) $32; the terms or other requirements of a
(B) $43 if the card issuer previously credit card account under an open-end
imposed a fee pursuant to paragraph (not home-secured) consumer credit
(b)(1)(ii)(A) of this section for a viola- plan based on a single event or trans-
tion of the same type that occurred action. A card issuer may, at its op-
during the same billing cycle or one of tion, comply with this prohibition by
the next six billing cycles; or imposing no more than one fee for vio-
(C) Three percent of the delinquent lating the terms or other requirements
balance on a charge card account that of an account during a billing cycle.
requires payment of outstanding bal- (3) Smaller card issuer. (i) Except as
ances in full at the end of each billing provided in paragraph (b)(3)(ii) of this
cycle if the card issuer has not received section, a card issuer is a smaller card
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the required payment for two or more issuer for purposes of paragraph
consecutive billing cycles, notwith- (b)(1)(ii)(E) of this section if the card
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§ 1026.53 12 CFR Ch. X (1–1–25 Edition)
issuer together with its affiliates had sistent with paragraph (a) of this sec-
fewer than one million open credit card tion, except that, during the two bill-
accounts, as defined in § 1026.58(b)(6), ing cycles immediately preceding expi-
for the entire preceding calendar year. ration of the specified period, the ex-
For purposes of this paragraph (b)(3), cess amount must be allocated first to
affiliate means any company that con- the balance subject to the deferred in-
trols, is controlled by, or is under com- terest or similar program and any re-
mon control with another company, as maining portion allocated to any other
set forth in the Bank Holding Company balances consistent with paragraph (a)
Act of 1956 (12 U.S.C. 1841 et seq.). of this section; or
(ii) If a card issuer together with its
(ii) Consumer request. The card issuer
affiliates had fewer than one million
may at its option allocate any amount
open credit card accounts for the entire
preceding calendar year but meets or paid by the consumer in excess of the
exceeds that number of open credit required minimum periodic payment
card accounts in the current calendar among the balances on the account in
year, the card issuer will no longer be the manner requested by the consumer.
a smaller card issuer for purposes of (2) Accounts with secured balances.
paragraph (b)(1)(ii)(E) of this section as When a balance on a credit card ac-
of 60 days after meeting or exceeding count under an open-end (not home-se-
that number of open credit card ac- cured) consumer credit plan is secured,
counts. the card issuer may at its option allo-
cate any amount paid by the consumer
[76 FR 79772, Dec. 22, 2011, as amended at 78
FR 18797, Mar. 28, 2013; 78 FR 76035, Dec. 16, in excess of the required minimum
2013; 79 FR 48017, Aug. 15, 2014; 80 FR 56898, periodic payment to that balance if re-
Sept. 21, 2015; 81 FR 41421, June 27, 2016; 81 FR quested by the consumer.
84370, Nov. 22, 2016; 83 FR 43505, Aug. 27, 2018;
84 FR 37567, Aug. 1, 2019; 86 FR 60360, Nov. 2, § 1026.54 Limitations on the imposition
2021; 89 FR 19202, Mar. 15, 2024] of finance charges.
§ 1026.53 Allocation of payments. (a) Limitations on imposing finance
charges as a result of the loss of a grace
(a) General rule. Except as provided in
period—(1) General rule. Except as pro-
paragraph (b) of this section, when a
vided in paragraph (b) of this section, a
consumer makes a payment in excess
of the required minimum periodic pay- card issuer must not impose finance
ment for a credit card account under charges as a result of the loss of a
an open-end (not home-secured) con- grace period on a credit card account
sumer credit plan, the card issuer must under an open-end (not home-secured)
allocate the excess amount first to the consumer credit plan if those finance
balance with the highest annual per- charges are based on:
centage rate and any remaining por- (i) Balances for days in billing cycles
tion to the other balances in descend- that precede the most recent billing
ing order based on the applicable an- cycle; or
nual percentage rate. (ii) Any portion of a balance subject
(b) Special rules—(1) Accounts with bal- to a grace period that was repaid prior
ances subject to deferred interest or simi- to the expiration of the grace period.
lar program. When a balance on a credit (2) Definition of grace period. For pur-
card account under an open-end (not poses of paragraph (a)(1) of this sec-
home-secured) consumer credit plan is tion, ‘‘grace period’’ has the same
subject to a deferred interest or similar meaning as in § 1026.5(b)(2)(ii)(B)(3).
program that provides that a consumer
(b) Exceptions. Paragraph (a) of this
will not be obligated to pay interest
section does not apply to:
that accrues on the balance if the bal-
ance is paid in full prior to the expira- (1) Adjustments to finance charges as
tion of a specified period of time: a result of the resolution of a dispute
(i) Last two billing cycles. The card under § 1026.12 or § 1026.13; or
issuer must allocate any amount paid (2) Adjustments to finance charges as
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by the consumer in excess of the re- a result of the return of a payment.
quired minimum periodic payment con-
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Consumer Financial Protection Bureau § 1026.55
§ 1026.55 Limitations on increasing an- disclosed pursuant to paragraph
nual percentage rates, fees, and (b)(1)(i) of this section.
charges. (2) Variable rate exception. A card
(a) General rule. Except as provided in issuer may increase an annual percent-
paragraph (b) of this section, a card age rate when:
issuer must not increase an annual per- (i) The annual percentage rate varies
centage rate or a fee or charge required according to an index that is not under
to be disclosed under § 1026.6(b)(2)(ii), the card issuer’s control and is avail-
(b)(2)(iii), or (b)(2)(xii) on a credit card able to the general public; and
account under an open-end (not home- (ii) The increase in the annual per-
secured) consumer credit plan. centage rate is due to an increase in
(b) Exceptions. A card issuer may in- the index.
crease an annual percentage rate or a (3) Advance notice exception. A card
fee or charge required to be disclosed issuer may increase an annual percent-
under § 1026.6(b)(2)(ii), (b)(2)(iii), or age rate or a fee or charge required to
(b)(2)(xii) pursuant to an exception set be disclosed under § 1026.6(b)(2)(ii),
forth in this paragraph even if that in- (b)(2)(iii), or (b)(2)(xii) after complying
crease would not be permitted under a with the applicable notice require-
different exception. ments in § 1026.9(b), (c), or (g), provided
(1) Temporary rate, fee, or charge ex- that:
ception. A card issuer may increase an
(i) If a card issuer discloses an in-
annual percentage rate or a fee or
creased annual percentage rate, fee, or
charge required to be disclosed under
charge pursuant to § 1026.9(b), the card
§ 1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
issuer must not apply that rate, fee, or
upon the expiration of a specified pe-
charge to transactions that occurred
riod of six months or longer, provided
prior to provision of the notice;
that:
(i) Prior to the commencement of (ii) If a card issuer discloses an in-
that period, the card issuer disclosed in creased annual percentage rate, fee, or
writing to the consumer, in a clear and charge pursuant to § 1026.9(c) or (g), the
conspicuous manner, the length of the card issuer must not apply that rate,
period and the annual percentage rate, fee, or charge to transactions that oc-
fee, or charge that would apply after curred prior to or within 14 days after
expiration of the period; and provision of the notice; and
(ii) Upon expiration of the specified (iii) This exception does not permit a
period: card issuer to increase an annual per-
(A) The card issuer must not apply centage rate or a fee or charge required
an annual percentage rate, fee, or to be disclosed under § 1026.6(b)(2)(ii),
charge to transactions that occurred (iii), or (xii) during the first year after
prior to the period that exceeds the an- the account is opened, while the ac-
nual percentage rate, fee, or charge count is closed, or while the card issuer
that applied to those transactions prior does not permit the consumer to use
to the period; the account for new transactions. For
(B) If the disclosures required by purposes of this paragraph, an account
paragraph (b)(1)(i) of this section are is considered open no earlier than the
provided pursuant to § 1026.9(c), the date on which the account may first be
card issuer must not apply an annual used by the consumer to engage in
percentage rate, fee, or charge to transactions.
transactions that occurred within 14 (4) Delinquency exception. A card
days after provision of the notice that issuer may increase an annual percent-
exceeds the annual percentage rate, age rate or a fee or charge required to
fee, or charge that applied to that cat- be disclosed under § 1026.6(b)(2)(ii),
egory of transactions prior to provision (b)(2)(iii), or (b)(2)(xii) due to the card
of the notice; and issuer not receiving the consumer’s re-
(C) The card issuer must not apply an quired minimum periodic payment
annual percentage rate, fee, or charge within 60 days after the due date for
to transactions that occurred during that payment, provided that:
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the period that exceeds the increased (i) The card issuer must disclose in a
annual percentage rate, fee, or charge clear and conspicuous manner in the
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§ 1026.55 12 CFR Ch. X (1–1–25 Edition)
notice of the increase pursuant to app. 527 or a similar Federal or state
§ 1026.9(c) or (g): statute or regulation, a card issuer
(A) A statement of the reason for the may increase that annual percentage
increase; and rate, fee, or charge once 50 U.S.C. app.
(B) That the increased annual per- 527 or the similar statute or regulation
centage rate, fee, or charge will cease no longer applies, provided that the
to apply if the card issuer receives six card issuer must not apply to any
consecutive required minimum peri- transactions that occurred prior to the
odic payments on or before the pay- decrease an annual percentage rate,
ment due date beginning with the first fee, or charge that exceeds the annual
payment due following the effective percentage rate, fee, or charge that ap-
date of the increase; and plied to those transactions prior to the
(ii) If the card issuer receives six con- decrease.
secutive required minimum periodic (7) Index replacement and margin
payments on or before the payment due change exception. A card issuer may in-
date beginning with the first payment crease an annual percentage rate when:
due following the effective date of the
(i) The card issuer changes the index
increase, the card issuer must reduce
and margin used to determine the an-
any annual percentage rate, fee, or
nual percentage rate if the original
charge increased pursuant to this ex-
index becomes unavailable, as long as
ception to the annual percentage rate,
historical fluctuations in the original
fee, or charge that applied prior to the
and replacement indices were substan-
increase with respect to transactions
tially similar, and as long as the re-
that occurred prior to or within 14 days
placement index and replacement mar-
after provision of the § 1026.9(c) or (g)
gin will produce a rate substantially
notice.
