US Laws, Codes, Statutes & Cases

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[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 15USC1602]

 
                      TITLE 15--COMMERCE AND TRADE
 
                 CHAPTER 41--CONSUMER CREDIT PROTECTION
 
              SUBCHAPTER I--CONSUMER CREDIT COST DISCLOSURE
 
                       Part A--General Provisions
 
Sec. 1602. Definitions and rules of construction

    (a) The definitions and rules of construction set forth in this 
section are applicable for the purposes of this subchapter.
    (b) The term ``Board'' refers to the Board of Governors of the 
Federal Reserve System.
    (c) The term ``organization'' means a corporation, government or 
governmental subdivision or agency, trust, estate, partnership, 
cooperative, or association.
    (d) The term ``person'' means a natural person or an organization.
    (e) The term ``credit'' means the right granted by a creditor to a 
debtor to defer payment of debt or to incur debt and defer its payment.
    (f) The term ``creditor'' refers only to a person who both (1) 
regularly extends, whether in connection with loans, sales of property 
or services, or otherwise, consumer credit which is payable by agreement 
in more than four installments or for which the payment of a finance 
charge is or may be required, and (2) is the person to whom the debt 
arising from the consumer credit transaction is initially payable on the 
face of the evidence of indebtedness or, if there is no such evidence of 
indebtedness, by agreement. Notwithstanding the preceding sentence, in 
the case of an open-end credit plan involving a credit card, the card 
issuer and any person who honors the credit card and offers a discount 
which is a finance charge are creditors. For the purpose of the 
requirements imposed under part D of this subchapter and sections 
1637(a)(5), 1637(a)(6), 1637(a)(7), 1637(b)(1), 1637(b)(2), 1637(b)(3), 
1637(b)(8), and 1637(b)(10) of this title, the term ``creditor'' shall 
also include card issuers whether or not the amount due is payable by 
agreement in more than four installments or the payment of a finance 
charge is or may be required, and the Board shall, by regulation, apply 
these requirements to such card issuers, to the extent appropriate, even 
though the requirements are by their terms applicable only to creditors 
offering open-end credit plans. Any person who originates 2 or more 
mortgages referred to in subsection (aa) of this section in any 12-month 
period or any person who originates 1 or more such mortgages through a 
mortgage broker shall be considered to be a creditor for purposes of 
this subchapter.
    (g) The term ``credit sale'' refers to any sale in which the seller 
is a creditor. The term includes any contract in the form of a bailment 
or lease if the bailee or lessee contracts to pay as compensation for 
use a sum substantially equivalent to or in excess of the aggregate 
value of the property and services involved and it is agreed that the 
bailee or lessee will become, or for no other or a nominal consideration 
has the option to become, the owner of the property upon full compliance 
with his obligations under the contract.
    (h) The adjective ``consumer'', used with reference to a credit 
transaction, characterizes the transaction as one in which the party to 
whom credit is offered or extended is a natural person, and the money, 
property, or services which are the subject of the transaction are 
primarily for personal, family, or household purposes.
    (i) The term ``open end credit plan'' means a plan under which the 
creditor reasonably contemplates repeated transactions, which prescribes 
the terms of such transactions, and which provides for a finance charge 
which may be computed from time to time on the outstanding unpaid 
balance. A credit plan which is an open end credit plan within the 
meaning of the preceding sentence is an open end credit plan even if 
credit information is verified from time to time.
    (j) The term ``adequate notice,'' as used in section 1643 of this 
title, means a printed notice to a cardholder which sets forth the 
pertinent facts clearly and conspicuously so that a person against whom 
it is to operate could reasonably be expected to have noticed it and 
understood its meaning. Such notice may be given to a cardholder by 
printing the notice on any credit card, or on each periodic statement of 
account, issued to the cardholder, or by any other means reasonably 
assuring the receipt thereof by the cardholder.
    (k) The term ``credit card'' means any card, plate, coupon book or 
other credit device existing for the purpose of obtaining money, 
property, labor, or services on credit.
    (l) The term ``accepted credit card'' means any credit card which 
the cardholder has requested and received or has signed or has used, or 
authorized another to use, for the purpose of obtaining money, property, 
labor, or services on credit.
    (m) The term ``cardholder'' means any person to whom a credit card 
