PRIA, Government Policy, Made Personal

Summary

Require creditors to give clear, written facts when they offer an open‑end loan or line of credit that is secured by the consumer’s main home. The lender must show the fixed or variable annual percentage rate and explain how a variable rate is figured, when it can change, any caps on yearly or lifetime rate increases, and where to find the index. The lender must list its fees (like annual, application, transaction, and closing fees) and give an estimate (one number or a range) of third‑party fees. The lender must warn that the home secures the loan and that default could mean losing the home. The lender must show repayment choices, limits or minimums on advances, any creditor rights to close or reduce the account, and whether payments could lead to a balloon or to negative amortization. The lender must also give a $10,000 example of minimum payments and show how long it would take to repay $10,000 if the borrower made only minimum payments, and a historical table (based on $10,000) of rate and payment changes for the past 15 years if the plan uses an index. The lender must say that tax deductibility should be checked with a tax adviser and that interest on credit above the home’s fair market value is not deductible for federal income tax. Give these disclosures at the time the lender gives the application. For phone, magazine, or third‑party applications, give them within 3 days after getting a completed application. Put the disclosures on or with the application and keep them separate and easy to find; the warnings about loss of the home, conditions, and lender rights must come first. If a third party gives the application, that person must also give the disclosures and the consumer pamphlet, or wait 3 days after the consumer gets the disclosures before charging any nonrefundable fee. “Principal dwelling” includes second or vacation homes. The lender must also give a Bureau pamphlet or one with similar information.

Title 15, §1637a

Commerce and Trade, Source: USLM XML via OLRC

(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 connection 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 variable 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 interest 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 period of time such initial rate will be in effect; 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 interest 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, showing 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 repayment 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 maximum annual interest rate may be imposed; and

(I)a statement that interest rate information will be provided on or with each periodic statement.

(3)Other fees imposed by the creditor (4) Estimates of fees which may be imposed by third parties

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 described as “points”), and the time when such fees are payable.

(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 consumer 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 disclosed; or

(ii)if applicable, that the terms are subject 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 under the plan if any term changes (other than a change contemplated by a variable feature of the plan) before any such agreement is final; and

(ii)if the consumer makes an election described in clause (i), the consumer is entitled to a refund of all fees paid in connection with the application.

(C)Retention of information

A statement that the consumer should make or otherwise retain a copy of information disclosed under this subparagraph.

(7)Rights of creditor with respect to extensions 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 request, 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, including—

(A)if applicable, any differences in repayment 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, including any differences in the length of any repayment period with regard to the periods described in clauses (i) and (ii) of subparagraph (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 determination of any such amount with regard to the periods described in clauses (i) and (ii) of subparagraph (A).

(9)Example of minimum payments and maximum 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 periodic payment, and the time it would take to repay the entire $10,000 if the consumer paid only the minimum periodic payments and obtained 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 payment (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 amortization;

(B)negative amortization increases the outstanding principal balance of the account; and

(C)negative amortization reduces the consumer’s equity in the consumer’s dwelling.

(12)Limitations and minimum amount requirements 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 period.

(B)Minimum balance and other transaction amount requirements

Any requirement which establishes a minimum amount for— (i)

(ii)any subsequent extension of credit to an account under the plan; or

(iii)any outstanding balance of an account under the plan.

(13)Statement regarding tax deductibility

A statement that—

(A)the consumer should consult a tax advisor 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 defined under title 26) of the dwelling, the interest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for Federal 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 required under subsection (e) shall be provided to any consumer at the time the creditor distributes an application to establish an account under such plan to such consumer.

(B)Telephone, publications, and third party applications

In the case of telephone applications, applications 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 information provided in connection with the application, 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 Bureau.

(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 interest rate information

Whether or not the disclosures required under subsection (a) are provided on the application form, the variable rate information described in subsection (a)(2) may be provided separately from the other information required to be disclosed.

(3)Requirement for historical table

In preparing the table required under subsection (a)(2)(G), the creditor shall consistently 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 account under any open end consumer credit plan described in subsection (a) which is provided to a consumer by any person other than the creditor— (1)

(2)if such person cannot provide specific terms about the plan because specific information about the plan terms is not available, no nonrefundable fee may be imposed in connection 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 application.

(d)“Principal dwelling” defined

For purposes of this section and section 1647 and 1665b of this title, the term “principal dwelling” 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 disclosures to the consumer shall provide—

(1)a pamphlet published by the Bureau pursuant to section 4 of the Home Equity Consumer Protection Act of 1988; or

(2)any pamphlet which provides substantially similar information to the information described in such section, as determined by the Bureau.

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 4 of the Home Equity Loan Consumer Protection 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 subpar. (B).

Summary

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