(5) Workout and temporary hardship ar- similar to the rate that was in effect at
rangement exception. A card issuer may the time the original index became un-
increase an annual percentage rate or a available. If the replacement index is
fee or charge required to be disclosed newly established and therefore does
under § 1026.6(b)(2)(ii), (b)(2)(iii), or not have any rate history, it may be
(b)(2)(xii) due to the consumer’s com- used if it and the replacement margin
pletion of a workout or temporary will produce a rate substantially simi-
hardship arrangement or the con- lar to the rate in effect when the origi-
sumer’s failure to comply with the nal index became unavailable; or
terms of such an arrangement, pro- (ii) If a variable rate on the plan is
vided that: calculated using a LIBOR index, the
(i) Prior to commencement of the ar- card issuer changes the LIBOR index
rangement (except as provided in and the margin for calculating the
§ 1026.9(c)(2)(v)(D)), the card issuer has variable rate on or after April 1, 2022,
provided the consumer with a clear and to a replacement index and a replace-
conspicuous written disclosure of the ment margin, as long as historical fluc-
terms of the arrangement (including tuations in the LIBOR index and re-
any increases due to the completion or placement index were substantially
failure of the arrangement); and similar, and as long as the replacement
(ii) Upon the completion or failure of index value in effect on October 18,
the arrangement, the card issuer must 2021, and replacement margin will
not apply to any transactions that oc- produce an annual percentage rate sub-
curred prior to commencement of the stantially similar to the rate cal-
arrangement an annual percentage culated using the LIBOR index value in
rate, fee, or charge that exceeds the an- effect on October 18, 2021, and the mar-
nual percentage rate, fee, or charge gin that applied to the variable rate
that applied to those transactions prior immediately prior to the replacement
to commencement of the arrangement. of the LIBOR index used under the
(6) Servicemembers Civil Relief Act ex- plan. If the replacement index is newly
ception. If an annual percentage rate or established and therefore does not have
a fee or charge required to be disclosed any rate history, it may be used if the
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under § 1026.6(b)(2)(ii), (iii), or (xii) has replacement index value in effect on
been decreased pursuant to 50 U.S.C. October 18, 2021, and the replacement
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Consumer Financial Protection Bureau § 1026.56
margin will produce an annual percent- (iii) A required minimum periodic
age rate substantially similar to the payment that includes a percentage of
rate calculated using the LIBOR index the balance that is equal to no more
value in effect on October 18, 2021, and than twice the percentage required be-
the margin that applied to the variable fore the effective date of the increase.
rate immediately prior to the replace- (d) Continuing application. This sec-
ment of the LIBOR index used under tion continues to apply to a balance on
the plan. If the replacement index is a credit card account under an open-
not published on October 18, 2021, the end (not home-secured) consumer cred-
card issuer generally must use the next it plan after:
calendar day for which both the LIBOR (1) The account is closed or acquired
index and the replacement index are by another creditor; or
published as the date for selecting indi- (2) The balance is transferred from a
ces values in determining whether the credit card account under an open-end
annual percentage rate based on the re- (not home-secured) consumer credit
placement index is substantially simi- plan issued by a creditor to another
lar to the rate based on the LIBOR credit account issued by the same cred-
index. The one exception is that if the itor or its affiliate or subsidiary (un-
replacement index is the Board-se- less the account to which the balance
lected benchmark replacement for con- is transferred is subject to § 1026.40).
sumer loans to replace the 1-month, 3- (e) Promotional waivers or rebates of in-
month, 6-month, or 12-month U.S. Dol- terest, fees, and other charges. If a card
lar LIBOR index, the card issuer must issuer promotes the waiver or rebate of
use the index value on June 30, 2023, for finance charges due to a periodic inter-
the LIBOR index and, for the Board-se- est rate or fees or charges required to
lected benchmark replacement for con- be disclosed under § 1026.6(b)(2)(ii), (iii),
sumer loans, must use the index value or (xii) and applies the waiver or rebate
on the first date that index is pub- to a credit card account under an open-
lished, in determining whether the an- end (not home-secured) consumer cred-
nual percentage rate based on the re- it plan, any cessation of the waiver or
placement index is substantially simi- rebate on that account constitutes an
lar to the rate based on the LIBOR increase in an annual percentage rate,
index. fee, or charge for purposes of this sec-
(c) Treatment of protected balances—(1) tion.
Definition of protected balance. For pur- [76 FR 79772, Dec. 22, 2011, as amended at 86
poses of this paragraph, ‘‘protected bal- FR 69782, Dec. 8, 2021; 88 FR 30622, May 11,
ance’’ means the amount owed for a 2023]
category of transactions to which an
increased annual percentage rate or an § 1026.56 Requirements for over-the-
increased fee or charge required to be limit transactions.
disclosed under § 1026.6(b)(2)(ii), (a) Definition. For purposes of this
(b)(2)(iii), or (b)(2)(xii) cannot be ap- section, the term ‘‘over-the-limit
plied after the annual percentage rate, transaction’’ means any extension of
fee, or charge for that category of credit by a card issuer to complete a
transactions has been increased pursu- transaction that causes a consumer’s
ant to paragraph (b)(3) of this section. credit card account balance to exceed
(2) Repayment of protected balance. the credit limit.
The card issuer must not require re- (b) Opt-in requirement—(1) General. A
payment of the protected balance using card issuer shall not assess a fee or
a method that is less beneficial to the charge on a consumer’s credit card ac-
consumer than one of the following count under an open-end (not home-se-
methods: cured) consumer credit plan for an
(i) The method of repayment for the over-the-limit transaction unless the
account before the effective date of the card issuer:
increase; (i) Provides the consumer with an
(ii) An amortization period of not oral, written or electronic notice, seg-
less than five years, beginning no ear- regated from all other information, de-
jspears on DSK121TN23PROD with CFR
lier than the effective date of the in- scribing the consumer’s right to af-
crease; or firmatively consent, or opt in, to the
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§ 1026.56 12 CFR Ch. X (1–1–25 Edition)
card issuer’s payment of an over-the- issuer’s payment of over-the-limit
limit transaction; transactions.
(ii) Provides a reasonable oppor- (3) Notice of right of revocation. The
tunity for the consumer to affirma- notice required by paragraph (b)(1)(v)
tively consent, or opt in, to the card of this section shall be provided on the
issuer’s payment of over-the-limit front of any page of each periodic
transactions; statement that reflects the assessment
(iii) Obtains the consumer’s affirma- of an over-the-limit fee or charge on a
tive consent, or opt-in, to the card consumer’s account.
issuer’s payment of such transactions; (e) Content—(1) Initial notice. The no-
(iv) Provides the consumer with con- tice required by paragraph (b)(1)(i) of
firmation of the consumer’s consent in this section shall include all applicable
writing, or if the consumer agrees, items in this paragraph (e)(1) and may
electronically; and not contain any information not speci-
fied in or otherwise permitted by this
(v) Provides the consumer notice in
paragraph.
writing of the right to revoke that con-
(i) Fees. The dollar amount of any
sent following the assessment of an
fees or charges assessed by the card
over-the-limit fee or charge.
issuer on a consumer’s account for an
(2) Completion of over-the-limit trans- over-the-limit transaction;
actions without consumer consent. Not- (ii) APRs. Any increased periodic
withstanding the absence of a con- rate(s) (expressed as an annual percent-
sumer’s affirmative consent under age rate(s)) that may be imposed on
paragraph (b)(1)(iii) of this section, a the account as a result of an over-the-
card issuer may pay any over-the-limit limit transaction; and
transaction on a consumer’s account (iii) Disclosure of opt-in right. An ex-
provided that the card issuer does not planation of the consumer’s right to af-
impose any fee or charge on the ac- firmatively consent to the card issuer’s
count for paying that over-the-limit payment of over-the-limit trans-
transaction. actions, including the method(s) by
(c) Method of election. A card issuer which the consumer may consent.
may permit a consumer to consent to (2) Subsequent notice. The notice re-
the card issuer’s payment of any over- quired by paragraph (b)(1)(v) of this
the-limit transaction in writing, oral- section shall describe the consumer’s
ly, or electronically, at the card right to revoke any consent provided
issuer’s option. The card issuer must under paragraph (b)(1)(iii) of this sec-
also permit the consumer to revoke his tion, including the method(s) by which
or her consent using the same methods the consumer may revoke.
available to the consumer for providing (3) Safe harbor. Use of Model Forms
consent. G–25(A) or G–25(B) of appendix G to
(d) Timing and placement of notices— this part, or substantially similar no-
(1) Initial notice—(i) General. The notice tices, constitutes compliance with the
required by paragraph (b)(1)(i) of this notice content requirements of para-
section shall be provided prior to the graph (e) of this section.
assessment of any over-the-limit fee or (f) Joint relationships. If two or more
charge on a consumer’s account. consumers are jointly liable on a credit
(ii) Oral or electronic consent. If a con- card account under an open-end (not
sumer consents to the card issuer’s home-secured) consumer credit plan,
payment of any over-the-limit trans- the card issuer shall treat the affirma-
action by oral or electronic means, the tive consent of any of the joint con-
card issuer must provide the notice re- sumers as affirmative consent for that
quired by paragraph (b)(1)(i) of this sec- account. Similarly, the card issuer
tion immediately prior to obtaining shall treat a revocation of consent by
that consent. any of the joint consumers as revoca-
(2) Confirmation of opt-in. The notice tion of consent for that account.
required by paragraph (b)(1)(iv) of this (g) Continuing right to opt in or revoke
section may be provided no later than opt-in. A consumer may affirmatively
jspears on DSK121TN23PROD with CFR
the first periodic statement sent after consent to the card issuer’s payment of
the consumer has consented to the card over-the-limit transactions at any time
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Consumer Financial Protection Bureau § 1026.57
in the manner described in the notice (3) Conditioning. A card issuer may
required by paragraph (b)(1)(i) of this not condition the amount of a con-
section. Similarly, the consumer may sumer’s credit limit on the consumer
revoke the consent at any time in the affirmatively consenting to the card
manner described in the notice re- issuer’s payment of over-the-limit
quired by paragraph (b)(1)(v) of this transactions if the card issuer assesses
section. a fee or charge for such service.
