ii. The list of charges in § 1026.4(c)(7) applies both to residential mortgage transactions (which may include, for example, the purchase of a mobile home) and to other transactions secured by real estate. in Supplement I. The fee or premium may be disclosed on a unit-cost basis only in open-end credit transactions, closed-end credit transactions by mail or telephone under § 1026.17(g), and certain closed-end credit transactions involving a debt cancellation agreement that limits the total amount of indebtedness subject to coverage; (iii) The following are disclosed, as applicable, for debt suspension coverage: That the obligation to pay loan principal and interest is only suspended, and that interest will continue to accrue during the period of suspension. 7. These types of coverage do not constitute single-interest insurance for purposes of the regulation, and premiums for them do not qualify for exclusion from the finance charge under § 1026.4(d). Determine how much you will borrow. If a charge for an account with a credit feature does not exceed the charge for an account without a credit feature, the charge is not a finance charge under § 1026.4(b)(2). Coverage written in connection with a transaction. The financial institution offers to lend the consumer $6,000 at an interest rate of 6% but will pay the 15% interest only on the amount of the consumer's deposit, $4,000. Required closing agent. First published on BankersOnline.com 1/17/05. See interpretation of Paragraph 4(b)(3) The term single-interest insurance as used in the regulation refers only to the types of coverage traditionally included in the term vendor's single-interest insurance (or VSI), that is, protection of tangible property against normal property damage, concealment, confiscation, conversion, embezzlement, and skip. in Supplement I. (10) Charges or premiums paid for debt cancellation or debt suspension coverage written in connection with a credit transaction, whether or not the coverage is insurance under applicable law. 4. REVISED 8/10/2016. See interpretation of Paragraphs 4(b)(7) and (b)(8) 1. Real estate or residential mortgage transaction charges excluded under § 1026.4(c)(7) are those charges imposed solely in connection with the initial decision to grant credit. This paragraph does not apply to a fee to participate in a covered separate credit feature accessible by a hybrid prepaid-credit card as defined in § 1026.61, regardless of whether this fee is imposed on the credit feature or on the asset feature of the prepaid account. A. Fees for preparing a Truth in Lending disclosure statement, if permitted by law (for example, the Real Estate Settlement Procedures Act prohibits such charges in certain transactions secured by real property). Credit insurance sold before or after an open-end (not home-secured) plan is opened is considered “written in connection with a credit transaction.” Insurance sold after consummation in closed-end credit transactions or after the opening of a home-equity plan subject to the requirements of § 1026.40 is not considered “written in connection with” the credit transaction if the insurance is written because of the consumer's default (for example, by failing to obtain or maintain required property insurance) or because the consumer requests insurance after consummation or the opening of a home-equity plan subject to the requirements of § 1026.40 (although credit-sale disclosures may be required for the insurance sold after consummation if it is financed). A $5 service charge is imposed for each item that results in an overdraft on an account with an overdraft line of credit, while a $25 service charge is imposed for paying or returning each item on a similar account without a credit feature; the $5 charge is not a finance charge. Transaction charges that are imposed on the asset feature of a prepaid account are subject to § 1026.4(b)(11)(ii) and related commentary, instead of § 1026.4(b)(11)(i). Compensation paid by a creditor to a mortgage broker under an agreement is not included as a separate component of a consumer's total finance charge (although this compensation may be reflected in the finance charge if it comes from amounts paid by the consumer to the creditor that are finance charges, such as points and interest). For example, a stamp tax, property tax, intangible tax, or any other state or local tax imposed on the consumer, or on the credit transaction, is not a finance charge even if the tax is collected by the creditor. See the commentary to § 1026.4(c)(4).). See interpretation of Paragraph 4(c)(3) Except with regard to a covered separate credit feature and an asset feature on a prepaid account that are both accessible by a hybrid prepaid-credit card as defined in § 1026.61, which are addressed in more detail in §§ 1026.4(b)(11) and 1026.61, any transaction charge imposed on a cardholder by a card issuer is a finance charge, regardless of whether the issuer imposes the same, greater, or lesser charge on withdrawals of funds from an asset account such as a checking or savings account. The assumption fee is a finance charge in the new buyer's transaction. For example, if a credit card network imposes a 1 percent fee on the card issuer, but the card issuer absorbs the fee as a cost of doing business (and only passes it on to consumers in the general sense that the interest and fees are imposed on all its customers to recover its costs), then the fee is not a foreign transaction fee and need not be disclosed. See interpretation of Paragraph 4(c)(1) 2. (7) Premiums or other charges for credit life, accident, health, or loss-of-income insurance, written in connection with a credit transaction. 