15 U.S.C. § 1637a — Disclosure requirements for open end

Page 1492 TITLE 15—COMMERCE AND TRADE § 1637a and the marketing practices of creditors to determine the impact that college affinity card agreements and college student card agreements have on credit card debt. ‘‘(2) REPORT.—Upon completion of any study under paragraph (1), the Comptroller General shall periodi- cally submit a report to the Congress on the findings and conclusions of the study, together with such rec- ommendations for administrative or legislative action as the Comptroller General determines to be appro- priate.’’ Pub. L. 100–583, § 8, Nov. 3, 1988, 102 Stat. 2969, pro- vided that: ‘‘Not later than 1 year after the regulations prescribed under section 7 of this Act [set out as a note above] become effective and annually thereafter, the Board of Governors of the Federal Reserve System shall transmit to the Congress a report containing an assessment by the Board of the profitability of credit card operations of depository institutions, including an analysis of any impact of the amendments made by this Act [see Short Title of 1988 Amendment note under sec- tion 1601 of this title] on such profitability.’’ § 1637a. Disclosure requirements for open end consumer credit plans secured by consumer’s principal dwelling (a) Application disclosures In the case of any open end consumer credit plan which provides for any extension of credit which is secured by the consumer’s principal dwelling, the creditor shall make the following disclosures in accordance with subsection (b): (1) Fixed annual percentage rate Each annual percentage rate imposed in con- nection with extensions of credit under the plan and a statement that such rate does not include costs other than interest. (2) Variable percentage rate In the case of a plan which provides for vari- able rates of interest on credit extended under the plan— (A) a description of the manner in which such rate will be computed and a statement that such rate does not include costs other than interest; (B) a description of the manner in which any changes in the annual percentage rate will be made, including— (i) any negative amortization and inter- est rate carryover; (ii) the timing of any such changes; (iii) any index or margin to which such changes in the rate are related; and (iv) a source of information about any such index; (C) if an initial annual percentage rate is offered which is not based on an index— (i) a statement of such rate and the pe- riod of time such initial rate will be in ef- fect; and (ii) a statement that such rate does not include costs other than interest; (D) a statement that the consumer should ask about the current index value and inter- est rate; (E) a statement of the maximum amount by which the annual percentage rate may change in any 1-year period or a statement that no such limit exists; (F) a statement of the maximum annual percentage rate that may be imposed at any time under the plan; (G) subject to subsection (b)(3), a table, based on a $10,000 extension of credit, show- ing how the annual percentage rate and the minimum periodic payment amount under each repayment option of the plan would have been affected during the preceding 15- year period by changes in any index used to compute such rate; (H) a statement of— (i) the maximum annual percentage rate which may be imposed under each repay- ment option of the plan; (ii) the minimum amount of any periodic payment which may be required, based on a $10,000 outstanding balance, under each such option when such maximum annual percentage rate is in effect; and (iii) the earliest date by which such max- imum annual interest rate may be im- posed; and (I) a statement that interest rate informa- tion will be provided on or with each peri- odic statement. (3) Other fees imposed by the creditor An itemization of any fees imposed by the creditor in connection with the availability or use of credit under such plan, including annual fees, application fees, transaction fees, and closing costs (including costs commonly de- scribed as ‘‘points’’), and the time when such fees are payable. (4) Estimates of fees which may be imposed by third parties (A) Aggregate amount An estimate, based on the creditor’s expe- rience with such plans and stated as a single amount or as a reasonable range, of the ag- gregate amount of additional fees that may be imposed by third parties (such as govern- mental authorities, appraisers, and attor- neys) in connection with opening an account under the plan. (B) Statement of availability A statement that the consumer may ask the creditor for a good faith estimate by the creditor of the fees that may be imposed by third parties. (5) Statement of risk of loss of dwelling A statement that— (A) any extension of credit under the plan is secured by the consumer’s dwelling; and (B) in the event of any default, the con- sumer risks the loss of the dwelling. (6) Conditions to which disclosed terms are subject (A) Period during which such terms are available A clear and conspicuous statement— (i) of the time by which an application must be submitted to obtain the terms dis- closed; or (ii) if applicable, that the terms are sub- ject to change. (B) Right of refusal if certain terms change A statement that— (i) the