(h) Duration of opt-in. A consumer’s (4) Over-the-limit fees attributed to fees
affirmative consent to the card issuer’s or interest. A card issuer may not im-
payment of over-the-limit transactions pose an over-the-limit fee or charge for
is effective until revoked by the con- a billing cycle if a consumer exceeds a
sumer, or until the card issuer decides credit limit solely because of fees or in-
for any reason to cease paying over- terest charged by the card issuer to the
the-limit transactions for the con- consumer’s account during that billing
sumer. cycle. For purposes of this paragraph
(i) Time to comply with revocation re- (j)(4), the relevant fees or interest
quest. A card issuer must comply with charges are charges imposed as part of
a consumer’s revocation request as the plan under § 1026.6(b)(3).
soon as reasonably practicable after
the card issuer receives it. § 1026.57 Reporting and marketing
(j) Prohibited practices. Notwith- rules for college student open-end
standing a consumer’s affirmative con- credit.
sent to a card issuer’s payment of over- (a) Definitions—(1) College student
the-limit transactions, a card issuer is credit card. The term ‘‘college student
prohibited from engaging in the fol- credit card’’ as used in this section
lowing practices: means a credit card issued under a
(1) Fees or charges imposed per cycle— credit card account under an open-end
(i) General rule. A card issuer may not (not home-secured) consumer credit
impose more than one over-the-limit plan to any college student.
fee or charge on a consumer’s credit (2) College student. The term ‘‘college
card account per billing cycle, and, in student’’ as used in this section means
any event, only if the credit limit was a consumer who is a full-time or part-
exceeded during the billing cycle. In time student of an institution of higher
addition, except as provided in para- education.
graph (j)(1)(ii) of this section, a card (3) Institution of higher education. The
issuer may not impose an over-the- term ‘‘institution of higher education’’
limit fee or charge on the consumer’s as used in this section has the same
credit card account for more than meaning as in sections 101 and 102 of
three billing cycles for the same over- the Higher Education Act of 1965 (20
the-limit transaction where the con- U.S.C. 1001 and 1002).
sumer has not reduced the account bal- (4) Affiliated organization. The term
ance below the credit limit by the pay- ‘‘affiliated organization’’ as used in
ment due date for either of the last two this section means an alumni organiza-
billing cycles. tion or foundation affiliated with or re-
(ii) Exception. The prohibition in lated to an institution of higher edu-
paragraph (j)(1)(i) of this section on im- cation.
posing an over-the-limit fee or charge (5) College credit card agreement. The
in more than three billing cycles for term ‘‘college credit card agreement’’
the same over-the-limit transaction(s) as used in this section means any busi-
does not apply if another over-the- ness, marketing or promotional agree-
limit transaction occurs during either ment between a card issuer and an in-
of the last two billing cycles. stitution of higher education or an af-
(2) Failure to promptly replenish. A filiated organization in connection
card issuer may not impose an over- with which college student credit cards
the-limit fee or charge solely because are issued to college students currently
of the card issuer’s failure to promptly enrolled at that institution.
replenish the consumer’s available (b) Public disclosure of agreements. An
jspears on DSK121TN23PROD with CFR
credit following the crediting of the institution of higher education shall
consumer’s payment under § 1026.10. publicly disclose any contract or other
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§ 1026.58 12 CFR Ch. X (1–1–25 Edition)
agreement made with a card issuer or lege credit card agreement during the
creditor for the purpose of marketing a period covered by the report; and
credit card. (vi) The total number of credit card
(c) Prohibited inducements. No card accounts opened pursuant to any such
issuer or creditor may offer a college agreement that were open at the end of
student any tangible item to induce the period covered by the report.
such student to apply for or open an (3) Timing of reports. Except for the
open-end consumer credit plan offered initial report described in this para-
by such card issuer or creditor, if such graph (d)(3), a card issuer must submit
offer is made: its annual report for each calendar
(1) On the campus of an institution of year to the Bureau by the first business
higher education; day on or after March 31 of the fol-
(2) Near the campus of an institution lowing calendar year.
of higher education; or
(3) At an event sponsored by or re- § 1026.58 Internet posting of credit
lated to an institution of higher edu- card agreements.
cation. (a) Applicability. The requirements of
(d) Annual report to the Bureau—(1) this section apply to any card issuer
Requirement to report. Any card issuer that issues credit cards under a credit
that was a party to one or more college card account under an open-end (not
credit card agreements in effect at any home-secured) consumer credit plan.
time during a calendar year must sub- (b) Definitions—(1) Agreement. For
mit to the Bureau an annual report re- purposes of this section, ‘‘agreement’’
garding those agreements in the form or ‘‘credit card agreement’’ means the
and manner prescribed by the Bureau. written document or documents evi-
(2) Contents of report. The annual re- dencing the terms of the legal obliga-
port to the Bureau must include the tion, or the prospective legal obliga-
following: tion, between a card issuer and a con-
(i) Identifying information about the sumer for a credit card account under
card issuer and the agreements sub- an open-end (not home-secured) con-
mitted, including the issuer’s name, sumer credit plan. ‘‘Agreement’’ or
address, and identifying number (such ‘‘credit card agreement’’ also includes
as an RSSD ID number or tax identi- the pricing information, as defined in
fication number); § 1026.58(b)(7).
(ii) A copy of any college credit card (2) Amends. For purposes of this sec-
agreement to which the card issuer was tion, an issuer ‘‘amends’’ an agreement
a party that was in effect at any time if it makes a substantive change (an
during the period covered by the re- ‘‘amendment’’) to the agreement. A
port; change is substantive if it alters the
(iii) A copy of any memorandum of rights or obligations of the card issuer
understanding in effect at any time or the consumer under the agreement.
during the period covered by the report Any change in the pricing information,
between the card issuer and an institu- as defined in § 1026.58(b)(7), is deemed to
tion of higher education or affiliated be substantive.
organization that directly or indirectly (3) Business day. For purposes of this
relates to the college credit card agree- section, ‘‘business day’’ means a day on
ment or that controls or directs any which the creditor’s offices are open to
obligations or distribution of benefits the public for carrying on substantially
between any such entities; all of its business functions.
(iv) The total dollar amount of any (4) Card issuer. For purposes of this
payments pursuant to a college credit section, ‘‘card issuer’’ or ‘‘issuer’’
card agreement from the card issuer to means the entity to which a consumer
an institution of higher education or is legally obligated, or would be legally
affiliated organization during the pe- obligated, under the terms of a credit
riod covered by the report, and the card agreement.
method or formula used to determine (5) Offers. For purposes of this sec-
such amounts; tion, an issuer ‘‘offers’’ or ‘‘offers to
jspears on DSK121TN23PROD with CFR
(v) The total number of credit card the public’’ an agreement if the issuer
accounts opened pursuant to any col- is soliciting or accepting applications
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Consumer Financial Protection Bureau § 1026.58
for accounts that would be subject to (ii) The credit card agreements that
that agreement. the card issuer offered to the public as
(6) Open accounts. For purposes of of the last business day of the pre-
this section and § 1026.52, an account is ceding calendar quarter that the card
an ‘‘open account’’ or ‘‘open credit card issuer has not previously submitted to
account’’ if it is a credit card account the Bureau;
under an open-end (not home-secured) (iii) Any credit card agreement pre-
consumer credit plan and either: viously submitted to the Bureau that
(i) The cardholder can obtain exten- was amended during the preceding cal-
sions of credit on the account; or endar quarter and that the card issuer
(ii) There is an outstanding balance offered to the public as of the last busi-
on the account that has not been ness day of the preceding calendar
charged off. An account that has been quarter, as described in § 1026.58(c)(3);
suspended temporarily (for example, and
due to a report by the cardholder of un- (iv) Notification regarding any credit
authorized use of the card) is consid- card agreement previously submitted
ered an ‘‘open account’’ or ‘‘open credit to the Bureau that the issuer is with-
card account.’’ drawing, as described in § 1026.58(c)(4),
(c)(5), (c)(6), and (c)(7).
