Interpretation of provisions in Truth in Lending Regulation Z
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For immediate release.
Juno 10, 1969.
The Board of Governors of the Federal Reserve Sjffitem announced today the approval of four intctprotatlonu of .provisions In Its Truth in Lending Regulation Z which goes into effect on July 1, A copy of each interpretation is attached.
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• TITLE 1?! - BANKS AND BANKING CHAl'TER It - FEDERAL RESERVE SYSTEM SUBCHAPTER A - BOARD OP GOVERNORS OF THE FEDERAL RESERVE SYSTEM iReg. li] ;ART 226 - TRUTH UN LENDING Miscellaneous Interpretations § 226»503 Minor IrroKuUvltto.8*aflxlntui;it Irregular pot l.od 1 ImitH (a) Section 226.5(d) specifies eertaift ftirilmuw# In determining what minor Irregularities In f i r s t Way be dlaregarded In determining the annual percentage rate, The quontiodi arlaiiifi IUI to what tnaxlmuta limits for auch petioda wduld is111.L permit tfile irregular periods to be considered regular In computing the annual percentage rote, (b) If the period from the date on which the finance charge begins to accrue and the date the f i n a l payment la due Is not less than three months In the case of weekly payments, six months In the caee of biweekly or semimonthly payments, or one year In the case o£ monthly payments, the maximum Interval of time from the date the finance charge beglnn to accrue to the date the f i r s t payment Is due la as follows: (1) In the case of weekly payments, 12 days; (2) In the case of biweekly or aemlmomthly payments, 25 days;
(3) in the caae of monthly payments, 50 days, (c) If the period from the date on which the 11none ; charge begins to accrue and the date the final payment is due la loss than three months In the case of weekly payments, oix months la tho case of biweekly or •cml* monthly payments, or one year In the case o£ monthly payment#, the maximum Interval of time from tho date the finance charge betylna to acerue to the date the f i r s t payment Is due Is as follow*:
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- 2 - (1) In the case of weekly payments, 10 days; (2) in the case of biweekly or semimonthly paymenta, 21 dnya ;
(3) in the case ol monthly paymenta, 42 daym (Interputs and appllca li U.S.C. l.(>06)
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§ 226,807 Assumption of an obligation: disclosures
to be made under .§ 226.8(K). iy
(b) For the purposes of §.226,4(k), an ."agaumption” occurs.onl
when, by written agreemant entered inte bekween.a subsequent. customer, and: :
the creditor, that subsequant.customer-ia.or willbe accepted by tha woe
creditor as an obligor on an oxieting evidence of debt. , In auch circumstances, disclosures shall be made ag follows: ... ... (1), I the finance charge originally {mposed on the existing,
evidence of debt was an add-on or discount type finance charge, the credie
need only disclose:
(1) The unpaid balance of the obligation asaumed;.. .... (11) The total amount of the charges impoaad by the ereditor,
individually itemized, in connection with the assumption}
(111) The riumber, amount , and due dates of Ydmaining payments to be made after assumption, the total of such payments, arid any other applicable information required under § 226.8(b) (3); .
(iv) Identification of the type of security interest, 1f any, retained or to ba acquired in any property of the aseuming customer and a brief identification of that property;
(v) The information required to be diacloged under § 226,8(») (4), (6) and (7);
(vi) Lf applicable tn connection with the assumption, the disclosures requicead under § 226.4(a) (5) and (6); and
(vil) If thac obligation was entered into on or after July 4, 1969, the annual percentage rate originally disclosad on the existing
obligation,
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-4 - (?) If the existing evidence of debt Is subject to a finance charge computed from time to time by application of 0 percentage rnto to on unpnld balance, the creditor Bhnll mnko the disclosures required under § 226.8(b) nod (d) and, If applicable In connection with the assumption, the disclosures required under § ?26.4(a)(5) and ((>), except that in determining the amount of the finance chnrge find the annual percentage role to be disclosed to the customer who assumes the obligation, the creditor rnfiy disregard any pvepai finance charges p.iid by the original customer, but ahull include in the finance charge «a a "prennid finance charge" the total amount of the charges imposed by the creditor, individually itemized, in connection with t ho ;in Rinrpt i on , (Interprets »nd applies 15 U.S.C. 1638 PIU! 15 U.S.C. 16.U)
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| 276.8Q8 Dtacloauve of amount of sohufulid p lyment a (a) Section 226,8(b)(3) ff quire i the croditor to'(jtaclosc* Che "'Amount. . .of payments «choduied to repay the indebtedness-" In certain Lronoacl ioria each payment conalgta of en equal amount to apply on principal nnd a finance charge which la determined by application oi a irate to the decreasing unpaid balance.
In such cases no two payments are equal in amount. Tho question w i s e s as to whether it la rvcuufuity to list the respective dollar amount of each such payment to comply with this requirement of § 226.8(b)(3), or whether an optional diselonuee in permitted.
(b) In any transaction In which the. amount o? each Mf-uljifiy scheduled payment (other than » firyt or last payment) tp.tudoa «n«wjuai amount to he Applied on principal and a finance charge computed by application of a rate to tho decreasing unpaid balance, at thu creditor'a option the requirement of § 226.8(b)(3) with respect to thtt amount: of i'/ich payment may bo met by disclosing tho following information:
(1) The amount of each payment to be applied on principal,. and on identification of that amount AS payment on principal; (2) The respective amount of finance charge included in the first and lost (Scheduled payments BO described; (c) If thlo option is utilized, tho exceptions provided under paragraphs? (b)(3), and (c)(8) and (d)(3) of S 226.8 shall not apply. (Interprets and applies 15 U.S.C. 1638 and 15 U,,8.(1. 1.63'))
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- 6 i 226.809 Disclosures for certnin student loans Footnotes 10 and 11 to Regulation Z provide nn exception from spticiUfiti disclosure requircraenti for interim student loans under c e r t a i n Federally insured student loan programs. Thciie exceptions ere applicable to other student loans of the same type, including those made to students under Federally supported loan programs or programs of lonn l,uarnntee, Administered by or under agreement with the U.S. Department of IliMlth, Education and Welfare.
In a l l of such cases, however, a l l discloauroo must bo mode prior to the time the f i n a l note la executed or repayment schedule la agreed upon. ( I n t e r p r e t s and applies 15 U.S.C. 1639)