consumer may elect not to enter into an agreement to open an account Page 1493 TITLE 15—COMMERCE AND TRADE § 1637a under the plan if any term changes (other than a change contemplated by a variable feature of the plan) before any such agree- ment is final; and (ii) if the consumer makes an election described in clause (i), the consumer is en- titled to a refund of all fees paid in connec- tion with the application. (C) Retention of information A statement that the consumer should make or otherwise retain a copy of informa- tion disclosed under this subparagraph. (7) Rights of creditor with respect to exten- sions of credit A statement that— (A) under certain conditions, the creditor may terminate any account under the plan and require immediate repayment of any outstanding balance, prohibit any additional extension of credit to the account, or reduce the credit limit applicable to the account; and (B) the consumer may receive, upon re- quest, more specific information about the conditions under which the creditor may take any action described in subparagraph (A). (8) Repayment options and minimum periodic payments The repayment options under the plan, in- cluding— (A) if applicable, any differences in repay- ment options with regard to— (i) any period during which additional extensions of credit may be obtained; and (ii) any period during which repayment is required to be made and no additional extensions of credit may be obtained; (B) the length of any repayment period, in- cluding any differences in the length of any repayment period with regard to the periods described in clauses (i) and (ii) of subpara- graph (A); and (C) an explanation of how the amount of any minimum monthly or periodic payment will be determined under each such option, including any differences in the determina- tion of any such amount with regard to the periods described in clauses (i) and (ii) of subparagraph (A). (9) Example of minimum payments and max- imum repayment period An example, based on a $10,000 outstanding balance and the interest rate (other than a rate not based on the index under the plan) which is, or was recently, in effect under such plan, showing the minimum monthly or peri- odic payment, and the time it would take to repay the entire $10,000 if the consumer paid only the minimum periodic payments and ob- tained no additional extensions of credit. (10) Statement concerning balloon payments If, under any repayment option of the plan, the payment of not more than the minimum periodic payments required under such option over the length of the repayment period— (A) would not repay any of the principal balance; or (B) would repay less than the outstanding balance by the end of such period, as the case may be, a statement of such fact, including an explicit statement that at the end of such repayment period a balloon pay- ment (as defined in section 1665b(f) of this title) would result which would be required to be paid in full at that time. (11) Negative amortization If applicable, a statement that— (A) any limitation in the plan on the amount of any increase in the minimum payments may result in negative amortiza- tion; (B) negative amortization increases the outstanding principal balance of the ac- count; and (C) negative amortization reduces the con- sumer’s equity in the consumer’s dwelling. (12) Limitations and minimum amount require- ments on extensions of credit (A) Number and dollar amount limitations Any limitation contained in the plan on the number of extensions of credit and the amount of credit which may be obtained during any month or other defined time pe- riod. (B) Minimum balance and other transaction amount requirements Any requirement which establishes a min- imum amount for— (i) the initial extension of credit to an account under the plan; (ii) any subsequent extension of credit to an account under the plan; or (iii) any outstanding balance of an ac- count under the plan. (13) Statement regarding tax deductibility A statement that— (A) the consumer should consult a tax ad- visor regarding the deductibility of interest and charges under the plan; and (B) in any case in which the extension of credit exceeds the fair market value (as de- fined under title 26) of the dwelling, the in- terest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for Fed- eral income tax purposes. (14) Disclosure requirements established by Bureau Any other term which the Bureau requires, in regulations, to be disclosed. (b) Time and form of disclosures (1) Time of disclosure (A) In general The disclosures required under subsection (a) with respect to any open end consumer credit plan which provides for any extension of credit which is secured by the consumer’s principal dwelling and the pamphlet re- quired under subsection (e) shall be provided to any consumer at the time the creditor distributes an application to establish an ac- count under such plan to such consumer. Page 1494 TITLE 15—COMMERCE AND TRADE § 1637a 1 So in original. Probably should be followed by ‘‘Loan’’. (B) Telephone, publications, and third party applications In the case of telephone applications, ap- plications contained in magazines or other publications, or applications provided by a third party, the disclosures required under subsection (a) and