(7) Pricing information. For purposes
(2) [Reserved]
of this section, ‘‘pricing information’’
(3) Amended agreements. If a credit
means the information listed in
card agreement has been submitted to
§ 1026.6(b)(2)(i) through (b)(2)(xii). Pric-
the Bureau, the agreement has not
ing information does not include tem-
been amended and the card issuer con-
porary or promotional rates and terms
tinues to offer the agreement to the
or rates and terms that apply only to
public, no additional submission re-
protected balances.
garding that agreement is required. If a
(8) Private label credit card account and credit card agreement that previously
private label credit card plan. For pur- has been submitted to the Bureau is
poses of this section: amended and the card issuer offered
(i) ‘‘private label credit card ac- the amended agreement to the public
count’’ means a credit card account as of the last business day of the cal-
under an open-end (not home-secured) endar quarter in which the change be-
consumer credit plan with a credit card came effective, the card issuer must
that can be used to make purchases submit the entire amended agreement
only at a single merchant or an affili- to the Bureau, in the form and manner
ated group of merchants; and specified by the Bureau, by the first
(ii) ‘‘private label credit card plan’’ quarterly submission deadline after the
means all of the private label credit last day of the calendar quarter in
card accounts issued by a particular which the change became effective.
issuer with credit cards usable at the (4) Withdrawal of agreements. If a card
same single merchant or affiliated issuer no longer offers to the public a
group of merchants. credit card agreement that previously
(c) Submission of agreements to Bu- has been submitted to the Bureau, the
reau—(1) Quarterly submissions. A card card issuer must notify the Bureau, in
issuer must make quarterly submis- the form and manner specified by the
sions to the Bureau, in the form and Bureau, by the first quarterly submis-
manner specified by the Bureau. Quar- sion deadline after the last day of the
terly submissions must be sent to the calendar quarter in which the issuer
Bureau no later than the first business ceased to offer the agreement.
day on or after January 31, April 30, (5) De minimis exception. (i) A card
July 31, and October 31 of each year. issuer is not required to submit any
Each submission must contain: credit card agreements to the Bureau if
(i) Identifying information about the the card issuer had fewer than 10,000
card issuer and the agreements sub- open credit card accounts as of the last
mitted, including the issuer’s name, business day of the calendar quarter.
address, and identifying number (such (ii) If an issuer that previously quali-
jspears on DSK121TN23PROD with CFR
as an RSSD ID number or tax identi- fied for the de minimis exception
fication number); ceases to qualify, the card issuer must
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§ 1026.58 12 CFR Ch. X (1–1–25 Edition)
begin making quarterly submissions to reau no later than the first quarterly
the Bureau no later than the first quar- submission deadline after the date as of
terly submission deadline after the which the agreement ceased to qualify.
date as of which the issuer ceased to (iii) If an agreement that did not pre-
qualify. viously qualify for the product testing
(iii) If a card issuer that did not pre- exception qualifies for the exception,
viously qualify for the de minimis ex- the card issuer must continue to make
ception qualifies for the de minimis ex- quarterly submissions to the Bureau
ception, the card issuer must continue with respect to that agreement until
to make quarterly submissions to the the issuer notifies the Bureau that the
Bureau until the issuer notifies the Bu- agreement is being withdrawn.
reau that the card issuer is with- (8) Form and content of agreements sub-
drawing all agreements it previously mitted to the Bureau—(i) Form and con-
submitted to the Bureau. tent generally. (A) Each agreement
(6) Private label credit card exception. must contain the provisions of the
(i) A card issuer is not required to sub- agreement and the pricing information
mit to the Bureau a credit card agree- in effect as of the last business day of
ment if, as of the last business day of the preceding calendar quarter.
the calendar quarter, the agreement: (B) Agreements must not include any
(A) Is offered for accounts under one personally identifiable information re-
or more private label credit card plans lating to any cardholder, such as name,
each of which has fewer than 10,000 address, telephone number, or account
open accounts; and number.
(B) Is not offered to the public other (C) The following are not deemed to
than for accounts under such a plan. be part of the agreement for purposes
(ii) If an agreement that previously of § 1026.58, and therefore are not re-
qualified for the private label credit quired to be included in submissions to
card exception ceases to qualify, the the Bureau:
card issuer must submit the agreement (1) Disclosures required by state or
to the Bureau no later than the first Federal law, such as affiliate mar-
quarterly submission deadline after the keting notices, privacy policies, billing
date as of which the agreement ceased rights notices, or disclosures under the
to qualify. E-Sign Act;
(iii) If an agreement that did not pre- (2) Solicitation materials;
viously qualify for the private label (3) Periodic statements;
credit card exception qualifies for the (4) Ancillary agreements between the
exception, the card issuer must con- issuer and the consumer, such as debt
tinue to make quarterly submissions to cancellation contracts or debt suspen-
the Bureau with respect to that agree- sion agreements;
ment until the issuer notifies the Bu- (5) Offers for credit insurance or
reau that the agreement is being with- other optional products and other simi-
drawn. lar advertisements; and
(7) Product testing exception. (i) A card (6) Documents that may be sent to
issuer is not required to submit to the the consumer along with the credit
Bureau a credit card agreement if, as of card or credit card agreement such as a
the last business day of the calendar cover letter, a validation sticker on the
quarter, the agreement: card, or other information about card
(A) Is offered as part of a product test security.
offered to only a limited group of con- (D) Agreements must be presented in
sumers for a limited period of time; a clear and legible font.
(B) Is used for fewer than 10,000 open (ii) Pricing information. (A) Pricing in-
accounts; and formation must be set forth in a single
(C) Is not offered to the public other addendum to the agreement. The ad-
than in connection with such a product dendum must contain all of the pricing
test. information, as defined by
(ii) If an agreement that previously § 1026.58(b)(7). The addendum may, but
qualified for the product testing excep- is not required to, contain any other
jspears on DSK121TN23PROD with CFR
tion ceases to qualify, the card issuer information listed in § 1026.6(b), pro-
must submit the agreement to the Bu- vided that information is complete and
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Consumer Financial Protection Bureau § 1026.58
accurate as of the applicable date card plans, an issuer may fulfill this re-
under § 1026.58. The addendum may not quirement by posting and maintaining
contain any other information. the agreement in accordance with the
(B) Pricing information that may requirements of this section on the
vary from one cardholder to another publicly available Web site of at least
depending on the cardholder’s credit- one of the merchants at which credit
worthiness or state of residence or cards issued under each private label
other factors must be disclosed either credit card plan with 10,000 or more
by setting forth all the possible vari- open accounts may be used.
ations (such as purchase APRs of 13 (2) Except as provided in § 1026.58(d),
percent, 15 percent, 17 percent, and 19 agreements posted pursuant to
percent) or by providing a range of pos- § 1026.58(d) must conform to the form
sible variations (such as purchase and content requirements for agree-
APRs ranging from 13 percent to 19 ments submitted to the Bureau speci-
percent). fied in § 1026.58(c)(8).
(C) If a rate included in the pricing (3) Agreements posted pursuant to
information is a variable rate, the § 1026.58(d) may be posted in any elec-
issuer must identify the index or for- tronic format that is readily usable by
mula used in setting the rate and the the general public. Agreements must
margin. Rates that may vary from one be placed in a location that is promi-
cardholder to another must be dis- nent and readily accessible by the pub-
closed by providing the index and the lic and must be accessible without sub-
possible margins (such as the prime mission of personally identifiable in-
rate plus 5 percent, 8 percent, 10 per- formation.
cent, or 12 percent) or range of margins (4) The card issuer must update the
(such as the prime rate plus from 5 to agreements posted on its Web site pur-
12 percent). The value of the rate and suant to § 1026.58(d) at least as fre-
the value of the index are not required quently as the quarterly schedule re-
to be disclosed. quired for submission of agreements to
(iii) Optional variable terms addendum. the Bureau under § 1026.58(c). If the
Provisions of the agreement other than issuer chooses to update the agree-
the pricing information that may vary ments on its Web site more frequently,
from one cardholder to another depend- the agreements posted on the issuer’s
ing on the cardholder’s creditworthi- Web site may contain the provisions of
ness or state of residence or other fac- the agreement and the pricing informa-
tors may be set forth in a single adden- tion in effect as of a date other than
dum to the agreement separate from the last business day of the preceding
the pricing information addendum. calendar quarter.
(iv) Integrated agreement. Issuers may (e) Agreements for all open accounts—
not provide provisions of the agree- (1) Availability of individual cardholder’s
ment or pricing information in the agreement. With respect to any open
form of change-in-terms notices or rid- credit card account, a card issuer must
ers (other than the pricing information either:
addendum and the optional variable (i) Post and maintain the card-
terms addendum). Changes in provi- holder’s agreement on its Web site; or
sions or pricing information must be (ii) Promptly provide a copy of the
integrated into the text of the agree- cardholder’s agreement to the card-
ment, the pricing information adden- holder upon the cardholder’s request. If
dum or the optional variable terms ad- the card issuer makes an agreement
dendum, as appropriate. available upon request, the issuer must
(d) Posting of agreements offered to the provide the cardholder with the ability
public. (1) Except as provided below, a to request a copy of the agreement
card issuer must post and maintain on both by using the issuer’s Web site
its publicly available Web site the (such as by clicking on a clearly identi-
credit card agreements that the issuer fied box to make the request) and by
is required to submit to the Bureau calling a readily available telephone
under § 1026.58(c). With respect to an line the number for which is displayed
jspears on DSK121TN23PROD with CFR
agreement offered solely for accounts on the issuer’s Web site and clearly
under one or more private label credit identified as to purpose. The card
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§ 1026.59 12 CFR Ch. X (1–1–25 Edition)
issuer must send to the cardholder or (iv) Agreements posted or otherwise
otherwise make available to the card- provided pursuant to § 1026.58(e) must
holder a copy of the cardholder’s agree- set forth the specific provisions and
ment in electronic or paper form no pricing information applicable to the
later than 30 days after the issuer re- particular cardholder. Provisions and
ceives the cardholder’s request. pricing information must be complete
(2) Special rule for issuers without and accurate as of a date no more than
interactive Web sites. An issuer that does 60 days prior to:
not maintain a Web site from which (A) The date on which the agreement
cardholders can access specific infor- is posted on the card issuer’s Web site
mation about their individual ac- under § 1026.58(e)(1)(i); or
counts, instead of complying with (B) The date the cardholder’s request
§ 1026.58(e)(1), may make agreements is received under § 1026.58(e)(1)(ii) or
available upon request by providing the (e)(2).
cardholder with the ability to request a (v) Agreements provided upon card-
copy of the agreement by calling a holder request pursuant to
readily available telephone line, the § 1026.58(e)(1)(ii) or (e)(2) may be pro-
number for which is displayed on the vided by the issuer in either electronic
issuer’s Web site and clearly identified or paper form, regardless of the form of
as to purpose or included on each peri- the cardholder’s request.
odic statement sent to the cardholder (f) E-Sign Act requirements. Card
and clearly identified as to purpose. issuers may provide credit card agree-
The issuer must send to the cardholder ments in electronic form under
or otherwise make available to the § 1026.58(d) and (e) without regard to
cardholder a copy of the cardholder’s the consumer notice and consent re-
agreement in electronic or paper form quirements of section 101(c) of the
no later than 30 days after the issuer Electronic Signatures in Global and
receives the cardholder’s request. National Commerce Act (E-Sign Act)
(3) Form and content of agreements. (i) (15 U.S.C. 7001 et seq.).