is issued or any person who has agreed with the card issuer to pay 
obligations arising from the issuance of a credit card to another 
person.
    (n) The term ``card issuer'' means any person who issues a credit 
card, or the agent of such person with respect to such card.
    (o) The term ``unauthorized use,'' as used in section 1643 of this 
title, means a use of a credit card by a person other than the 
cardholder who does not have actual, implied, or apparent authority for 
such use and from which the cardholder receives no benefit.
    (p) The term ``discount'' as used in section 1666f of this title 
means a reduction made from the regular price. The term ``discount'' as 
used in section 1666f of this title shall not mean a surcharge.
    (q) The term ``surcharge'' as used in this section and section 1666f 
of this title means any means of increasing the regular price to a 
cardholder which is not imposed upon customers paying by cash, check, or 
similar means.''
    (r) The term ``State'' refers to any State, the Commonwealth of 
Puerto Rico, the District of Columbia, and any territory or possession 
of the United States.
    (s) The term ``agricultural purposes'' includes the production, 
harvest, exhibition, marketing, transportation, processing, or 
manufacture of agricultural products by a natural person who cultivates, 
plants, propagates, or nurtures those agricultural products, including 
but not limited to the acquisition of farmland, real property with a 
farm residence, and personal property and services used primarily in 
farming.
    (t) The term ``agricultural products'' includes agricultural, 
horticultural, viticultural, and dairy products, livestock, wildlife, 
poultry, bees, forest products, fish and shellfish, and any products 
thereof, including processed and manufactured products, and any and all 
products raised or produced on farms and any processed or manufactured 
products thereof.
    (u) The term ``material disclosures'' means the disclosure, as 
required by this subchapter, of the annual percentage rate, the method 
of determining the finance charge and the balance upon which a finance 
charge will be imposed, the amount of the finance charge, the amount to 
be financed, the total of payments, the number and amount of payments, 
the due dates or periods of payments scheduled to repay the 
indebtedness, and the disclosures required by section 1639(a) of this 
title.
    (v) The term ``dwelling'' means a residential structure or mobile 
home which contains one to four family housing units, or individual 
units of condominiums or cooperatives.
    (w) The term ``residential mortgage transaction'' means a 
transaction in which a mortgage, deed of trust, purchase money security 
interest arising under an installment sales contract, or equivalent 
consensual security interest is created or retained against the 
consumer's dwelling to finance the acquisition or initial construction 
of such dwelling.
    (x) As used in this section and section 1666f of this title, the 
term ``regular price'' means the tag or posted price charged for the 
property or service if a single price is tagged or posted, or the price 
charged for the property or service when payment is made by use of an 
open-end credit plan or a credit card if either (1) no price is tagged 
or posted, or (2) two prices are tagged or posted, one of which is 
charged when payment is made by use of an open-end credit plan or a 
credit card and the other when payment is made by use of cash, check, or 
similar means. For purposes of this definition, payment by check, draft, 
or other negotiable instrument which may result in the debiting of an 
open-end credit plan or a credit cardholder's open-end account shall not 
be considered payment made by use of the plan or the account.
    (y) Any reference to any requirement imposed under this subchapter 
or any provision thereof includes reference to the regulations of the 
Board under this subchapter or the provision thereof in question.
    (z) The disclosure of an amount or percentage which is greater than 
the amount or percentage required to be disclosed under this subchapter 
does not in itself constitute a violation of this subchapter.
    (aa)(1) A mortgage referred to in this subsection means a consumer 
credit transaction that is secured by the consumer's principal dwelling, 
other than a residential mortgage transaction, a reverse mortgage 
transaction, or a transaction under an open end credit plan, if--
        (A) the annual percentage rate at consummation of the 
    transaction will exceed by more than 10 percentage points the yield 
    on Treasury securities having comparable periods of maturity on the 
    fifteenth day of the month immediately preceding the month in which 
    the application for the extension of credit is received by the 
    creditor; or
        (B) the total points and fees payable by the consumer at or 
    before closing will exceed the greater of--
            (i) 8 percent of the total loan amount; or
            (ii) $400.

