[Code of Federal Regulations] [Title 12, Volume 3] [Revised as of January 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 12CFR226.1] [Page 268-270] TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents Subpart A_General Sec. 226.1 Authority, purpose, coverage, organization, enforcement and liability. Subpart A_General Sec. 226.1 Authority, purpose, coverage, organization, enforcement and liability. 226.2 Definitions and rules of construction. 226.3 Exempt transactions. 226.4 Finance charge. Subpart B_Open-End Credit 226.5 General disclosure requirements. 226.5a Credit and charge card applications and solicitations. 226.5b Requirements for home equity plans. 226.6 Initial disclosure statement. 226.7 Periodic statement. [[Page 269]] 226.8 Identification of transactions. 226.9 Subsequent disclosure requirements. 226.10 Prompt crediting of payments. 226.11 Treatment of credit balances. 226.12 Special credit card provisions. 226.13 Billing error resolution. 226.14 Determination of annual percentage rate. 226.15 Right of rescission. 226.16 Advertising. Subpart C_Closed-End Credit 226.17 General disclosure requirements. 226.18 Content of disclosures. 226.19 Certain residential mortgage and variable-rate transactions. 226.20 Subsequent disclosure requirements. 226.21 Treatment of credit balances. 226.22 Determination of annual percentage rate. 226.23 Right of rescission. 226.24 Advertising. Subpart D_Miscellaneous 226.25 Record retention. 226.26 Use of annual percentage rate in oral disclosures. 226.27 Language of disclosures. 226.28 Effect on State laws. 226.29 State exemptions. 226.30 Limitation on rates. Subpart E_Special Rules for Certain Home Mortgage Transactions 226.31 General rules. 226.32 Requirements for certain closed-end home mortgages. 226.33 Requirements for reverse mortgages. 226.34 Prohibited acts or practices in connection with credit secured by a consumer's dwelling. 226.35 [Reserved] Subpart F_Electronic Communication 226.36 Requirement for electronic communication. Appendix A to Part 226--Effect on State Laws Appendix B to Part 226--State Exemptions Appendix C to Part 226--Issuance of Staff Interpretations Appendix D to Part 226--Multiple Advance Construction Loans Appendix E to Part 226--Rules For Card Issuers That Bill On a Transaction-By-Transaction Basis Appendix F to Part 226--Annual Percentage Rate Computations for Certain Open-End Credit Plans Appendix G to Part 226--Open-End Model Forms and Clauses Appendix H to Part 226--Closed-End Model Forms and Clauses Appendix I to Part 226--Federal Enforcement Agencies Appendix J to Part 226--Annual Percentage Rate Computations For Closed- End Credit Transactions Appendix K to Part 226--Total Annual Loan Cost Rate Computations for Reverse Mortgage Transactions Appendix L to Part 226--Assumed Loan Periods for Computations of Total Annual Loan Cost Rates Supplement I to Part 226--Official Staff Interpretations Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5). Source: Reg. Z, 46 FR 20892, Apr. 7, 1981, unless otherwise noted. (a) Authority. This regulation, known as Regulation Z, is issued by the Board of Governors of the Federal Reserve System to implement the Federal Truth in Lending Act, which is contained in title I of the Consumer Credit Protection Act, as amended (15 U.S.C. 1601 et seq.). This regulation also implements title XII, section 1204 of the Competitive Equality Banking Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Information-collection requirements contained in this regulation have been approved by the Office of Management and Budget under the provisions of 44 U.S.C. 3501 et seq. and have been assigned OMB number 7100-0199. (b) Purpose. The purpose of this regulation is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. The regulation also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. The regulation does not govern charges for consumer credit. The regulation requires a maximum interest rate to be stated in variable-rate contracts secured by the consumer's dwelling. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and mortgages that are subject to the requirements of [[Page 270]] Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer's principal dwelling. (c) Coverage. (1) In general, this regulation applies to each individual or business that offers or extends credit when four conditions are met: (i) The credit is offered or extended to consumers; (ii) the offering or extension of credit is done regularly;\1\ (iii) the credit is subject to a finance charge or is payable by a written agreement in more than 4 installments; and (iv) the credit is primarily for personal, family, or household purposes. --------------------------------------------------------------------------- \1\ The meaning of regularly is explained in the definition of creditor in Sec. 226.2(a). --------------------------------------------------------------------------- (2) If a credit card is involved, however, certain provisions apply even if the credit is not subject to a finance charge, or is not payable by a written agreement in more than 4 installments, or if the credit card is to be used for business purposes. (3) In addition, certain requirements of Sec. 226.5b apply to persons who are not creditors but who provide applications for home equity plans to consumers. (d) Organization. The regulation is divided into subparts and appendices as follows: (1) Subpart A contains general information. It sets forth: (i) The authority, purpose, coverage, and organization of the regulation; (ii) the definitions of basic terms; (iii) the transactions that are exempt from coverage; and (iv) the method of determining the finance charge. (2) Subpart B contains the rules for open-end credit. It requires that initial disclosures and periodic statements be provided, as well as additional disclosures for credit and charge card applications and solicitations and for home equity plans subject to the requirements of Sec. Sec. 226.5a and 226.5b, respectively. (3) Subpart C relates to closed-end credit. It contains rules on disclosures, treatment of credit balances, annual percentage rate calculations, rescission requirements, and advertising. (4) Subpart D contains rules on oral disclosures, Spanish language disclosure in Puerto Rico, record retention, effect on state laws, state exemptions, and rate limitations. (5) Subpart E contains special rules for mortgage transactions. Section 226.32 requires certain disclosures and provides limitations for loans that have rates and fees above specified amounts. Section 226.33 requires disclosures, including the total annual loan cost rate, for reverse mortgage transactions. Section 226.34 prohibits specific acts and practices in connection with mortgage transactions. (6) Several appendices contain information such as the procedures for determinations about state laws, state exemptions and issuance of staff interpretations, special rules for certain kinds of credit plans, a list of enforcement agencies, and the rules for computing annual percentage rates in closed-end credit transactions and total annual loan cost rates for reverse mortgage transactions. (e) Enforcement and liability. Section 108 of the act contains the administrative enforcement provisions. Sections 112, 113, 130, 131, and 134 contain provisions relating to liability for failure to comply with the requirements of the act and the regulation. Section 1204(c) of title XII of the Competitive Equality Banking Act of 1987, Pub. L. 100-86, 101 Stat. 552, incorporates by reference administrative enforcement and civil liability provisions of sections 108 and 130 of the act. [Reg. Z, 46 FR 20892, Apr. 7, 1981, as amended at 52 FR 43181, Nov. 9, 1987; 54 FR 13865, Apr. 6, 1989; 54 FR 24686, June 9, 1989; 60 FR 15471, Mar. 24, 1995; 66 FR 65617, Dec. 20, 2001]