Except as provided in § 1026.58(e), agree-
(g) Temporary suspension of agreement
ments posted on the card issuer’s Web
submission requirement—(1) Quarterly
site pursuant to § 1026.58(e)(1)(i) or
submissions. The quarterly submission
made available upon the cardholder’s
requirement in paragraph (c) of this
request pursuant to § 1026.58(e)(1)(ii) or
section is suspended for the submis-
(e)(2) must conform to the form and
sions that would otherwise be due to
content requirements for agreements
the Bureau by the first business day on
submitted to the Bureau specified in
or after April 30, 2015; July 31, 2015; Oc-
§ 1026.58(c)(8).
tober 31, 2015; and January 31, 2016.
(ii) If the card issuer posts an agree-
(2) Posting of agreements offered to the
ment on its Web site or otherwise pro-
public. Nothing in paragraph (g)(1) of
vides an agreement to a cardholder
this section shall affect the agreement
electronically under § 1026.58(e), the
posting requirements in paragraph (d)
agreement may be posted or provided
in any electronic format that is readily of this section.
usable by the general public and must [76 FR 79772, Dec. 22, 2011, as amended at 80
be placed in a location that is promi- FR 21158, Apr. 17, 2015; 89 FR 19202, Mar. 15,
nent and readily accessible to the card- 2024]
holder.
(iii) Agreements posted or otherwise § 1026.59 Reevaluation of rate in-
creases.
provided pursuant to § 1026.58(e) may
contain personally identifiable infor- (a) General rule—(1) Evaluation of in-
mation relating to the cardholder, such creased rate. If a card issuer increases
as name, address, telephone number, or an annual percentage rate that applies
account number, provided that the to a credit card account under an open-
issuer takes appropriate measures to end (not home-secured) consumer cred-
make the agreement accessible only to it plan, based on the credit risk of the
jspears on DSK121TN23PROD with CFR
the cardholder or other authorized per- consumer, market conditions, or other
sons. factors, or increased such a rate on or
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Consumer Financial Protection Bureau § 1026.59
after January 1, 2009, and 45 days’ ad- conducting the first two reviews re-
vance notice of the rate increase is re- quired under paragraph (a) of this sec-
quired pursuant to § 1026.9(c)(2) or (g), tion, unless the rate increase subject to
the card issuer must: paragraph (a) of this section was based
(i) Evaluate the factors described in solely upon factors specific to the con-
paragraph (d) of this section; and sumer, such as a decline in the con-
(ii) Based on its review of such fac- sumer’s credit risk, the consumer’s de-
tors, reduce the annual percentage rate linquency or default, or a violation of
applicable to the consumer’s account, the terms of the account.
as appropriate. (e) Rate increases due to delinquency. If
(2) Rate reductions—(i) Timing. If a an issuer increases a rate applicable to
card issuer is required to reduce the a consumer’s account pursuant to
rate applicable to an account pursuant § 1026.55(b)(4) based on the card issuer
to paragraph (a)(1) of this section, the not receiving the consumer’s required
card issuer must reduce the rate not minimum periodic payment within 60
later than 45 days after completion of days after the due date, the issuer is
the evaluation described in paragraph not required to perform the review de-
(a)(1). scribed in paragraph (a) of this section
(ii) Applicability of rate reduction. Any prior to the sixth payment due date
reduction in an annual percentage rate after the effective date of the increase.
required pursuant to paragraph (a)(1) of However, if the annual percentage rate
this section shall apply to: applicable to the consumer’s account is
(A) Any outstanding balances to not reduced pursuant to
which the increased rate described in § 1026.55(b)(4)(ii), the card issuer must
paragraph (a)(1) of this section has perform the review described in para-
been applied; and graph (a) of this section. The first such
(B) New transactions that occur after review must occur no later than six
the effective date of the rate reduction months after the sixth payment due
that would otherwise have been subject following the effective date of the rate
to the increased rate. increase.
(b) Policies and procedures. A card
(f) Termination of obligation to review
issuer must have reasonable written
factors. The obligation to review fac-
policies and procedures in place to con-
tors described in paragraph (a) and (d)
duct the review described in paragraph
of this section ceases to apply:
(a) of this section.
(c) Timing. A card issuer that is sub- (1) If the issuer reduces the annual
ject to paragraph (a) of this section percentage rate applicable to a credit
must conduct the review described in card account under an open-end (not
paragraph (a)(1) of this section not less home-secured) consumer credit plan to
frequently than once every six months the rate applicable immediately prior
after the rate increase. to the increase, or, if the rate applica-
(d) Factors—(1) In general. Except as ble immediately prior to the increase
provided in paragraph (d)(2) of this sec- was a variable rate, to a variable rate
tion, a card issuer must review either: determined by the same formula (index
(i) The factors on which the increase and margin) that was used to calculate
in an annual percentage rate was origi- the rate applicable immediately prior
nally based; or to the increase; or
(ii) The factors that the card issuer (2) If the issuer reduces the annual
currently considers when determining percentage rate to a rate that is lower
the annual percentage rates applicable than the rate described in paragraph
to similar new credit card accounts (f)(1) of this section.
under an open-end (not home-secured) (3) Effective April 1, 2022, in the case
consumer credit plan. where the rate applicable immediately
(2) Rate increases imposed between Jan- prior to the increase was a variable
uary 1, 2009 and February 21, 2010. For rate with a formula based on a LIBOR
rate increases imposed between Janu- index, the card issuer reduces the an-
ary 1, 2009 and February 21, 2010, an nual percentage rate to a rate deter-
jspears on DSK121TN23PROD with CFR
issuer must consider the factors de- mined by a replacement formula that
scribed in paragraph (d)(1)(ii) when is derived from a replacement index
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§ 1026.60 12 CFR Ch. X (1–1–25 Edition)
value on October 18, 2021, plus replace- (ii) Except as provided in paragraph
ment margin that is equal to the (g)(2)(iii) of this section, the card
LIBOR index value on October 18, 2021, issuer is not required to conduct re-
plus the margin used to calculate the views in accordance with paragraph (a)
rate immediately prior to the increase of this section for any rate increases
(previous formula). A card issuer must made prior to the card issuer’s acquisi-
satisfy the conditions set forth in tion of such accounts.
§ 1026.55(b)(7)(ii) for selecting a replace- (iii) If as a result of the card issuer’s
ment index. If the replacement index is review, an account is subject to, or
not published on October 18, 2021, the continues to be subject to, an increased
card issuer generally must use the val- rate as a penalty, or due to the con-
ues of the indices on the next calendar sumer’s delinquency or default, the re-
day for which both the LIBOR index quirements of paragraph (a) of this sec-
and the replacement index are pub- tion apply.
lished as the index values to use to de- (h) Exceptions—(1) Servicemembers Civil
termine the replacement formula. The Relief Act exception. The requirements
one exception is that if the replace- of this section do not apply to in-
ment index is the Board-selected creases in an annual percentage rate
benchmark replacement for consumer that was previously decreased pursuant
loans to replace the 1-month, 3-month, to 50 U.S.C. app. 527, provided that such
6-month, or 12-month U.S. Dollar a rate increase is made in accordance
LIBOR index, the card issuer must use with § 1026.55(b)(6).
the index value on June 30, 2023, for the (2) Charged off accounts. The require-
LIBOR index and, for the Board-se- ments of this section do not apply to
lected benchmark replacement for con- accounts that the card issuer has
sumer loans, must use the index value charged off in accordance with loan-
on the first date that index is pub- loss provisions.
lished, as the index values to use to de- (3) Transition from LIBOR. The re-
termine the replacement formula. quirements of this section do not apply
(g) Acquired accounts—(1) General. Ex- to increases in an annual percentage
cept as provided in paragraph (g)(2) of rate that occur as a result of the tran-
this section, this section applies to sition from the use of a LIBOR index as
credit card accounts that have been ac- the index in setting a variable rate to
quired by the card issuer from another the use of a replacement index in set-
card issuer. A card issuer that complies ting a variable rate if the change from
with this section by reviewing the fac- the use of the LIBOR index to a re-
tors described in paragraph (d)(1)(i) placement index occurs in accordance
must review the factors considered by with § 1026.55(b)(7)(i) or (ii).
the card issuer from which it acquired [76 FR 79772, Dec. 22, 2011, as amended at 86
the accounts in connection with the FR 69782, Dec. 8, 2021; 88 FR 30623, May 11,
rate increase. 2023]
(2) Review of acquired portfolio. If, not
later than six months after the acquisi- § 1026.60 Credit and charge card appli-
tion of such accounts, a card issuer re- cations and solicitations.
views all of the credit card accounts it (a) General rules. The card issuer shall
acquires in accordance with the factors provide the disclosures required under
that it currently considers in deter- this section on or with a solicitation or
mining the rates applicable to its simi- an application to open a credit or
lar new credit card accounts: charge card account.
(i) Except as provided in paragraph (1) Definition of solicitation. For pur-
(g)(2)(iii), the card issuer is required to poses of this section, the term solicita-
conduct reviews described in paragraph tion means an offer by the card issuer
(a) of this section only for rate in- to open a credit or charge card account
creases that are imposed as a result of that does not require the consumer to
its review under this paragraph. See complete an application. A ‘‘firm offer
§§ 1026.9 and 1026.55 for additional re- of credit’’ as defined in section 603(l) of
jspears on DSK121TN23PROD with CFR
quirements regarding rate increases on the Fair Credit Reporting Act (15
acquired accounts. U.S.C. 1681a(l)) for a credit or charge
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Consumer Financial Protection Bureau § 1026.60
card is a solicitation for purposes of (B) If the table described in para-
this section. graph (a)(2)(i) of this section is pro-
(2) Form of disclosures; tabular format. vided electronically, it must be pro-
(i) The disclosures in paragraphs (b)(1) vided in close proximity to the applica-
through (5) (except for (b)(1)(iv)(B)) and tion or solicitation.