2. Insurance written in connection with a transaction. For example: i. in Supplement I, (i) Requires the use of a third party as a condition of or an incident to the extension of credit, even if the consumer can choose the third party; or. i. It does not include any charge of a type payable in a comparable cash transaction. C. Assume a prepaid account issuer charges $0.50 on prepaid accounts without a covered separate credit feature for each transaction that accesses funds in the asset feature of the prepaid accounts. Other excluded charges. (See the commentary to § 1026.4(a). Prepaid loan charges include origination fees… From the OSC to Reg. In this case, the $0.50 per transaction fee imposed on the asset feature of the prepaid account with a covered separate credit feature is not a finance charge. If, however, you have life-of-loan fees added to the flood certification, that portion is a finance charge, as would be ongoing pest inspections. Premium rate increases. If the term of coverage is less than the term of the credit transaction, the term of coverage also shall be disclosed. (See § 1026.4(b)(6). (For additional discussion of the treatment of taxes, see other commentary to § 1026.4(a).). Here’s an easy way to determine whether something is a finance charge. in Supplement I. An example of a third-party charge included in the finance charge is the cost of required mortgage insurance, even if the consumer is allowed to choose the insurer. (6) Interest forfeited as a result of an interest reduction required by law on a time deposit used as security for an extension of credit. The term “debt cancellation coverage” includes guaranteed automobile protection, or “GAP,” agreements, which pay or satisfy the remaining debt after property insurance benefits are exhausted. This comment provides guidance with respect to comparable fees under § 1026.4(b)(11)(ii) for the two types of credit extensions on a covered separate credit feature. Treatment of transaction fees on credit card plans. B. § 1026.21 Treatment of credit balances. iv. If the creditor does not offer the required insurance, the premium to be included in the finance charge is the cost of a policy of insurance of the type, amount, and term required by the creditor. 4. Finance charge. To exclude property insurance premiums or charges from the finance charge, the creditor must allow the consumer to choose the insurer and disclose that fact. in Supplement I. (ii) Retains a portion of the third-party charge, to the extent of the portion retained. Forfeitures of interest. In determining whether a charge is for actual unanticipated late payment on a 30-day account, for example, factors to be considered include: A. Taskforce on Federal Consumer Financial Law. § 1026.32 Requirements for high-cost mortgages. For many forms of credit, the finance charge fluctuates as … For example: A. (3) Points, loan fees, assumption fees, finder's fees, and similar charges. in Supplement I. If the purchaser pays cash, the price is $9,000, but if the purchaser finances the tract with the seller the price is $10,000. in Supplement I. Required credit life insurance; debt cancellation or suspension coverage. If you’re inte… Finance charges include interest charges, late fees, loan processing fees, or any other cost that goes beyond repaying the amount borrowed. Other insurance. 2. With respect to excluding a fee from the finance charge, Regulation Z makes clear that sums must be actually paid to public officials to be excluded under item (1), such as charges or other fees for filing or recording security agreements, mortgages, continuation statements, termination statements, and similar documents. If the obligation is between the creditor and a third party (an assignee, for example), charges or other fees for filing or recording security agreements, mortgages, continuation statements, termination statements, and similar documents relating to that obligation are not excludable from the finance charge under this section. See comment 61(a)(2)–5.iii for guidance on the applicability of this regulation in connection with non-covered credit features accessible by prepaid cards. 