DEFINE FINANCE HCARGE REGISTRATION

The agreement provides for an interest rate on any credit extension of, for example, 1%. The line of credit may be used to borrow against the funds in the time deposit. A consumer enters into a combined time deposit/credit agreement with a financial institution that establishes a time deposit account and an open-end line of credit. The creditor's failure to pay interest on the $6,000 does not result in an additional finance charge on the extension of credit, provided the consumer is entitled by the deposit agreement with the financial institution to interest only on the amount of the consumer's deposit.ī. 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. A consumer wishes to buy from a financial institution a $10,000 certificate of deposit paying 15% interest but has only $4,000. However, the consumer must be entitled to the interest that is not paid in order for the lost interest to be a finance charge. The interest lost is a finance charge and must be reflected in the annual percentage rate on the loan. The creditor charges the consumer an interest rate of 6% on the loan and stops paying interest on $5,000 of the $10,000 certificate for the term of the loan. A consumer borrows $5,000 for 90 days and secures it with a $10,000 certificate of deposit paying 15% interest. If the creditor reduces the interest rate it pays or stops paying interest on the consumer's deposit account or any portion of it for the term of a credit transaction (including, for example, an overdraft on a checking account or a loan secured by a certificate of deposit), the interest lost is a finance charge. (For additional discussion of the treatment of taxes, see other commentary to § 1026.4(a).)ģ. A tax imposed by a state or other governmental body on a creditor is not a finance charge if the creditor absorbs the tax as a cost of doing business and does not separately impose the tax on the consumer. A discount imposed on a credit obligation when it is assigned by a seller-creditor to another party is not a finance charge as long as the discount is not separately imposed on the consumer. However, if the creditor separately imposes a charge on the consumer to cover certain costs, the charge is a finance charge if it otherwise meets the definition. 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. If an escrow agent is used in both cash and credit sales of real estate and the agent's charge is $100 in a cash transaction and $150 in a credit transaction, only $50 is a finance charge.Ģ. If the charge in a credit transaction exceeds the charge imposed in a comparable cash transaction, only the difference is a finance charge. Charges for a required maintenance or service contract imposed only in a credit transaction. 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).Ĭ. Inspection and handling fees for the staged disbursement of construction-loan proceeds.ī. In contrast, the following items are finance charges:Ī. 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. This is the case even if an individual must pay cash to obtain the discount, provided that credit customers who are members of the group and do not qualify for the discount pay no more than the nonmember cash customers.ĭ.

Discounts available to a particular group of consumers because they meet certain criteria, such as being members of an organization or having accounts at a particular financial institution. Discounts that are available to cash and credit customers, such as quantity discounts.Ĭ.

DEFINE FINANCE HCARGE REGISTRATION

Taxes, license fees, or registration fees paid by both cash and credit customers.ī. For example, the following items are not finance charges:Ī.

A creditor financing the sale of property or services may compare charges with those payable in a similar cash transaction by the seller of the property or service. In determining whether an item is a finance charge, the creditor should compare the credit transaction in question with a similar cash transaction. Charges imposed uniformly in cash and credit transactions are not finance charges.

Define finance hcarge