    (2)(A) After the 2-year period beginning on the effective date of 
the regulations promulgated under section 155 of the Riegle Community 
Development and Regulatory Improvement Act of 1994, and no more 
frequently than biennially after the first increase or decrease under 
this subparagraph, the Board may by regulation increase or decrease the 
number of percentage points specified in paragraph (1)(A), if the Board 
determines that the increase or decrease is--
        (i) consistent with the consumer protections against abusive 
    lending provided by the amendments made by subtitle B of title I of 
    the Riegle Community Development and Regulatory Improvement Act of 
    1994; and
        (ii) warranted by the need for credit.

    (B) An increase or decrease under subparagraph (A) may not result in 
the number of percentage points referred to in subparagraph (A) being--
        (i) less that 8 percentage points; or
        (ii) greater than 12 percentage points.

    (C) In determining whether to increase or decrease the number of 
percentage points referred to in subparagraph (A), the Board shall 
consult with representatives of consumers, including low-income 
consumers, and lenders.
    (3) The amount specified in paragraph (1)(B)(ii) shall be adjusted 
annually on January 1 by the annual percentage change in the Consumer 
Price Index, as reported on June 1 of the year preceding such 
adjustment.
    (4) For purposes of paragraph (1)(B), points and fees shall 
include--
        (A) all items included in the finance charge, except interest or 
    the time-price differential;
        (B) all compensation paid to mortgage brokers;
        (C) each of the charges listed in section 1605(e) of this title 
    (except an escrow for future payment of taxes), unless--
            (i) the charge is reasonable;
            (ii) the creditor receives no direct or indirect 
        compensation; and
            (iii) the charge is paid to a third party unaffiliated with 
        the creditor; and

        (D) such other charges as the Board determines to be 
    appropriate.

    (5) This subsection shall not be construed to limit the rate of 
interest or the finance charge that a person may charge a consumer for 
any extension of credit.
    (bb) The term ``reverse mortgage transaction'' means a nonrecourse 
transaction in which a mortgage, deed of trust, or equivalent consensual 
security interest is created against the consumer's principal dwelling--
        (1) securing one or more advances; and
        (2) with respect to which the payment of any principal, 
    interest, and shared appreciation or equity is due and payable 
    (other than in the case of default) only after--
            (A) the transfer of the dwelling;
            (B) the consumer ceases to occupy the dwelling as a 
        principal dwelling; or
            (C) the death of the consumer.

(Pub. L. 90-321, title I, Sec. 103, May 29, 1968, 82 Stat. 147; Pub. L. 
91-508, title V, Sec. 501, Oct. 26, 1970, 84 Stat. 1126; Pub. L. 93-495, 
title III, Sec. 303, Oct. 28, 1974, 88 Stat. 1511; Pub. L. 94-222, 
Sec. 3(a), Feb. 27, 1976, 90 Stat. 197; Pub. L. 96-221, title VI, 
Secs. 602, 603(a), (b), 604, 612(a)(2), (b), Mar. 31, 1980, 94 Stat. 
168, 169, 175, 176; Pub. L. 97-25, title I, Sec. 102, July 27, 1981, 95 
Stat. 144; Pub. L. 97-320, title VII, Sec. 702(a), Oct. 15, 1982, 96 
Stat. 1538; Pub. L. 103-325, title I, Secs. 152(a)-(c), 154(a), Sept. 
23, 1994, 108 Stat. 2190, 2191, 2196.)

