§1607 — Title 15 Commerce and Trade | U.S. Code

Summary

Federal agencies are the ones that enforce the rules in this part. Different agencies handle different kinds of lenders and businesses: the appropriate federal banking agency handles various national and state banks and branches; the National Credit Union Administration handles federal credit unions; the Department of Transportation handles air carriers for certain air rules; the Department of Agriculture enforces parts that fall under the Packers and Stockyards Act; the Farm Credit Administration covers Farm Credit institutions; the Consumer Financial Protection Bureau (under subtitle E) enforces rules for people it covers; and the Securities and Exchange Commission can act for brokers or dealers. If an agency enforces these rules, the violation is treated as a breach of that agency’s own law, and the agency can use its other legal powers too. If no other agency is specifically in charge, the Federal Trade Commission may enforce the rules and can use all its usual powers even if the business is not traditionally covered by the FTC. The Bureau’s power to make rules does not stop other agencies from making their own enforcement procedures. If a lender disclosed the annual percentage rate (APR) or finance charge incorrectly, the agency must tell the lender and can require the lender to fix the borrower’s account so the borrower does not pay more than the disclosed finance charge or the dollar equivalent of the disclosed APR, whichever is lower. Agencies generally allow a tolerance of one-quarter of 1 percent (0.25%) for APR errors and a matching tolerance for the finance charge. For transactions after March 31, 1982, loans with amortization of ten years or less keep the 0.25% tolerance but not less than other listed tolerances; loans over ten years follow other specified tolerances. Agencies must order adjustments when wrong disclosures come from a clear pattern of violations, gross negligence, or a willful attempt to mislead. They may choose not to order adjustments for certain small, technical, or excusable errors (for example, errors under 10% in a disclosed amount when the other disclosure was correct, failures involving excludable fees, or purely technical mistakes). No adjustment is required if it would seriously hurt the lender’s safety or soundness, though the agency can order a smaller or staged adjustment instead. Adjustments under $1 need not be made, except that if more than one year has passed the agency may direct payment to the U.S. Treasury. Time limits apply: open-end plans generally lose adjustment claims after two years, and other limits depend on examinations and the May 10, 1978 cutoff, but never later than the life of the credit or two years after the loan agreement. A lender that finds an error, tells the borrower, and fixes the account within 60 days is protected from an agency order. Finally, agencies must use proper cease-and-desist or hearing procedures to order adjustments, and there is a special rule requiring adjustments for APR disclosure errors that were more than 0.25% low for transactions from January 1, 1977, through March 31, 1980.

Title 15, §1607

Commerce and Trade — Source: USLM XML via OLRC

(a)Subject to subtitle B of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5511 et seq.], compliance with the requirements imposed under this subchapter shall be enforced under—

(1)section 8 of the Federal Deposit Insurance Act [12 U.S.C. 1818], by the appropriate Federal banking agency, as defined in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), with respect to—

(A)national banks, Federal savings associations, and Federal branches and Federal agencies of foreign banks;

(B)member banks of the Federal Reserve System (other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured State branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act [12 U.S.C. 601 et seq., 611 et seq.]; and

(C)banks and State savings associations insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), and insured State branches of foreign banks;

(2)the Federal Credit Union Act [12 U.S.C. 1751 et seq.], by the Director of the National Credit Union Administration, with respect to any Federal credit union;

(3)part A of subtitle VII of title 49, by the Secretary of Transportation, with respect to any air carrier or foreign air carrier subject to that part;

(4)the Packers and Stockyards Act, 1921 [7 U.S.C. 181 et seq.] (except as provided in section 406 of that Act [7 U.S.C. 226, 227]), by the Secretary of Agriculture, with respect to any activities subject to that Act;

(5)the Farm Credit Act of 1971 [12 U.S.C. 2001 et seq.], by the Farm Credit Administration with respect to any Federal land bank, Federal land bank association, Federal intermediate credit bank, or production credit association; and

(6)subtitle E of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5561 et seq.], by the Bureau, with respect to any person subject to this subchapter.

(7)section 21B and 21C of the Securities Exchange Act of 1934 [15 U.S.C. 78u–2, 78u–3], in the case of a broker or dealer, other than a depository institution, by the Securities and Exchange Commission.

(b)For the purpose of the exercise by any agency referred to in subsection (a) of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this subchapter shall be deemed to be a violation of a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (a), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this subchapter, any other authority conferred on it by law.

(c)Except to the extent that enforcement of the requirements imposed under this subchapter is specifically committed to some other Government agency under any of paragraphs (1) through (5) of subsection (a), and subject to subtitle B of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5511 et seq.], the Federal Trade Commission shall be authorized to enforce such requirements. For the purpose of the exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act [15 U.S.C. 41 et seq.], a violation of any requirement imposed under this subchapter shall be deemed a violation of a requirement imposed under that Act. All of the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Federal Trade Commission to enforce compliance by any person with the requirements under this subchapter, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests under the Federal Trade Commission Act.