(b)(7) through (15) of this section made (3) Fees based on a percentage. If the
pursuant to paragraph (c), (d)(2), (e)(1) amount of any fee required to be dis-
or (f) of this section generally shall be closed under this section is determined
in the form of a table with headings, on the basis of a percentage of another
content, and format substantially simi- amount, the percentage used and the
lar to any of the applicable tables identification of the amount against
found in G–10 in appendix G to this which the percentage is applied may be
part. disclosed instead of the amount of the
(ii) The table described in paragraph fee.
(a)(2)(i) of this section shall contain (4) Fees that vary by state. Card
only the information required or per- issuers that impose fees referred to in
mitted by this section. Other informa- paragraphs (b)(8) through (12) of this
tion may be presented on or with an section that vary by state may, at the
application or solicitation, provided issuer’s option, disclose in the table re-
such information appears outside the quired by paragraph (a)(2)(i) of this sec-
required table. tion: The specific fee applicable to the
(iii) Disclosures required by para- consumer’s account; or the range of the
graphs (b)(1)(iv)(B), (b)(1)(iv)(C) and fees, if the disclosure includes a state-
(b)(6) of this section must be placed di- ment that the amount of the fee varies
rectly beneath the table. by state and refers the consumer to a
(iv) When a tabular format is re- disclosure provided with the table
quired, any annual percentage rate re- where the amount of the fee applicable
quired to be disclosed pursuant to para- to the consumer’s account is disclosed.
graph (b)(1) of this section, any intro- A card issuer may not list fees for mul-
ductory rate required to be disclosed tiple states in the table.
pursuant to paragraph (b)(1)(ii) of this (5) Exceptions. This section does not
section, any rate that will apply after apply to:
a premium initial rate expires required (i) Home-equity plans accessible by a
to be disclosed under paragraph credit or charge card that are subject
(b)(1)(iii) of this section, and any fee or to the requirements of § 1026.40;
percentage amounts or maximum lim- (ii) Overdraft lines of credit tied to
its on fee amounts disclosed pursuant asset accounts accessed by check-guar-
to paragraphs (b)(2), (b)(4), (b)(8) antee cards or by debit cards;
through (b)(13) of this section must be (iii) Lines of credit accessed by
disclosed in bold text. However, bold check-guarantee cards or by debit
text shall not be used for: The amount cards that can be used only at auto-
of any periodic fee disclosed pursuant mated teller machines;
to paragraph (b)(2) of this section that (iv) Lines of credit accessed solely by
is not an annualized amount; and other account numbers except for a covered
annual percentage rates or fee amounts separate credit feature solely acces-
disclosed in the table. sible by an account number that is a
(v) For an application or a solicita- hybrid prepaid-credit card as defined in
tion that is accessed by the consumer § 1026.61;
in electronic form, the disclosures re- (v) Additions of a credit or charge
quired under this section may be pro- card to an existing open-end plan;
vided to the consumer in electronic (vi) General purpose applications un-
form on or with the application or so- less the application, or material ac-
licitation. companying it, indicates that it can be
(vi)(A) Except as provided in para- used to open a credit or charge card ac-
graph (a)(2)(vi)(B) of this section, the count; or
table described in paragraph (a)(2)(i) of (vii) Consumer-initiated requests for
this section must be provided in a applications.
jspears on DSK121TN23PROD with CFR
prominent location on or with an appli- (b) Required disclosures. The card
cation or a solicitation. issuer shall disclose the items in this
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§ 1026.60 12 CFR Ch. X (1–1–25 Edition)
paragraph on or with an application or immediate proximity to the introduc-
a solicitation in accordance with the tory rate. The card issuer also must
requirements of paragraphs (c), (d), disclose the rate that would otherwise
(e)(1), or (f) of this section. A credit apply to the account pursuant to para-
card issuer shall disclose all applicable graph (b)(1) of this section. Where the
items in this paragraph except for rate is not tied to an index or formula,
paragraph (b)(7) of this section. A the card issuer must disclose the rate
charge card issuer shall disclose the ap- that will apply after the introductory
plicable items in paragraphs (b)(2), (4), rate expires. In a variable-rate ac-
(7) through (12), and (15) of this section. count, the card issuer must disclose a
With respect to a covered separate rate based on the applicable index or
credit feature that is a charge card ac- formula in accordance with the accu-
count accessible by a hybrid prepaid- racy requirements set forth in para-
credit card as defined in § 1026.61, a graphs (c)(2), (d)(3), or (e)(4) of this sec-
charge card issuer also shall disclose
tion, as applicable.
the applicable items in paragraphs
(iii) Premium initial rate. If the initial
(b)(3), (13), and (14) of this section.
(1) Annual percentage rate. Each peri- rate is temporary and is higher than
odic rate that may be used to compute the rate that will apply after the tem-
the finance charge on an outstanding porary rate expires, the card issuer
balance for purchases, a cash advance, must disclose the premium initial rate
or a balance transfer, expressed as an pursuant to paragraph (b)(1) of this sec-
annual percentage rate (as determined tion and the time period during which
by § 1026.14(b)). When more than one the premium initial rate will remain in
rate applies for a category of trans- effect. Consistent with paragraph (b)(1)
actions, the range of balances to which of this section, the premium initial
each rate is applicable shall also be dis- rate for purchases must be in at least
closed. The annual percentage rate for 16-point type. The issuer must also dis-
purchases disclosed pursuant to this close in the table the rate that will
paragraph shall be in at least 16-point apply after the premium initial rate
type, except for the following: Oral dis- expires, in at least 16-point type.
closures of the annual percentage rate (iv) Penalty rates—(A) In general. Ex-
for purchases; or a penalty rate that cept as provided in paragraph
may apply upon the occurrence of one (b)(1)(iv)(B) and (C) of this section, if a
or more specific events. rate may increase as a penalty for one
(i) Variable rate information. If a rate or more events specified in the account
disclosed under paragraph (b)(1) of this agreement, such as a late payment or
section is a variable rate, the card an extension of credit that exceeds the
issuer shall also disclose the fact that credit limit, the card issuer must dis-
the rate may vary and how the rate is close pursuant to this paragraph (b)(1)
determined. In describing how the ap- the increased rate that may apply, a
plicable rate will be determined, the
brief description of the event or events
card issuer must identify the type of
that may result in the increased rate,
index or formula that is used in setting
and a brief description of how long the
the rate. The value of the index and the
increased rate will remain in effect.
amount of the margin that are used to
calculate the variable rate shall not be (B) Introductory rates. If the issuer
disclosed in the table. A disclosure of discloses an introductory rate, as that
any applicable limitations on rate in- term is defined in § 1026.16(g)(2)(ii), in
creases shall not be included in the the table or in any written or elec-
table. tronic promotional materials accom-
(ii) Discounted initial rate. If the ini- panying applications or solicitations
tial rate is an introductory rate, as subject to paragraph (c) or (e) of this
that term is defined in § 1026.16(g)(2)(ii), section, the issuer must briefly disclose
the card issuer must disclose in the directly beneath the table the cir-
table the introductory rate, the time cumstances, if any, under which the in-
period during which the introductory troductory rate may be revoked, and
jspears on DSK121TN23PROD with CFR
rate will remain in effect, and must use the type of rate that will apply after
the term ‘‘introductory’’ or ‘‘intro’’ in the introductory rate is revoked.
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Consumer Financial Protection Bureau § 1026.60
(C) Employee preferential rates. If a will be imposed; and the annualized
card issuer discloses in the table a pref- amount of the fee.
erential annual percentage rate for (ii) Any non-periodic fee that relates
which only employees of the card to opening an account. A card issuer
issuer, employees of a third party, or must disclose that the fee is a one-time
other individuals with similar affili- fee.
ations with the card issuer or third (3) Fixed finance charge; minimum in-
party, such as executive officers, direc- terest charge. Any fixed finance charge
tors, or principal shareholders are eli- and a brief description of the charge.
gible, the card issuer must briefly dis- Any minimum interest charge if it ex-
close directly beneath the table the ceeds $1.00 that could be imposed dur-
circumstances under which such pref- ing a billing cycle, and a brief descrip-
erential rate may be revoked, and the tion of the charge. The $1.00 threshold
rate that will apply after such pref- amount shall be adjusted periodically
erential rate is revoked. by the Bureau to reflect changes in the
(v) Rates that depend on consumer’s Consumer Price Index. The Bureau
creditworthiness. If a rate cannot be de- shall calculate each year a price level
termined at the time disclosures are adjusted minimum interest charge
given because the rate depends, at least using the Consumer Price Index in ef-
in part, on a later determination of the fect on June 1 of that year. When the
consumer’s creditworthiness, the card cumulative change in the adjusted
issuer must disclose the specific rates minimum value derived from applying
the annual Consumer Price level to the
or the range of rates that could apply
current minimum interest charge
and a statement that the rate for
threshold has risen by a whole dollar,
which the consumer may qualify at ac-
the minimum interest charge will be
count opening will depend on the con-
increased by $1.00. The issuer may, at
sumer’s creditworthiness, and other
its option, disclose in the table min-
factors if applicable. If the rate that
imum interest charges below this
depends, at least in part, on a later de-
threshold.
termination of the consumer’s credit-
(4) Transaction charges. Any trans-
worthiness is a penalty rate, as de-
action charge imposed by the card
scribed in paragraph (b)(1)(iv) of this
issuer for the use of the card for pur-
section, the card issuer at its option chases.
may disclose the highest rate that (5) Grace period. The date by which or
could apply, instead of disclosing the the period within which any credit ex-
specific rates or the range of rates that tended for purchases may be repaid
could apply. without incurring a finance charge due
(vi) APRs that vary by state. Issuers to a periodic interest rate and any con-
imposing annual percentage rates that ditions on the availability of the grace
vary by state may, at the issuer’s op- period. If no grace period is provided,
tion, disclose in the table: the specific that fact must be disclosed. If the
annual percentage rate applicable to length of the grace period varies, the
the consumer’s account; or the range of card issuer may disclose the range of
the annual percentage rates, if the dis- days, the minimum number of days, or
closure includes a statement that the the average number of days in the
annual percentage rate varies by state grace period, if the disclosure is identi-
and refers the consumer to a disclosure fied as a range, minimum, or average.
provided with the table where the an- In disclosing in the tabular format a
nual percentage rate applicable to the grace period that applies to all types of
consumer’s account is disclosed. A card purchases, the phrase ‘‘How to Avoid
issuer may not list annual percentage Paying Interest on Purchases’’ shall be
rates for multiple states in the table. used as the heading for the row describ-
(2) Fees for issuance or availability. (i) ing the grace period. If a grace period
Any annual or other periodic fee that is not offered on all types of purchases,
may be imposed for the issuance or in disclosing this fact in the tabular
availability of a credit or charge card, format, the phrase ‘‘Paying Interest’’
jspears on DSK121TN23PROD with CFR
including any fee based on account ac- shall be used as the heading for the row
tivity or inactivity; how frequently it describing this fact.