2. See interpretation of 4(f) Prohibited Offsets Where the hybrid prepaid-credit card accesses credit from a covered separate credit feature in the course of authorizing, settling, or otherwise completing a transaction conducted with the card to obtain goods or services, obtain cash, or conduct person-to-person transfers, any per transaction fees imposed on the asset feature of prepaid accounts, including load and transfer fees, for such credit from the credit feature are comparable only to per transaction fees for each transaction to access funds in the asset feature of a prepaid account that are imposed on prepaid accounts in the same prepaid account program that does not have such a credit feature. (i) Requires the particular services for which the consumer is charged; (ii) Requires the imposition of the charge; or. 2. The amount of the fee is set or authorized by law. In determining whether an item is a finance charge, the creditor should compare the credit transaction in question with a similar cash transaction. Select Finance Charge, then go to the Company Preferences tab. Since the $4,000 loan exceeds, in part, the maximum amount of indebtedness that can be covered by the plan, the creditor may properly give the insurance-cost disclosures on the $4,000 loan on a unit-cost basis. 140 Judgment Search NO NO NO NO Title fee. i. in Supplement I. See interpretation of 4(a)(1) Charges by Third Parties (b) Examples of finance charges. In this case, the $1.25 fee imposed on the asset feature of the prepaid account with a covered separate credit feature is a finance charge because no fee is charged for a direct deposit of salary from an employer or a direct deposit of government benefits on prepaid accounts without such a credit feature. The annuity is intended to replace in whole or in part the creditor's payments to the consumer either immediately or at some future date. Looking for effective, convenient training on a particular subject. 1. In addition, a tax is not a finance charge if it is excluded from the finance charge by another provision of the regulation or commentary (for example, if the tax is imposed uniformly in cash and credit transactions). Loss-of-income insurance. To illustrate: A. Fees imposed on prepaid accounts without a covered separate credit feature for a one-time load or transfer of funds from a separate asset account or from a non-covered separate credit feature are not comparable for purposes of § 1026.4(b)(11)(ii). Per transaction fees for a transaction that is conducted to load or draw funds into a prepaid account from some other source are not comparable for purposes of § 1026.4(b)(11)(ii). Also, in section c(7) the reg notes that the fees are excluded from the finance charge even if the services for which the fees are imposed are performed by the creditor's employees rather than by a third party. Any charge imposed on a credit cardholder by a card issuer for the use of an automated teller machine (ATM) to obtain a cash advance (whether in a proprietary, shared, interchange, or other system) is a finance charge regardless of whether the card issuer imposes a charge on its debit cardholders for using the ATM to withdraw cash from a consumer asset account, such as a checking or savings account. Specially Designated Nationals List (SDN). 8. If an aggregate sum is disclosed, a general term such as security interest fees or filing fees may be used. If a consumer purchases credit insurance or debt cancellation or debt suspension coverage for an open-end (not home-secured) plan by telephone, the creditor must make the disclosures under paragraphs (d)(1)(i) and (ii) or (d)(3)(i) through (iii) of this section, as applicable, orally. This upfront fee can reduce how much you receive and can be included in the loan’s annual percentage rate, or APR.. As you shop around for personal loans, it’s important to consider each option’s origination fee along with the other features and terms the lenders offer. The following charges are not finance charges: See interpretation of 4(c) Charges Excluded From the Finance Charge However, if the fee is to be excluded from the finance charge under § 1026.4(c)(1), it must be charged to all applicants, not just to applicants who are approved or who actually receive credit. in Supplement I. Learn about our FREE and Premium Newsletters and Briefings. (f) Prohibited offsets. If a policy that is primarily VSI also provides coverages that are not VSI or other property insurance, a portion of the premiums must be allocated to the nonexcludable coverages and included in the finance charge. Such a policy is not “written in connection with” the transaction, as long as the insurance was not purchased for use in that credit extension, since it was previously owned by the consumer. A finance charge includes the total of all the interest you’ll pay over the entire life of your loan (assuming you keep the loan to term), plus all prepaid loan charges. Any consumer in the transaction may sign or initial the request. in Supplement I, An official website of the United States government, Explore guides to help you plan for big financial goals, Subpart B - Open-End Credit § 1026.5–§ 1026.16, Subpart C - Closed-End Credit § 1026.17–§ 1026.24, Subpart D - Miscellaneous § 1026.25–§ 1026.30, Subpart E - Special Rules for Certain Home Mortgage Transactions § 1026.31–§ 1026.45, Subpart F - Special Rules for Private Education Loans § 1026.46–§ 1026.48, Subpart G - Special Rules Applicable to Credit Card Accounts and Open-End Credit Offered to College Students § 1026.51–§ 1026.61, Supplement I to Part 1026 - Official Interpretations, Official interpretation of 4(a) Definition, Official interpretation of 4(a)(1) Charges by