(d)The authority of the Bureau to issue regulations under this subchapter does not impair the authority of any other agency designated in this section to make rules respecting its own procedures in enforcing compliance with requirements imposed under this subchapter.

(e)(1)In carrying out its enforcement activities under this section, each agency referred to in subsection (a) or (c), in cases where an annual percentage rate or finance charge was inaccurately disclosed, shall notify the creditor of such disclosure error and is authorized in accordance with the provisions of this subsection to require the creditor to make an adjustment to the account of the person to whom credit was extended, to assure that such person will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower. For the purposes of this subsection, except where such disclosure error resulted from a willful violation which was intended to mislead the person to whom credit was extended, in determining whether a disclosure error has occurred and in calculating any adjustment, (A) each agency shall apply (i) with respect to the annual percentage rate, a tolerance of one-quarter of 1 percent more or less than the actual rate, determined without regard to section 1606(c) of this title, and (ii) with respect to the finance charge, a corresponding numerical tolerance as generated by the tolerance provided under this subsection for the annual percentage rate; except that (B) with respect to transactions consummated after two years following March 31, 1980, each agency shall apply (i) for transactions that have a scheduled amortization of ten years or less, with respect to the annual percentage rate, a tolerance not to exceed one-quarter of 1 percent more or less than the actual rate, determined without regard to section 1606(c) of this title, but in no event a tolerance of less than the tolerances allowed under section 1606(c) of this title, (ii) for transactions that have a scheduled amortization of more than ten years, with respect to the annual percentage rate, only such tolerances as are allowed under section 1606(c) of this title, and (iii) for all transactions, with respect to the finance charge, a corresponding numerical tolerance as generated by the tolerances provided under this subsection for the annual percentage rate.

(2)Each agency shall require such an adjustment when it determines that such disclosure error resulted from (A) a clear and consistent pattern or practice of violations, (B) gross negligence, or (C) a willful violation which was intended to mislead the person to whom the credit was extended. Notwithstanding the preceding sentence, except where such disclosure error resulted from a willful violation which was intended to mislead the person to whom credit was extended, an agency need not require such an adjustment if it determines that such disclosure error—

(A)resulted from an error involving the disclosure of a fee or charge that would otherwise be excludable in computing the finance charge, including but not limited to violations involving the disclosures described in section 1605(b), (c) and (d) of this title, in which event the agency may require such remedial action as it determines to be equitable, except that for transactions consummated after two years after March 31, 1980, such an adjustment shall be ordered for violations of section 1605(b) of this title;

(B)involved a disclosed amount which was 10 per centum or less of the amount that should have been disclosed and (i) in cases where the error involved a disclosed finance charge, the annual percentage rate was disclosed correctly, and (ii) in cases where the error involved a disclosed annual percentage rate, the finance charge was disclosed correctly; in which event the agency may require such adjustment as it determines to be equitable;

(C)involved a total failure to disclose either the annual percentage rate or the finance charge, in which event the agency may require such adjustment as it determines to be equitable; or

(D)resulted from any other unique circumstance involving clearly technical and nonsubstantive disclosure violations that do not adversely affect information provided to the consumer and that have not misled or otherwise deceived the consumer.

(3)Notwithstanding paragraph (2), no adjustment shall be ordered—

(A)if it would have a significantly adverse impact upon the safety or soundness of the creditor, but in any such case, the agency may—

(i)require a partial adjustment in an amount which does not have such an impact; or

(ii)require the full adjustment, but permit the creditor to make the required adjustment in partial payments over an extended period of time which the agency considers to be reasonable, if (in the case of an agency referred to in paragraph (1), (2), or (3) of subsection (a)), the agency determines that a partial adjustment or making partial payments over an extended period is necessary to avoid causing the creditor to become undercapitalized pursuant to section 38 of the Federal Deposit Insurance Act [12 U.S.C. 1831o];

(B)the 11 So in original. Probably should be preceded by “if”. amount of the adjustment would be less than $1, except that if more than one year has elapsed since the date of the violation, the agency may require that such amount be paid into the Treasury of the United States, or

(C)except where such disclosure error resulted from a willful violation which was intended to mislead the person to whom credit was extended, in the case of an open-end credit plan, more than two years after the violation, or in the case of any other extension of credit, as follows:

(i)with respect to creditors that are subject to examination by the agencies referred to in paragraphs (1) through (3) of subsection (a) of this section, except in connection with violations arising from practices identified in the current examination and only in connection with transactions that are consummated after the date of the immediately preceding examination, except that where practices giving rise to violations identified in earlier examinations have not been corrected, adjustments for those violations shall be required in connection with transactions consummated after the date of examination in which such practices were first identified;

(ii)with respect to creditors that are not subject to examination by such agencies, except in connection with transactions that are consummated after May 10, 1978; and

(iii)in no event after the later of (I) the expiration of the life of the credit extension, or (II) two years after the agreement to extend credit was consummated.