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§ 1026.60 12 CFR Ch. X (1–1–25 Edition)
(6) Balance computation method. The issuer must only consider fees for
name of the balance computation issuance or availability of credit, or a
method listed in paragraph (g) of this security deposit, that are required. If
section that is used to determine the fees for issuance or availability are op-
balance for purchases on which the fi- tional, these fees should not be consid-
nance charge is computed, or an expla- ered in determining whether the disclo-
nation of the method used if it is not sure must be given. Nonetheless, if the
listed. In determining which balance 15 percent threshold test is met, the
computation method to disclose, the issuer in providing the disclosure must
card issuer shall assume that credit ex- disclose the amount of available credit
tended for purchases will not be repaid calculated by excluding those optional
within the grace period, if any. fees, and the available credit including
(7) Statement on charge card payments. those optional fees. This paragraph
A statement that charges incurred by does not apply with respect to fees or
use of the charge card are due when the security deposits that are not debited
periodic statement is received. to the account.
(8) Cash advance fee. Any fee imposed (15) Web site reference. A reference to
for an extension of credit in the form of the Web site established by the Bureau
cash or its equivalent. and a statement that consumers may
(9) Late payment fee. Any fee imposed obtain on the Web site information
for a late payment. about shopping for and using credit
(10) Over-the-limit fee. Any fee im- cards. Until January 1, 2013, issuers
posed for exceeding a credit limit. may substitute for this reference a ref-
(11) Balance transfer fee. Any fee im- erence to the Web site established by
posed to transfer an outstanding bal- the Board of Governors of the Federal
ance. Reserve System.
(12) Returned-payment fee. Any fee im- (c) Direct mail and electronic applica-
posed by the card issuer for a returned tions and solicitations—(1) General. The
payment. card issuer shall disclose the applicable
(13) Required insurance, debt cancella- items in paragraph (b) of this section
tion or debt suspension coverage. (i) A fee on or with an application or solicita-
for insurance described in § 1026.4(b)(7) tion that is mailed to consumers or
or debt cancellation or suspension cov- provided to consumers in electronic
erage described in § 1026.4(b)(10), if the form.
insurance or debt cancellation or sus- (2) Accuracy. (i) Disclosures in direct
pension coverage is required as part of mail applications and solicitations
the plan; and must be accurate as of the time the
(ii) A cross reference to any addi- disclosures are mailed. An accurate
tional information provided about the variable annual percentage rate is one
insurance or coverage accompanying in effect within 60 days before mailing.
the application or solicitation, as ap- (ii) Disclosures provided in electronic
plicable. form must be accurate as of the time
(14) Available credit. If a card issuer they are sent, in the case of disclosures
requires fees for the issuance or avail- sent to a consumer’s email address, or
ability of credit described in paragraph as of the time they are viewed by the
(b)(2) of this section, or requires a secu- public, in the case of disclosures made
rity deposit for such credit, and the available at a location such as a card
total amount of those required fees issuer’s Web site. An accurate variable
and/or security deposit that will be im- annual percentage rate provided in
posed and charged to the account when electronic form is one in effect within
the account is opened is 15 percent or 30 days before it is sent to a consumer’s
more of the minimum credit limit for email address, or viewed by the public,
the card, a card issuer must disclose as applicable.
the available credit remaining after (d) Telephone applications and solicita-
these fees or security deposit are deb- tions—(1) Oral disclosure. The card
ited to the account, assuming that the issuer shall disclose orally the infor-
consumer receives the minimum credit mation in paragraphs (b)(1) through (7)
jspears on DSK121TN23PROD with CFR
limit. In determining whether the 15 and (b)(14) of this section, to the extent
percent threshold test is met, the applicable, in a telephone application
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Consumer Financial Protection Bureau § 1026.60
or solicitation initiated by the card (i) The applicable information in
issuer. paragraph (b) of this section;
(2) Alternative disclosure. The oral dis- (ii) The date the required informa-
closure under paragraph (d)(1) of this tion was printed, including a statement
section need not be given if the card that the required information was ac-
issuer either: curate as of that date and is subject to
(i)(A) Does not impose a fee described change after that date; and
in paragraph (b)(2) of this section; or (iii) A statement that the consumer
(B) Imposes such a fee but provides should contact the card issuer for any
the consumer with a right to reject the change in the required information
plan consistent with § 1026.5(b)(1)(iv); since it was printed, and a toll-free
and telephone number or a mailing address
(ii) The card issuer discloses in writ- for that purpose.
ing within 30 days after the consumer (2) No disclosure of credit information.
requests the card (but in no event later If none of the items in paragraph (b) of
than the delivery of the card) the fol- this section is provided on or with the
lowing: application or solicitation, the card
(A) The applicable information in issuer may state in a prominent loca-
paragraph (b) of this section; and tion on the application or solicitation
(B) As applicable, the fact that the the following:
consumer has the right to reject the (i) There are costs associated with
plan and not be obligated to pay fees the use of the card; and
described in paragraph (b)(2) or any (ii) The consumer may contact the
other fees or charges until the con- card issuer to request specific informa-
sumer has used the account or made a tion about the costs, along with a toll-
payment on the account after receiving free telephone number and a mailing
a billing statement. address for that purpose.
(3) Accuracy. (i) The oral disclosures (3) Prompt response to requests for in-
under paragraph (d)(1) of this section formation. Upon receiving a request for
must be accurate as of the time they any of the information referred to in
are given. this paragraph, the card issuer shall
(ii) The alternative disclosures under promptly and fully disclose the infor-
paragraph (d)(2) of this section gen- mation requested.
erally must be accurate as of the time (4) Accuracy. The disclosures given
they are mailed or delivered. A vari- pursuant to paragraph (e)(1) of this sec-
able annual percentage rate is one that tion must be accurate as of the date of
is accurate if it was: printing. A variable annual percentage
(A) In effect at the time the disclo- rate is accurate if it was in effect with-
sures are mailed or delivered; or in 30 days before printing.
(B) In effect as of a specified date (f) In-person applications and solicita-
(which rate is then updated from time tions. A card issuer shall disclose the
to time, but no less frequently than information in paragraph (b) of this
each calendar month). section, to the extent applicable, on or
(e) Applications and solicitations made with an application or solicitation that
available to general public. The card is initiated by the card issuer and
issuer shall provide disclosures, to the given to the consumer in person. A
extent applicable, on or with an appli- card issuer complies with the require-
cation or solicitation that is made ments of this paragraph if the issuer
available to the general public, includ- provides disclosures in accordance with
ing one contained in a catalog, maga- paragraph (c)(1) or (e)(1) of this section.
zine, or other generally available publi- (g) Balance computation methods de-
cation. The disclosures shall be pro- fined. The following methods may be
vided in accordance with paragraph described by name. Methods that differ
(e)(1) or (e)(2) of this section. due to variations such as the allocation
(1) Disclosure of required credit infor- of payments, whether the finance
mation. The card issuer may disclose in charge begins to accrue on the trans-
jspears on DSK121TN23PROD with CFR
a prominent location on the applica- action date or the date of posting the
tion or solicitation the following: transaction, the existence or length of
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§ 1026.60, Nt. 12 CFR Ch. X (1–1–25 Edition)
a grace period, and whether the bal- card as defined in § 1026.61 or covered over-
ance is adjusted by charges such as late draft credit accessible by an account number
payment fees, annual fees and unpaid that is a hybrid debit-credit card;
finance charges do not constitute sepa- (v) Additions of a credit or charge card to
rate balance computation methods. an existing open-end plan;
(1)(i) Average daily balance (including (vi) General purpose applications unless
the application, or material accompanying
new purchases). This balance is figured it, indicates that it can be used to open a
by adding the outstanding balance (in- credit or charge card account; or
cluding new purchases and deducting (vii) Consumer-initiated requests for appli-
payments and credits) for each day in cations.