the pamphlet required under subsection (e) shall be provided by the creditor before the end of the 3-day period beginning on the date the creditor receives a completed application from a consumer. (2) Form (A) In general Except as provided in paragraph (1)(B), the disclosures required under subsection (a) shall be provided on or with any application to establish an account under an open end consumer credit plan which provides for any extension of credit which is secured by the consumer’s principal dwelling. (B) Segregation of required disclosures from other information The disclosures required under subsection (a) shall be conspicuously segregated from all other terms, data, or additional informa- tion provided in connection with the appli- cation, either by grouping the disclosures separately on the application form or by providing the disclosures on a separate form, in accordance with regulations of the Bu- reau. (C) Precedence of certain information The disclosures required by paragraphs (5), (6), and (7) of subsection (a) shall precede all of the other required disclosures. (D) Special provision relating to variable in- terest rate information Whether or not the disclosures required under subsection (a) are provided on the ap- plication form, the variable rate information described in subsection (a)(2) may be pro- vided separately from the other information required to be disclosed. (3) Requirement for historical table In preparing the table required under sub- section (a)(2)(G), the creditor shall consist- ently select one rate of interest for each year and the manner of selecting the rate from year to year shall be consistent with the plan. (c) Third party applications In the case of an application to open an ac- count under any open end consumer credit plan described in subsection (a) which is provided to a consumer by any person other than the cred- itor— (1) such person shall provide such consumer with— (A) the disclosures required under sub- section (a) with respect to such plan, in ac- cordance with subsection (b); and (B) the pamphlet required under sub- section (e); or (2) if such person cannot provide specific terms about the plan because specific informa- tion about the plan terms is not available, no nonrefundable fee may be imposed in connec- tion with such application before the end of the 3-day period beginning on the date the consumer receives the disclosures required under subsection (a) with respect to the appli- cation. (d) ‘‘Principal dwelling’’ defined For purposes of this section and sections 1647 and 1665b of this title, the term ‘‘principal dwell- ing’’ includes any second or vacation home of the consumer. (e) Pamphlet In addition to the disclosures required under subsection (a) with respect to an application to open an account under any open end consumer credit plan described in such subsection, the creditor or other person providing such disclo- sures to the consumer shall provide— (1) a pamphlet published by the Bureau pur- suant to section 4 of the Home Equity 1 Con- sumer Protection Act of 1988; or (2) any pamphlet which provides substan- tially similar information to the information described in such section, as determined by the Bureau. (Pub. L. 90–321, title I, § 127A, as added Pub. L. 100–709, § 2(a), Nov. 23, 1988, 102 Stat. 4725; amend- ed Pub. L. 109–8, title XIII, § 1302(a)(1), Apr. 20, 2005, 119 Stat. 208; Pub. L. 111–203, title X, § 1100A(2), July 21, 2010, 124 Stat. 2107.) Editorial Notes REFERENCES IN TEXT Section 4 of the Home Equity Loan Consumer Protec- tion Act of 1988, referred to in subsec. (e)(1), is section 4 of Pub. L. 100–709, which is set out as a note below. AMENDMENTS 2010—Subsecs. (a)(14), (b)(2)(B), (e). Pub. L. 111–203 substituted ‘‘Bureau’’ for ‘‘Board’’ wherever appearing. 2005—Subsec. (a)(13). Pub. L. 109–8 substituted ‘‘tax deductibility’’ for ‘‘consultation of tax advisor’’ in heading, designated existing provisions as introductory provisions and subpar. (A), inserted dash, substituted ‘‘; and’’ for period at end of subpar. (A), and added sub- par. (B). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the des- ignated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under Title 11, Bankruptcy, before such ef- fective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of Title 11. EFFECTIVE DATE For effective date of section, see Regulations; Effec- tive Date note below. REGULATIONS Pub. L. 109–8, title XIII, § 1302(c), Apr. 20, 2005, 119 Stat. 209, provided that: Page 1495 TITLE 15—COMMERCE AND TRADE § 1638 ‘‘(1) IN GENERAL.—The Board [of Governors of the Federal Reserve System] shall promulgate regulations implementing the amendments made by this section [amending this section and sections 1638, 1664, and 1665b of this title]. ‘‘(2) EFFECTIVE DATE.—Regulations issued under para- graph (1) shall not take effect until the later of— ‘‘(A) 12 months after the date of enactment of this Act [Apr. 20, 2005]; or ‘‘(B) 12 months after the date of publication of such final regulations by the Board.’’ REGULATIONS; EFFECTIVE DATE Pub. L. 100–709, § 7, Nov. 23, 1988, 102 Stat. 4734, pro- vided that: ‘‘(a) REGULATIONS.