[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR226.6]

[Page 266-267]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 226--TRUTH IN LENDING (REGULATION Z)--Table of Contents
 
                       Subpart B--Open-End Credit
 
Sec. 226.6  Initial disclosure statement.

    The creditor shall disclose to the consumer, in terminology 
consistent with that to be used on the periodic statement, each of the 
following items, to the extent applicable:
    (a) Finance charge. The circumstances under which a finance charge 
will be imposed and an explanation of how it will be determined, as 
follows:
    (1) A statement of when finance charges begin to accrue, including 
an explanation of whether or not any time period exists within which any 
credit extended may be repaid without incurring a finance charge. If 
such a time period is provided, a creditor may, at its option and 
without disclosure, impose no finance charge when payment is received 
after the time period's expiration.
    (2) A disclosure of each periodic rate that may be used to compute 
the finance charge, the range of balances to which it is applicable,\11\ 
and the corresponding annual percentage rate.\12\ When different 
periodic rates apply to different types of transactions, the types of 
transactions to which the periodic rates apply shall also be disclosed.
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    \11\ A creditor is not required to adjust the range of balances 
disclosure to reflect the balance below which only a minimum charge 
applies.
    \12\ If a creditor is offering a variable rate plan, the creditor 
shall also disclose: (1) The circumstances under which the rate(s) may 
increase; (2) any limitations on the increase; and (3) the effect(s) of 
an increase.
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    (3) An explanation of the method used to determine the balance on 
which the finance charge may be computed.

[[Page 267]]

    (4) An explanation of how the amount of any finance charge will be 
determined,\13\ including a description of how any finance charge other 
than the periodic rate will be determined.
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    \13\ If no finance charge is imposed when the outstanding balance is 
less than a certain amount, no disclosure is required of that fact or of 
the balance below which no finance charge will be imposed.
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    (b) Other charges. The amount of any charge other than a finance 
charge that may be imposed as part of the plan, or an explanation of how 
the charge will be determined.
    (c) Security interests. The fact that the creditor has or will 
acquire a security interest in the property purchased under the plan, or 
in other property identified by item or type.
    (d) Statement of billing rights. A statement that outlines the 
consumer's rights and the creditor's responsibilities under 
Secs. 226.12(c) and 226.13 and that is substantially similar to the 
statement found in appendix G.
    (e) Home equity plan information. The following disclosures 
described in Sec. 226.5b(d), as applicable:
    (1) A statement of the conditions under which the creditor may take 
certain action, as described in Sec. 226.5b(d)(4)(i), such as 
terminating the plan or changing the terms.
    (2) The payment information described in Sec. 226.5b(d)(5) (i) and 
(ii) for both the draw period and any repayment period.
    (3) A statement that negative amortization may occur as described in 
Sec. 226.5b(d)(9).
    (4) A statement of any transaction requirements as described in 
Sec. 226.5b(d)(10).
    (5) A statement regarding the tax implications as described in 
Sec. 226.5b(d)(11).
    (6) A statement that the annual percentage rate imposed under the 
plan does not include costs other than interest as described in 
Secs. 226.5b(d)(6) and (d)(12)(ii).
    (7) The variable-rate disclosures described in Sec. 226.5b(d)(12) 
(viii), (x), (xi), and (xii), as well as the disclosure described in 
Sec. 226.5b(d)(5)(iii), unless the disclosures provided with the 
application were in a form the consumer could keep and included a 
representative payment example for the category of payment option chosen 
by the consumer.

[Reg. Z, 46 FR 20892, Apr. 7, 1981, as amended at 54 FR 24688, June 9, 
1989]