Third Parties, Official interpretation of 4(a)(2) Special Rule; Closing Agent Charges, Official interpretation of 4(a)(3) Special Rule; Mortgage Broker Fees, Official interpretation of 4(b) Examples of Finance Charges, Official interpretation of Paragraph 4(b)(2), Official interpretation of Paragraph 4(b)(3), Official interpretation of Paragraph 4(b)(5), Official interpretation of Paragraphs 4(b)(7) and (b)(8), Official interpretation of Paragraph 4(b)(9), Official interpretation of Paragraph 4(b)(10), Official interpretation of Paragraph 4(b)(11), Official interpretation of Paragraph 4(b)(11)(i), Official interpretation of Paragraph 4(b)(11)(ii), Official interpretation of 4(c) Charges Excluded From the Finance Charge, Official interpretation of Paragraph 4(c)(1), Official interpretation of Paragraph 4(c)(2), Official interpretation of Paragraph 4(c)(3), Official interpretation of Paragraph 4(c)(4), Official interpretation of Paragraph 4(c)(5), Official interpretation of Paragraph 4(c)(6), Official interpretation of 4(c)(7) Real-Estate Related Fees, Official interpretation of 4(d) Insurance and Debt Cancellation and Debt Suspension Coverage, Official interpretation of 4(d)(3) Voluntary Debt Cancellation or Debt Suspension Fees, Official interpretation of 4(d)(4) Telephone Purchases, Official interpretation of 4(e) Certain Security Interest Charges, Official interpretation of 4(f) Prohibited Offsets. Disclosures in programs combining debt cancellation and debt suspension features. ii. For example, the premium for a hospitalization insurance policy, if it is required to be purchased only in a credit transaction, is a finance charge. The finance charge is the cost of consumer credit as a dollar amount. Under § 1026.4(c)(6), such “lost interest” need not be included in the finance charge. The term “debt suspension” does not include loan payment deferral arrangements in which the triggering event is the bank's unilateral decision to allow a deferral of payment and the borrower's unilateral election to do so, such as by skipping or reducing one or more payments (“skip payments”). in Supplement I. The difference with the VA IRRRL program, however, is that the work is not as extensive. In addition, the rate used for a particular transaction need not be the rate in effect on the date of the transaction (purchase or cash advance). From bankers. iii. § 1026.17 General disclosure requirements. § 1026.22 Determination of annual percentage rate. § 1026.2 Definitions and rules of construction. Seller's points. The initial term of an insurance policy is the full term of the credit transaction if the consumer pays or finances a single premium in advance. Debt suspension coverage provides for suspension of the obligation to make one or more payments on the date(s) otherwise required by the credit agreement, when a specified event occurs. The consumer has agreed to pay a premium or fee that is assessed periodically but the consumer is under no obligation to continue the coverage, whether or not the consumer has made an initial payment. The creditor is free to impose the fee in only certain of its loan programs, such as mortgage loans. § 1026.57 Reporting and marketing rules for college student open-end credit. (a) Definition. If, however, you have life-of-loan fees added to the flood certification, that portion is a finance charge, as would be ongoing pest inspections. In this case, the additional $0.75 is a finance charge. Included are fees imposed by the card issuer and fees imposed by a third party that performs the conversion, such as a credit card network or the card issuer's corporate parent. (8) Premiums or other charges for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, written in connection with a credit transaction. Compensation by lender. If debt cancellation or debt suspension coverage for two or more events is provided at a single charge, the entire charge may be excluded from the finance charge if at least one of the events is accident or loss of life, health, or income and the conditions specified in § 1026.4(d)(3) or, as applicable, § 1026.4(d)(4), are satisfied. Single-interest insurance defined. Examples of charges which are included in the finance charge include any of the following types of charges which are applicable: (1) Interest, time price differential, and any amount payable under a point, discount, or other system or additional charges. ii. For example, a fee that would be paid in a comparable cash … Premiums for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, including single interest insurance if the insurer waives all right of subrogation against the consumer, may be excluded from the finance charge if the following conditions are met: (i) The insurance coverage may be obtained from a person of the consumer's choice, and this fact is disclosed. Whether the insurance or coverage is in fact required or optional is a factual question. A charge for conducting or attending a closing is a finance charge and may be excluded only if the charge is included in and is incidental to a lump-sum fee excluded under § 1026.4(c)(7). Relationship to other provisions. The exclusion does not apply to fees for services to be performed periodically during the loan term, regardless of when the fee is collected. Fees charged for the specialized form of debt cancellation agreement known as guaranteed automobile protection (“GAP”) agreements must be disclosed according to § 1026.4(d)(3) rather than according to § 1026.4(d)(2) for property insurance. The insurer waives any right of subrogation. The initial term of a property insurance policy on an automobile that is written for one year is one year even though premiums are paid monthly and the term of the credit transaction is four years. C. Fees imposed by a third party are included only if they are directly passed on to the consumer. 