TRUTH IN LENDING AND REGULATION Z Flashcards
If you discover an unintentional error in complying with Reg Z requirements, what corrective action must you take?
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.
Reg Z defines “finance charge” as the cost of consumer credit in a dollar amount. The regulation provides a list of the types of charges that must be
considered as components of the finance charge. Name four of those charges
Interest, service transaction and activity charges, borrower’s points including loan fees, assumption fees, and finder fees, credit report fees are finance charges except for mortgage loans.
For loans secured by real property, a
credit union must adhere to the following
record retention requirements:
Regulation Z requires credit unions
to retain evidence of their compliance
with its provisions for a period of two
years after the date the disclosures are
to be given or action is required to be
taken.
* Application disclosures – 3 years from
the later of the date of consummation,
the date the disclosures were required
to be made or the date action was
required to be taken
* Closing Disclosure – 5 years from the
date of consummation
* Other closing disclosures – 3 years
from the later of the date of consummation,
the date the disclosures were
required to be made or the date action
was required to be taken
For all loans secured by a dwelling,
credit unions must include in their consumer
loan agreements, the maximum
interest rate that may be imposed during
the term of the loan when:
- In the case of closed-end credit, the
APR may increase after consummation;
or - In the case of open-end credit, the
APR may increase during the life of
the plan.
When a member notifies the credit union, in writing, of a billing error on an openend credit plan, what are the three steps the credit union must take per Reg Z?
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 (within 2 billing cycles or 90 days);
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).
If a member reasserts a billing error claim after the initial investigation has been completed, what is the credit union’s duty?
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; and 3) promptly report any
resolutions to those agencies.
Regulation Z requires credit unions to promptly credit payments made on openend credit accounts. What are two of the four rules governing this?
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.
For Open-End Disclosures,
When an application form is given to the member, disclose :
Before the first transaction or at consummation (time the contract is “created”), disclose:
After consummation, you must provide:
- Table of credit card terms.
- HELOC disclosures and booklet.
- Initial disclosure statement.
- Rescission notices for nonpurchase loans secured by the member’s principal
dwelling. - Periodic statement.
- Billing rights notice.
- Change in terms notice.
- Credit card renewal notice.
- Change of credit card insurance provider notice.
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?
They must be: 1) in writing and 2) in a form the member may keep
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.
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.
A credit union must provide a notice
of change in terms for home equity
lines of credit at least..
..15 days prior to the effective date of the change, if it
changes any term required to be disclosed
at account opening. The 15-daytiming requirement does not apply if the change has been agreed to by the member, of if a periodic rate or finance
charge is increased because of the member’s delinquency or default.
Does disclosing the APR in an advertisement act as a trigger term for both openand closed-end credit?
Yes OR No
No, disclosing the APR in an advertisement is only considered a trigger term for open-end loans.
A significant difference is that HELOC
advertisements also are required to provide
additional disclosures if the advertisement
sets forth any payment term, positively or negatively. For example, if included, the following statements are trigger terms for home equity plans, but
not for other open-end loans:
- There are no finance charges for the first
month. - There’s no finance charge if you pay the full
balance within 25 days of the statement
date.
Furthermore, if an advertisement for a
home equity plan contains a trigger term,
you must disclose the three items listed
in section 1026.16(b) as described above, as well as the following: - Any loan fee that is a percentage of the credit limit under the plan (for example, “points”) and an estimate of any other fees the credit union
imposes for opening the plan, stated as a single dollar amount or a reasonable range. - The periodic rate, if any, used to compute the finance charge, expressed as an annual percentage rate.
- The maximum annual percentage rate that may be charged if it is a variable‑rate plan.
Reg Z provides specific accuracy requirements for APRs in both open- and closed-end credit. What are those requirements?
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.
What does the term “cross-collateralization” mean?
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.