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
§ 1026.61 Hybrid prepaid-credit cards.
by adding the outstanding balance (ex-
cluding new purchases and deducting (a) Hybrid prepaid-credit card—(1) In
payments and credits) for each day in general. (i) Credit offered in connection
the billing cycle, and then dividing by with a prepaid account is subject to
the number of days in the billing cycle. this section and this regulation as
(2) Adjusted balance. This balance is specified below.
figured by deducting payments and (ii) For purposes of this regulation,
credits made during the billing cycle except as provided in paragraph (a)(4)
from the outstanding balance at the of this section, a prepaid card is a hy-
beginning of the billing cycle. brid prepaid-credit card with respect to
(3) Previous balance. This balance is a separate credit feature as described
the outstanding balance at the begin- in paragraph (a)(2)(i) of this section
ning of the billing cycle. when it can access credit from that
(4) Daily balance. For each day in the credit feature, or with respect to a
billing cycle, this balance is figured by credit feature structured as a negative
taking the beginning balance each day, balance on the asset feature of the pre-
adding any new purchases, and sub- paid account as described in paragraph
tracting any payment and credits. (a)(3) of this section when it can access
[76 FR 79772, Dec. 22, 2011, as amended at 81 credit from that credit feature. A hy-
FR 84370, Nov. 22, 2016] brid prepaid-credit card is a credit card
for purposes of this regulation with re-
EFFECTIVE DATE NOTE: At 89 FR 106837,
Dec. 30, 2024, § 1026.60 was amended by revis- spect to those credit features.
ing paragraph (a)(5), effective Oct. 1, 2025. (iii) With respect to a credit feature
For the convenience of the user, the revised structured as a negative balance on the
text is set forth as follows: asset feature of the prepaid account as
described in paragraph (a)(3) of this
§ 1026.60 Credit and charge card applica-
tions and solicitations. section, a prepaid card is not a hybrid
(a) * * * prepaid-credit card or a credit card for
(5) Exceptions. This section does not apply purposes of this regulation if the condi-
to: tions set forth in paragraph (a)(4) of
(i) Home-equity plans accessible by a cred- this section are met.
it or charge card that are subject to the re- (2) Prepaid card can access credit from
quirements of § 1026.40; a covered separate credit feature—(i) Cov-
(ii) Covered overdraft credit as defined in
§ 1026.62 tied to asset accounts accessed by ered separate credit feature. (A) A sepa-
check-guarantee cards or by debit cards rate credit feature that can be accessed
other than hybrid debit-credit cards as de- by a hybrid prepaid-credit card as de-
fined in § 1026.62; scribed in this paragraph (a)(2)(i) is de-
(iii) Lines of credit accessed by check- fined as a covered separate credit fea-
guarantee cards or by debit cards, other than ture. A prepaid card is a hybrid pre-
covered overdraft credit accessed by hybrid paid-credit card with respect to a sepa-
debit-credit cards, that can be used only at
rate credit feature when it is a single
automated teller machines;
(iv) Lines of credit accessed solely by ac- device that can be used from time to
time to access the separate credit fea-
jspears on DSK121TN23PROD with CFR
count numbers except for a covered separate
credit feature solely accessible by an ac- ture where the following two condi-
count number that is a hybrid prepaid-credit tions are both satisfied:
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Consumer Financial Protection Bureau § 1026.61
(1) The card can be used to draw, through a negative balance on the
transfer, or authorize the draw or asset feature violates paragraph (b) of
transfer of credit from the separate this section. A prepaid account issuer
credit feature in the course of author- can use a negative asset balance struc-
izing, settling, or otherwise completing ture to extend credit on an asset fea-
transactions conducted with the card ture of a prepaid account only if the
to obtain goods or services, obtain prepaid card is not a hybrid prepaid-
cash, or conduct person-to-person credit card with respect to that credit
transfers; and as described in paragraph (a)(4) of this
(2) The separate credit feature is of- section.
fered by the prepaid account issuer, its (4) Exception for credit extended
affiliate, or its business partner. through a negative balance. A prepaid
(B) A separate credit feature that card is not a hybrid prepaid-credit card
meets the conditions set forth in para- with respect to credit extended
graph (a)(2)(i)(A) of this section is a through a negative balance on the
covered separate credit feature acces- asset feature of the prepaid account
sible by a hybrid prepaid-credit card and is not a credit card for purposes of
even with respect to credit that is this regulation with respect to that
drawn or transferred, or authorized to credit where:
be drawn or transferred, from the cred- (i) The prepaid card cannot access
it feature outside the course of a trans- credit from a covered separate credit
action conducted with the card to ob- feature as described in paragraph
tain goods or services, obtain cash, or (a)(2)(i) of this section that is offered
conduct person-to-person transfers. by a prepaid account issuer or its affil-
(ii) Non-covered separate credit feature. iate; and
A separate credit feature that does not (ii) The prepaid card only can access
meet the two conditions set forth in credit extended through a negative bal-
paragraph (a)(2)(i) of this section is de- ance on the asset feature of the prepaid
fined as a non-covered separate credit account where both paragraphs
feature. A prepaid card is not a hybrid (a)(4)(ii)(A) and (B) of this section are
prepaid-credit card with respect to a satisfied.
non-covered separate credit feature, (A) The prepaid account issuer has an
even if the prepaid card is a hybrid pre- established policy and practice of ei-
paid-credit card with respect to a cov- ther declining to authorize any trans-
ered separate credit feature as de- action for which it reasonably believes
scribed in paragraph (a)(2)(i) of this the consumer has insufficient or un-
section. A non-covered separate credit available funds in the asset feature of
feature is not subject to the rules ap- the prepaid account at the time the
plicable to hybrid prepaid-credit cards; transaction is authorized to cover the
however, it may be subject to this reg- amount of the transaction, or declining
ulation depending on its own terms and to authorize any such transactions ex-
conditions, independent of the connec- cept in one or more of the following
tion to the prepaid account. circumstances:
(3) Prepaid card can access credit ex- (1) The amount of the transaction
tended through a negative balance on the will not cause the asset feature balance
asset feature of the prepaid account—(i) to become negative by more than $10 at
In general. Except as provided in para- the time of the authorization; or
graph (a)(4) of this section, a prepaid (2) In cases where the prepaid ac-
card is a hybrid prepaid-credit card count issuer has received an instruc-
when it is a single device that can be tion or confirmation for an incoming
used from time to time to access credit electronic fund transfer originated
extended through a negative balance from a separate asset account to load
on the asset feature of the prepaid ac- funds to the prepaid account or where
count. the prepaid account issuer has received
(ii) Negative asset balances. Notwith- a request from the consumer to load
standing paragraph (a)(3)(i) of this sec- funds to the prepaid account from a
tion with regard to coverage under this separate asset account but in either
jspears on DSK121TN23PROD with CFR
regulation, structuring a hybrid pre- case the funds from the separate asset
paid-credit card to access credit account have not yet settled, the
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§ 1026.61 12 CFR Ch. X (1–1–25 Edition)
amount of the transaction will not (ii) Asset feature means an asset ac-
cause the asset feature balance to be- count that is a prepaid account, or an
come negative at the time of the au- asset subaccount of a prepaid account.
thorization by more than the incoming (iii) Business partner means a person
or requested load amount, as applica- (other than the prepaid account issuer
ble. or its affiliates) that can extend credit
(B) The following fees or charges are through a separate credit feature
not imposed on the asset feature of the where the person or its affiliate has an
prepaid account: arrangement with a prepaid account
(1) Any fees or charges for opening, issuer or its affiliate except as provided
issuing, or holding a negative balance in paragraph (a)(5)(iii)(D) of this sec-
on the asset feature, or for the avail- tion.
ability of credit, whether imposed on a (A) Arrangement defined. For purposes
one-time or periodic basis. This para- of paragraph (a)(5)(iii) of this section, a
graph does not include fees or charges person that can extend credit through
to open, issue, or hold the prepaid ac- a separate credit feature or the per-
count where the amount of the fee or son’s affiliate has an arrangement with
charge imposed on the asset feature is a prepaid account issuer or its affiliate
not higher based on whether credit if the circumstances in either para-
might be offered or has been accepted, graph (a)(5)(iii)(B) or (C) of this section
whether or how much credit the con- are met.
sumer has accessed, or the amount of (B) Arrangement by agreement. A per-
credit available; son that can extend credit through a
(2) Any fees or charges that will be separate credit feature or its affiliate
imposed only when credit is extended has an arrangement with a prepaid ac-
on the asset feature or when there is a count issuer or its affiliate if the par-
negative balance on the asset feature, ties have an agreement that allows the
except that a prepaid account issuer prepaid card from time to time to
may impose fees or charges for the ac- draw, transfer, or authorize a draw or
tual costs of collecting the credit ex- transfer of credit in the course of au-
tended if otherwise permitted by law; thorizing, settling, or otherwise com-
or pleting transactions conducted with
(3) Any fees or charges where the the card to obtain goods or services,
amount of the fee or charge is higher obtain cash, or conduct person-to-per-
when credit is extended on the asset son transfers.
feature or when there is a negative bal- (C) Marketing arrangement. A person
ance on the asset feature. that can extend credit through a sepa-
(C) A prepaid account issuer may rate credit feature or its affiliate has
still satisfy the exception in paragraph an arrangement with a prepaid account
(a)(4) of this section even if it debits issuer or its affiliate if:
fees or charges from the asset feature (1) The parties have a business, mar-
when there are insufficient or unavail- keting, or promotional agreement or
able funds in the asset feature to cover other arrangement which provides that
those fees or charges at the time they prepaid accounts offered by the prepaid
are imposed, so long as those fees or account issuer will be marketed to the
charges are not the type of fees or customers of the person that can ex-
charges enumerated in paragraph tend credit; or the separate credit fea-
(a)(4)(ii)(B) of this section. ture offered by the person who can ex-
(5) Definitions. For purposes of this tend credit will be marketed to the
section and other provisions in the reg- holders of prepaid accounts offered by
ulation that relate to hybrid prepaid- the prepaid account issuer (including
credit cards: any marketing to customers to encour-
(i) Affiliate means any company that age them to authorize the prepaid card
controls, is controlled by, or is under to access the separate credit feature as
common control with another com- described in paragraph (a)(5)(iii)(C)(2)
pany, as set forth in the Bank Holding of this section); and
jspears on DSK121TN23PROD with CFR
Company Act of 1956 (12 U.S.C. 1841 et (2) At the time of the marketing
seq.). agreement or arrangement described in
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