2. Disclosures. If the term of insurance is less than the term of the transaction, the term of insurance shall also be disclosed. APR fees on a mortgage typically include charges like origination fees and discount points. A service station operator may display the cash price of fuel by itself on a curb sign, as long as the sign clearly indicates that the price is limited to cash purchases. (3) Voluntary debt cancellation or debt suspension fees. Credit life, accident, health, or loss-of-income insurance, and debt cancellation and suspension coverage described in § 1026.4(b)(10), must be voluntary in order for the premium or charges to be excluded from the finance charge. Affirmative request. What is the finance charge on a mortgage? Blanket and specific single-interest coverage are treated the same for purposes of the regulation. (See the commentary to § 1026.4(c)(6).) (e) Certain security interest charges. 2. For example, if the merchant itself performs the currency conversion and adds a fee, this fee need not be disclosed by the card issuer. General. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. Some comprehensive insurance policies may include a variety of additional coverages, such as repossession insurance and holder-in-due-course insurance. D. Charges for a service policy, auto club membership, or policy of insurance against latent defects offered to or required of both cash and credit customers for the same price. Earnings on deposits or investments. B. § 1026.37 Content of disclosures for certain mortgage transactions (Loan Estimate). Fees or charges on the asset feature of the prepaid account are not finance charges under § 1026.4 with respect to the non-covered separate credit feature. (See comment 4(a)-5 regarding the treatment of taxes, generally.). Participation fees - exclusions. This disclosure must be made whether or not the property insurance is available from or through the creditor. 6. A fee charged by a mortgage broker is excluded from the finance charge if it is the type of fee that is also excluded when charged by the creditor. For example, credit-report fees cover not only the cost of the report but also the cost of verifying information in the report. in Supplement I. Section 1026.61 governs credit offered in connection with a prepaid card. A finance charge is an expense you’d have to pay when using credit that you wouldn’t have to pay if you were using cash. Advertisers and sponsors are not responsible for site content. They may also charge a single fee for an entire project based on the estimated number of hours the project will take. Charges for “delinquency, default, or a similar occurrence” include, for example, charges for reinstatement of credit privileges or for submitting as payment a check that is later returned unpaid. ii. in Supplement I. *If you have multiple cards, the Minimum Amount Due for each card will be summed up and reflected in your Statement of Account as Total Amount Due. B. iv. 2. For example: i. (i) Any fee or charge described in paragraphs (b)(1) through (10) of this section imposed on the covered separate credit feature, whether it is structured as a credit subaccount of the prepaid account or a separate credit account. In order for a notary fee to be excluded under § 1026.4(e)(1), all of the following conditions must be met: i. Charges absorbed by the creditor as a cost of doing business are not finance charges, even though the creditor may take such costs into consideration in determining the interest rate to be charged or the cash price of the property or service sold. These payments, also known as finance charges, will be included in your payments and can be calculated either as monthly payments or as a sum total over the life of your loan. Creditors sometimes compensate mortgage brokers under a separate arrangement with those parties. (For purposes of this section, if applicable law is silent as to passing on the tax, the law is deemed not to authorize passing it on.). in Supplement I. Premiums for credit life insurance, shown as an example of a finance charge under § 1026.4(b)(7), may be excluded if the requirements of § 1026.4(d)(1) are met. Comment 4(b)(11)(ii)–1.iii provides guidance for credit extensions where a consumer draws or transfers credit from the covered separate credit feature outside the course of a transaction conducted with the card to obtain goods or services, obtain cash, or conduct person-to-person transfers. 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