                       References in Text

    The Riegle Community Development and Regulatory Improvement Act of 
1994, referred to in subsec. (aa)(2)(A)(i), is Pub. L. 103-325, Sept. 
23, 1994, 108 Stat. 2160. Section 155 of the Act is set out below. For 
classification of subtitle B of title I of the Act, known as the ``Home 
Ownership and Equity Protection Act of 1994'', see Short Title of 1994 
Amendment note set out under section 1601 of this title. For complete 
classification of this Act to the Code, see Short Title note set out 
under section 4701 of Title 12, Banks and Banking, and Tables.


                               Amendments

    1994--Subsec. (f). Pub. L. 103-325, Sec. 152(c), inserted at end 
``Any person who originates 2 or more mortgages referred to in 
subsection (aa) of this section in any 12-month period or any person who 
originates 1 or more such mortgages through a mortgage broker shall be 
considered to be a creditor for purposes of this subchapter.''
    Subsec. (u). Pub. L. 103-325, Sec. 152(b), substituted ``the due 
dates'' for ``and the due dates'' and inserted before period at end ``, 
and the disclosures required by section 1639(a) of this title''.
    Subsec. (aa). Pub. L. 103-325, Sec. 152(a), added subsec. (aa).
    Subsec. (bb). Pub. L. 103-325, Sec. 154(a), added subsec. (bb).
    1982--Subsec. (f). Pub. L. 97-320 struck out provision that a person 
who regularly arranged for the extension of consumer credit payable in 
more than four installments or for which the payment of a finance charge 
was or might have been required from persons not creditors was a 
creditor, and provision that this subchapter applied to any creditor, 
irrespective of his or its status as a natural person or any type of 
organization, who was a card issuer.
    1981--Subsecs. (x) to (z). Pub. L. 97-25 added subsec. (z) and, 
effective Apr. 10, 1982, redesignated subsecs. (x), (y), and (z) as (y), 
(z), and (x), respectively.
    1980--Subsec. (f). Pub. L. 96-221, Sec. 602(a), substituted 
provisions defining term ``creditor'' as referring only to a person who 
both regularly extends consumer credit, subject to specified conditions, 
and is the person to whom the debt arising is initially payable on the 
face of the indebtedness or by agreement, and notwithstanding such 
provisions, also refers to a person regularly arranging for the 
extension of consumer credit, and a card issuer and any person honoring 
the credit card, subject to specified conditions, for provisions 
defining term ``creditor'' as referring only to creditors who regularly 
extend, or arrange for the extension of credit payable in more than four 
installments or where a finance charge is or may be required, and 
substituted ``(a)(5)'' for ``(a)(6)'', ``(a)(6)'' for ``(a)(7)'', 
``(a)(7)'' for ``(a)(8)'', ``(b)(8)'' for ``(b)(9)'', and ``(b)(10)'' 
for ``(b)(11)''.
    Subsec. (g). Pub. L. 96-221, Sec. 602(b), substituted ``in which the 
seller is a creditor'' for ``with respect to which credit is extended or 
arranged by the seller''.
    Subsec. (h). Pub. L. 96-221, Sec. 603(a), struck out applicability 
to agricultural purposes.
    Subsec. (i). Pub. L. 96-221, Sec. 604, inserted provisions 
respecting the reasonable contemplations of the creditor, and 
verification of credit information from time to time.
    Subsecs. (s), (t). Pub. L. 96-221, Sec. 603(b), added subsecs. (s) 
and (t). Former subsecs. (s) and (t) redesignated (x) and (y), 
respectively.
    Subsec. (u). Pub. L. 96-221, Sec. 612(a)(2), added subsec. (u).
    Subsecs. (v), (w). Pub. L. 96-221, Sec. 612(b), added subsecs. (v) 
and (w).
    Subsecs. (x), (y). Pub. L. 96-221, Sec. 603(b), redesignated former 
subsecs. (s) and (t) as (x) and (y), respectively.
    1976--Subsecs. (p) to (t). Pub. L. 94-222 added subsecs. (p) and (q) 
and redesignated former subsecs. (p) to (r) as (r) to (t), respectively.
    1974--Subsec. (f). Pub. L. 93-495 inserted provision requiring the 
credit to be payable by agreement in more than four installments and 
defining term ``creditor'' for the purposes of the requirements imposed 
under the enumerated sections of this chapter.
    1970--Subsecs. (j) to (r). Pub. L. 91-508 added subsecs. (j) to (o) 
and redesignated former subsecs. (j) to (l) as (p) to (r), respectively.