(4)(A)Notwithstanding any other provision of this section, an adjustment under this subsection may be required by an agency referred to in subsection (a) or (c) only by an order issued in accordance with cease and desist procedures provided by the provision of law referred to in such subsections.

(B)In case of an agency which is not authorized to conduct cease and desist proceedings, such an order may be issued after an agency hearing on the record conducted at least thirty but not more than sixty days after notice of the alleged violation is served on the creditor. Such a hearing shall be deemed to be a hearing which is subject to the provisions of section 8(h) of the Federal Deposit Insurance Act [12 U.S.C. 1818(h)] and shall be subject to judicial review as provided therein.

(5)Except as otherwise specifically provided in this subsection and notwithstanding any provision of law referred to in subsection (a) or (c), no agency referred to in subsection (a) or (c) may require a creditor to make dollar adjustments for errors in any requirements under this subchapter, except with regard to the requirements of section 1666d of this title.

(6)A creditor shall not be subject to an order to make an adjustment, if within sixty days after discovering a disclosure error, whether pursuant to a final written examination report or through the creditor’s own procedures, the creditor notifies the person concerned of the error and adjusts the account so as to assure that such person will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower.

(7)Notwithstanding the second sentence of subsection (e)(1), subsection (e)(3)(C)(i), and subsection (e)(3)(C)(ii), each agency referred to in subsection (a) or (c) shall require an adjustment for an annual percentage rate disclosure error that exceeds a tolerance of one quarter of one percent less than the actual rate, determined without regard to section 1606(c) of this title, with respect to any transaction consummated between January 1, 1977, and March 31, 1980.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Consumer Financial Protection Act of 2010, referred to in subsecs. (a) and (c), is title X of Pub. L. 111–203, July 21, 2010, 124 Stat. 1955. Subtitles B (§§ 1021–1029A) and E (§§ 1051–1058) of the Act are classified generally to parts B (§ 5511 et seq.) and E (§ 5561 et seq.), respectively, of subchapter V of chapter 53 of Title 12, Banks and Banking. For complete classification of this Act to the Code, see

Short Title

note set out under section 5301 of Title 12 and Tables. section 25 and 25A of the Federal Reserve Act, referred to in subsec. (a)(1)(B), are classified to subchapters I (§ 601 et seq.) and II (§ 611 et seq.), respectively, of chapter 6 of Title 12, Banks and Banking. The Federal Credit Union Act, referred to in subsec. (a)(2), is act June 26, 1934, ch. 750, 48 Stat. 1216, which is classified generally to chapter 14 (§ 1751 et seq.) of Title 12. For complete classification of this Act to the Code, see section 1751 of Title 12 and Tables. The Packers and Stockyards Act, 1921, referred to in subsec. (a)(4), is act Aug. 15, 1921, ch. 64, 42 Stat. 159, which is classified generally to chapter 9 (§ 181 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 181 of Title 7 and Tables. The Farm Credit Act of 1971, referred to in subsec. (a)(5), is Pub. L. 92–181, Dec. 10, 1971, 85 Stat. 583, which is classified generally to chapter 23 (§ 2001 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see

Short Title

note set out under section 2001 of Title 12 and Tables. The Federal Trade Commission Act, referred to in subsec. (c), is act Sept. 26, 1914, ch. 311, 38 Stat. 717, which is classified generally to subchapter I (§ 41 et seq.) of chapter 2 of this title. For complete classification of this Act to the Code, see section 58 of this title and Tables. Codification In subsec. (a)(3), “part A of subtitle VII of title 49” substituted for “the Federal Aviation Act of 1958” and “that part” substituted for “that Act” on authority of Pub. L. 103–272, § 6(b), July 5, 1994, 108 Stat. 1378, the first section of which enacted subtitles II, III, and V to X of Title 49, Transportation.