—Before the end of the 60-day pe- riod beginning on the date of the enactment of this Act [Nov. 23, 1988], the Board of Governors of the Federal Reserve System shall prescribe such regulations as may be necessary to carry out the proposes [sic] of the amendments made by this Act [enacting this section and sections 1647 and 1665b of this title, amending sec- tions 1632 and 1637 of this title, and enacting provisions set out as notes under this section and section 1601 of this title]. ‘‘(b) EFFECTIVE DATE.—The amendments made by this Act, and the regulations prescribed pursuant to sub- section (a) with respect to such amendments, shall apply to— ‘‘(1) any agreement to open an account under an open end consumer credit plan under which exten- sions of credit are secured by a consumer’s principal dwelling which is entered into after the end of the 5- month period beginning on the date on which the reg- ulations prescribed under subsection (a) become final; and ‘‘(2) any application to open such an account which is distributed by, or received by a creditor, after the end of such 5-month period. ‘‘(c) VOLUNTARY COMPLIANCE.—Notwithstanding sub- section (b), any creditor may comply with the amend- ments made by this Act, in accordance with the regula- tions prescribed by the Board, before the effective date established under such subsection.’’ CONSUMER EDUCATION Pub. L. 100–709, § 4, Nov. 23, 1988, 102 Stat. 4733, pro- vided that: ‘‘The Board of Governors of the Federal Re- serve System shall develop and prepare a pamphlet for distribution to consumers which contains— ‘‘(1) a general description of open end consumer credit plans secured by the consumer’s principal dwelling and the terms and conditions under which such loans are generally extended; and ‘‘(2) a discussion of the potential advantages and disadvantages of such plans, including how to com- pare among home equity plans and between home eq- uity and closed end credit plans.’’ § 1638. Transactions other than under an open end credit plan (a) Required disclosures by creditor For each consumer credit transaction other than under an open end credit plan, the creditor shall disclose each of the following items, to the extent applicable: (1) The identity of the creditor required to make disclosure. (2)(A) The ‘‘amount financed’’, using that term, which shall be the amount of credit of which the consumer has actual use. This amount shall be computed as follows, but the computations need not be disclosed and shall not be disclosed with the disclosures conspicu- ously segregated in accordance with sub- section (b)(1): (i) take the principal amount of the loan or the cash price less downpayment and trade-in; (ii) add any charges which are not part of the finance charge or of the principal amount of the loan and which are financed by the consumer, including the cost of any items excluded from the finance charge pur- suant to section 1605 of this title; and (iii) subtract any charges which are part of the finance charge but which will be paid by the consumer before or at the time of the consummation of the transaction, or have been withheld from the proceeds of the cred- it. (B) In conjunction with the disclosure of the amount financed, a creditor shall provide a statement of the consumer’s right to obtain, upon a written request, a written itemization of the amount financed. The statement shall include spaces for a ‘‘yes’’ and ‘‘no’’ indication to be initialed by the consumer to indicate whether the consumer wants a written itemization of the amount financed. Upon re- ceiving an affirmative indication, the creditor shall provide, at the time other disclosures are required to be furnished, a written itemization of the amount financed. For the purposes of this subparagraph, ‘‘itemization of the amount financed’’ means a disclosure of the following items, to the extent applicable: (i) the amount that is or will be paid di- rectly to the consumer; (ii) the amount that is or will be credited to the consumer’s account to discharge obli- gations owed to the creditor; (iii) each amount that is or will be paid to third persons by the creditor on the con- sumer’s behalf, together with an identifica- tion of or reference to the third person; and (iv) the total amount of any charges de- scribed in the preceding subparagraph (A)(iii). (3) The ‘‘finance charge’’, not itemized, using that term. (4) The finance charge expressed as an ‘‘an- nual percentage rate’’, using that term. This shall not be required if the amount financed does not exceed $75 and the finance charge does not exceed $5, or if the amount financed exceeds $75 and the finance charge does not ex- ceed $7.50. (5) The sum of the amount financed and the finance charge, which shall be termed the ‘‘total of payments’’. (6) The number, amount, and due dates or period of payments scheduled to repay the total of payments. (7) In a sale of property or services in which the seller is the creditor required to disclose pursuant to section 1631(b) of this title, the ‘‘total sale price’’, using that term, which shall be the total of the cash price of the prop- erty or services, additional charges, and the fi- nance charge. (8) Descriptive explanations of the terms ‘‘amount financed’’, ‘‘finance charge’’, ‘‘an- nual percentage rate’’, ‘‘total of payments’’, and ‘‘total sale price’’ as specified by the Bu- reau. The descriptive explanation of ‘‘total