Truth in Lending Act and Regulation Z

Question 1

If you discover an unintentional error in complying with Reg Z requirements what corrective action must you take?

Answer 1

You must: 1) notify the affected members and 2) make appropriate adjustments within 60 days after discovering the error and before any legal action has begun or any member gives written notice of the error.

Question 2

Reg Z defines “finance charge” as the cost of consumer credit in a dollar amount. The regulation provides a list of the type of charges that must be considered as components of the finance charge. Name four of those charges.

Answer 2

Those charges include: 1) interest, time/price differentials, and amounts payable under an add-on or discount system of additional charges; 2) service fees, transaction fees, activity charges, and carrying charges; 3) points, loan fees, assumption fees, finder’s fees, and similar charges; 4) appraisal fees, investigation fees, and credit report fees; 5) premiums or other charges for any guarantee or insurance that protects your credit union against a members default or other credit loss; 6) charges that your credit union pays to another person for
purchasing or accepting a loan, if the member is obligated to pay the charges either in cash, as an additional amount on the obligation, or as a deduction from the loan proceeds; 7) premiums or other charges for credit life, health, accident, or loss of income insurance obtained in connection with a credit transaction; 8) premiums or other charges for loss of or damage to property, or against liability that arises out of the ownership or use of property.

Question 3

Reg Z provides specific accuracy requirements for APRs in both open- and closed-end credit. What are those requirements?

Answer 3

For both open- and closed-end credit the APR must be within 1/8 of a
percentage point above or below the determined APR. However, for irregular transactions on closed-end credit, the percentage can be 1/4 of a percentage point above or below.

Question 4

The special rules for credit cards allow the member to withhold payment of up to the full amount of the transaction plus any finance charge imposed on that amount when there is an unresolved dispute between the member and a merchant. What three (3) conditions must be met before this rule can apply?

Answer 4

This rule applies when: 1) the member has made a good-faith attempt to resolve the dispute; 2) the amount involved is greater than $50; and 3) the transaction occurs in the member’s state or within 100 miles of the member’s current address.

Question 5

When a member notifies the credit union, in writing, of a billing error on an open-end credit plan, what are the three steps the credit union must take per Reg Z?

Answer 5

The credit union must: 1) send the member a written acknowledgment of receipt of the claim with 30 days; 2) resolve the claim within the allowable time frame; and 3) avoid certain actions (such as trying to collect the amount, imposing a finance charge on the amount, report it to a credit-reporting agency, or restrict or close the account).

Question 6

Regulation Z requires credit unions to promptly credit payments made on open-end credit accounts. What are two of the four rules governing this?

Answer 6

Prompt crediting of payment rules: 1) credit as of day of receipt; 2) provide payment specifications on or with the periodic statement; 3) adjust for failure to credit the payment timely; and 4) handle credit balances as required.

Question 7

If a member reasserts a billing error claim after the initial investigation has been completed, what is the credit union’s duty?

Answer 7

The credit union is not obligated to reinvestigate the claim. However, if the account has been reported to a credit reporting agency, the credit union must:
1) inform the agency the amount is in dispute
2) provide the member with the name and address of the agencies notified
3) promptly report any resolutions to those agencies.

Question 8

There are three general disclosure requirements for open-end credit disclosures. One is that the disclosures be made in a clear and conspicuous manner. What are the other two?

Answer 8

They must be: 1) in writing and 2) in a form the member may keep

Question 9

Reg Z requires credit unions to provide periodic statements to members with open-end credit for each billing cycle that a finance charge is imposed or there is a debit or credit balance of $1.00. These statements must be provided at least quarterly. Name four of the required items for this statement.

Answer 9

Required information for periodic statements (as applicable): (1) previous balance; (2) identification of transactions; (3) credits to the account; (4) periodic rates; (5) balance for computing finance charge; (6) finance charge; (7) annual percentage rate; (8) other charges; (9) closing date; (10) new balance; (11) grace period; (12) address for billing error notice; and (13) liability notice for credit card plans.

Question 10

When you change an account term or condition that is required to be disclosed under Reg Z or increase a minimum payment requirement and that change is not one of the exceptions provided in the regulation, what is the notification requirement for the change?

Answer 10

You must mail or deliver written notice of the change as least 45 days before its effective date

Question 11

Credit unions are required to provide members an initial billing rights statement when they establish their account as well as an annual billing rights disclosure. What is the alternative to this annual mailing provided in Reg Z?

Answer 11

Credit unions can include a shortened form of the billing rights notice on or with each periodic statement mailed or delivered to the member.

Question 12

Y or N
Does disclosing the APR in an advertisement act as a trigger term for both open-and closed-end credit?

Answer 12

No, disclosing the APR in an advertisement is only considered a trigger term for open-end loans.

Question 13

In order to be considered “prominently located,” where must Schumer box disclosures appear?

Answer 13

The disclosures must be provided on or with the solicitation or application.

Question 14

Where must the APR for cash advances and balance transfers appear?

Answer 14

In the Schumer box or table

Question 15

A special interest rate disclosure rule applies to variable-rate loans. What is that rule?

Answer 15

The credit union must disclose the maximum interest rate that can be charges during the term of the loan.

Question 16

What does the term “cross-collateralization” mean?

Answer 16

Sometimes credit unions will use property they already have a security interest in as collateral for another loan. In order to extend this security interest, the first loan must contain an agreement to do this even if it does not apply to that loan at that time.

Question 17

Certain terms, if mentioned or described in an advertisement by themselves, might mislead members as to the “deal” your credit union is offering. These are known as “trigger terms.” If an advertisement for closed-end credit contains one of these trigger terms, what are two of the four additional disclosures required for that advertisement?

Answer 17

The advertisement must also include: 1) the amount or percentage of the down payment; 2) the terms of repayment; 3) the “annual percentage rate” using that term; and 4) if applicable, a statement that the APR will increase during the life of the loan.

Question 18

When providing disclosures electronically, credit unions are required to use visual text in a clear and conspicuous format. List the three other requirements for electronic disclosures.

Answer 18

The credit union must disclose the requirements for accessing and retaining disclosures, the consumer must demonstrate the ability to access the information and affirmatively consent to receive it electronically, and disclosures must meet the disclosure requirements of the regulations

Question 19

What are the retainability requirements for electronic disclosures?