Amendments

2010—Subsec. (a). Pub. L. 111–203, § 1100A(8)(A), added subsec. (a) and struck out former subsec. (a) which listed agencies under which compliance with subchapter requirements would be enforced. Subsec. (a)(7). Pub. L. 111–203, § 1414(b), added par. (7). Subsec. (c). Pub. L. 111–203, § 1100A(8)(B), added subsec. (c) and struck out former subsec. (c). Prior to amendment, text read as follows: “Except to the extent that

Enforcement

of the requirements imposed under this subchapter is specifically committed to some other Government agency under subsection (a) of this section, the Federal Trade Commission shall enforce such requirements. For the purpose of the exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any requirement imposed under this subchapter shall be deemed a violation of a requirement imposed under that Act. All of the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with the requirements imposed under this subchapter, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act.” Subsec. (d). Pub. L. 111–203, § 1100A(2), substituted “Bureau” for “Board”. 1996—Subsec. (e)(3). Pub. L. 104–208 struck out “ordered (A) if” and inserted “ordered— “(A) if”; struck out “may require a partial” and inserted “may— “(i) require a partial”; struck out “, except that with respect to any transaction consumated after March 31, 1980, the agency shall require” and inserted “; or “(ii) require”; directed the substitution of “reasonable, if (in the case of an agency referred to in paragraph (1), (2), or (3) of subsection (a)), the agency determines that a partial adjustment or making partial payments over an extended period is necessary to avoid causing the creditor to become undercapitalized pursuant to section 38 of the Federal Deposit Insurance Act; “(B) the”; for “reasonable, (B) the”, which was executed by making the substitution for “reasonable, (B) if the”; and struck out “(C) except” and inserted “(C) except”. 1992—Subsec. (a)(1)(C). Pub. L. 102–550 substituted semicolon for period at end. 1991—Subsec. (a). Pub. L. 102–242, § 212(b)(2), inserted at end “The terms used in paragraph (1) that are not defined in this subchapter or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101).” Pub. L. 102–242, § 212(b)(1), added par. (1) and struck out former par. (1) which read as follows: “section 8 of the Federal Deposit Insurance Act, in the case of “(A) national banks, by the Comptroller of the Currency. “(B) member banks of the Federal Reserve System (other than national banks), by the Board. “(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), by the Board of Directors of the Federal Deposit Insurance Corporation.” 1989—Subsec. (a)(2). Pub. L. 101–73 amended par. (2) generally. Prior to amendment, par. (2) read as follows: “section 5(d) of the Home Owner’s Loan Act of 1933, section 407 of the National Housing Act, and section 6(i) and 17 of the Federal Home Loan Bank Act, by the Federal Home Loan Bank Board (acting directly or through the Federal Savings and Loan Insurance Corporation), in the case of any institution subject to any of those provisions.” 1984—Subsec. (a)(4). Pub. L. 98–443 substituted “Secretary of Transportation” for “Civil Aeronautics Board”. 1980—Subsec. (e). Pub. L. 96–221, § 608(a), added subsec. (e). Pub. L. 96–221, § 608(c), struck out in pars. (1)(A)(i) and (7) “, except in the case of an irregular mortgage lending transaction” after “section 1606(c) of this title”. See

Effective Date

of 1980 Amendment note below. 1974—Subsec. (a)(4) to (6). Pub. L. 93–495 redesignated pars. (5) and (6) as (4) and (5), respectively. Former par. (4), which related to

Enforcement

by the Interstate Commerce Commission, was struck out.

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 AmendmentAmendment by section 1100A(2), (8) of Pub. L. 111–203 effective on the designated 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. Amendment by section 1414(b) of Pub. L. 111–203 effective on the date on which final

Regulations

implementing that amendment take effect, or on the date that is 18 months after the designated transfer date if such

Regulations

have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as a note under section 1601 of this title.

Effective Date

of 1992 AmendmentAmendment by Pub. L. 102–550 effective as if included in the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. 102–242, as of Dec. 19, 1991, see section 1609(a) of Pub. L. 102–550, set out as a note under section 191 of Title 12, Banks and Banking.

Effective Date

of 1984 AmendmentAmendment by Pub. L. 98–443 effective Jan. 1, 1985, see section 9(v) of Pub. L. 98–443, set out as a note under section 5314 of Title 5, Government Organization and Employees.

Effective Date

of 1980 Amendment Pub. L. 96–221, title VI, § 608(b), Mar. 31, 1980, 94 Stat. 173, provided that: “This section [amending this section] shall take effect on the date of enactment of the Truth in Lending Simplification and Reform Act [Mar. 31, 1980].” Pub. L. 96–221, title VI, § 608(c), Mar. 31, 1980, 94 Stat. 173, provided that the amendment made by that section is effective one year after Mar. 31, 1980.

Effective Date

of 1974 AmendmentAmendment by Pub. L. 93–495 effective Oct. 28, 1974, see section 416 of Pub. L. 93–495, set out as an

Effective Date

note under section 1665a of this title.

Transfer of Functions

“National Credit Union Administration Board” substituted for “Director of the Bureau of Federal Credit Unions” in subsec. (a)(3) pursuant to section 3 of Pub. L. 91–206 and section 501 of Pub. L. 95–630 [12 U.S.C. 1752a] which transferred functions of Bureau of Federal Credit Unions, and Director thereof, to National Credit Union Administration and vested authority for management of Administration in National Credit Union Administration Board.

§1607 Administrative enforcement

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Title 15, §1607

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