4. Allocation of lump sums. In the case of a credit sales transaction involving a lump sum payment by the consumer and a discount or other item that constitutes a financial burden in accordance with § 1026.4, the discount or other items constitute a prepaid financing charge insofar as the lump sum payment is not applied to the spot price. For example, a seller sells real estate to a consumer for $10,000, requires the consumer to pay $3,000 at the time of purchase, and finances the rest in the form of a completed loan transaction. The cash price of the property is $9,000. The seller is the creditor in the transaction and, therefore, the $1,000 difference between the loan and the cash price (the discount) is a financing fee. (See commentary on § 1026.4(b)(9) and (c)(5).) If the creditor applies the full $3,000 to the cash price and adds the $1,000 financing cost to the interest on the $6,000 to obtain the full cost of financing, the entire lump sum payment of $3,000 is a down payment and the discount is not a prepaid financing charge. However, if the creditor applies only $2,000 of the lump sum payment at the cash price, $2,000 of the $3,000 is a down payment and the $1,000 discount is a prepaid financing charge. Ii. As set out in section 1026.2(a)(15)(ii)(C), the credit card account exclusion under an open (non-home-secured) consumer credit plan for an overdraft facility accessible through an account number does not apply to a separate covered credit function accessible through a hybrid prepaid credit card (including a hybrid prepaid credit card that is only a number). account) within the meaning of section 1026.61. Open loans, such as credit cards, differ from closed loans, such as car loans, in terms of the distribution of funds and whether a consumer who has started paying off the balance can withdraw the money again.
4. Construction financing. If a transaction meets the definition of a residential mortgage transaction and the creditor elects to disclose it as a multiple transaction under section 1026.17(c)(6), each transaction is considered a residential mortgage transaction, even if different creditors are involved. For example: 1. Coverage. Only commercial messages promoting consumer credit transactions subject to disclosure are advertising. Messages that generally invite, offer, or announce the availability of credit transactions, whether in visual, oral, or print media, fall under Regulation Z (12 CFR part 1026). II. Examples of new transactions related to a dwelling already purchased are the financing of a lump sum payment due under a land purchase agreement and an extension of a loan to a co-owner of a property to purchase the shares of the other co-owner. In these cases, disclosures under Article 1026.18(q) (Acceptance Guidelines) are not required. For these new transactions, however, the withdrawal rules of §§ 1026.15 and 1026.23 apply.
ii. This test does not mean that the lender must set a specific credit limit for the line of credit or that the line of credit must always be replenished at its original amount. The lender may, in a particular case, reduce a credit limit or refuse to renew a new credit because of changes in the creditor`s financial situation or creditworthiness. (However, the rules set out in paragraph 1026.40(f) limit a creditor`s ability to suspend loan advances for home security plans.) While consumers should reasonably expect to receive loans as long as they are current and within prescribed credit limits, further credit extensions need not be an absolute right for the plan to meet the self-replenishment criterion.6 Verification of the value of the guarantee. Creditors who otherwise satisfy the requirements of Article 1026.2(a)(20) will provide perpetual credit, notwithstanding that the creditor must verify the value of the collateral to comply with applicable federal, state or other laws, or verify the value of the security associated with a particular advance under the Plan. 3. Same cycles. Although the cycles must be the same, there is a permissible deviation to account for weekends, holidays and differences in the number of days in months. If the actual date of each settlement does not differ by more than four days from a fixed “day” (for example.dem third Thursday of each month) or “date” (for example.dem 15 of each month) that the creditor uses regularly, the intervals between the statements are considered to be the same. The same cycle requirement also applies when the creditor applies a daily periodic interest rate to determine the cost of financing.
The equal interval requirement does not apply to the first billing cycle on an open account (i.e. , the period between the opening of the account and the preparation of the first periodic settlement) or for a transitional settlement cycle that may occur when the creditor occasionally changes its settlement cycles to set a new statement date or date. (See notes 9(c)(1)-3 and 9(c)(2)-3.) Open loan agreements are good for borrowers because they give them more control over when and how much they borrow. In addition, no interest is usually charged for the portion of the line of credit that is not used, which can result in interest savings for the borrower compared to using an installment loan. ii. Suppose a creditor requires all applicants to submit 20 pieces of information. The consumer provides only six pieces of information and tells the lender that they will contact the lender the next day to answer the remaining 14 questions. The six pieces of information provided by the consumer were the consumer`s name, income, social security number, property address, estimated property value, and mortgage amount requested.
While Lender 14 requires additional information to process the consumer`s mortgage application, the lender has received an application under section 1026.2(a)(3) and must therefore comply with the relevant requirements of section 1026.19. The pre-approved amount is specified in the agreement between the lender and the borrower. Open loans are also called lines of credit or revolving lines of credit. On the business side, a line of credit loan can use a variety of parameters to determine maximum amounts. These measures may include information about the value or turnover of a business, or through guarantees such as real estate assets and the value of other tangible assets held by the organization. i. A representative of a card issuer is considered a card issuer. Except as provided in Note 2(a)(7)–1.ii, the Regulations do not define an agent, as agency relationships have traditionally been defined by contract and by the state or other applicable law.
However, the mere provision of services related to the production of credit cards or the processing of data for third parties does not make someone an agent of the card issuer. On the other hand, a financial institution may become a representative of the card issuer if an agreement between the institution and the card issuer provides that the cardholder may use a line of credit with the financial institution to fulfill the obligations arising from the use of the credit card. 6. Multi-purpose transactions. A transaction meets the definition in this section if a portion of the proceeds of the loan is used to finance the initial purchase or construction of the consumer`s principal residence. For example, a transaction to finance the initial construction of the consumer`s main dwelling is a residential mortgage transaction, even if a portion of the funds are paid directly to the consumer or used to repay a loan for the purchase of the land on which the dwelling will be built. However, unlike the open loan, where the borrower can withdraw the money after repayments, closed loans do not allow the funds to be withdrawn for the second time. For this reason, open loans are often referred to as a revolving line of credit.
1. Main objective. There is no exact criterion of what constitutes a loan offered or renewed for personal, family or household purposes, or what constitutes the primary purpose. (See, however, the discussion of commercial purposes in the commentary to § 1026.3(a).) i. Loyalty cards are credit cards for which no periodic interest rate is used to calculate financing fees. According to the regulation, a reference to credit cards usually includes customer cards. In particular, references to credit card accounts under an open (non-home-secured) consumer credit plan in subsections B and G typically include credit cards.