                    Effective Date of 1982 Amendment

    Section 702(b) of Pub. L. 97-320 provided that: ``The amendment made 
by subsection (a) [amending this section] shall take effect on the 
effective date of title VI of the Depository Institutions Deregulation 
and Monetary Control Act of 1980 [two years and six months after Mar. 
31, 1980, see Effective Date of 1980 Amendment note below].''


                    Effective Date of 1981 Amendment

    Section 102(b) of Pub. L. 97-25 provided that the amendment made by 
that section is effective Apr. 10, 1982.


                    Effective Date of 1980 Amendment

    Section 625 of title VI of Pub. L. 96-221, as amended by Pub. L. 97-
25, title III, Sec. 301, July 27, 1981, 95 Stat. 145; Pub. L. 97-110, 
title III, Sec. 301, Dec. 26, 1981, 95 Stat. 1515, provided that:
    ``(a) Except as provided in section 608(b) [set out as an Effective 
Date of 1980 Amendment note under section 1607 of this title], the 
amendments made by this title [enacting section 1646 of this title, 
amending sections 57a, 1602 to 1606, 1610, 1612, 1613, 1631, 1632, 1635, 
1637, 1638, 1640, 1641, 1643, 1663, 1664, 1665a, 1666, 1666d, 1667d, and 
1691f of this title, repealing sections 1614, 1636, and 1639 of this 
title, and enacting provisions set out as a note under section 1601 of 
this title] shall take effect upon the expiration of two years and six 
months after the date of enactment of this title [Mar. 31, 1980].
    ``(b) All regulations, forms, and clauses required to be prescribed 
under the amendments made by this title shall be promulgated at least 
one year prior to such effective date.
    ``(c) Notwithstanding subsections (a) and (b), any creditor may 
comply with the amendments made by this title, in accordance with the 
regulations, forms, and clauses prescribed by the Board, prior to such 
effective date. Any creditor who elects to comply with such amendments 
and any assignee of such a creditor shall be subject to the provisions 
of sections 130 and 131 of the Truth in Lending Act, as amended by 
sections 615 and 616, respectively, of this title [sections 1640 and 
1641 of this title].''


                    Effective Date of 1974 Amendment

    For effective date of amendment by Pub. L. 93-495, see section 308 
of Pub. L. 93-495, set out as an Effective Date note under section 1666 
of this title.


                               Regulations

    Section 155 of title I of Pub. L. 103-325 provided that: ``Not later 
than 180 days after the date of enactment of this Act [Sept. 23, 1994], 
the Board of Governors of the Federal Reserve System shall issue such 
regulations as may be necessary to carry out this subtitle [subtitle B 
(Secs. 151-158) of title I of Pub. L. 103-325, see Short Title of 1994 
Amendment note set out under section 1601 of this title], and such 
regulations shall become effective on the date on which disclosure 
regulations are required to become effective under section 105(d) of the 
Truth in Lending Act [15 U.S.C. Sec. 1604(d)].''


  Applicability of 1994 Amendments and Regulations to Subsection (aa) 
                                Mortgages

    Section 156 of title I of Pub. L. 103-325 provided that: ``This 
subtitle [subtitle B (Secs. 151-158) of title I of Pub. L. 103-325, see 
Short Title of 1994 Amendment note set out under section 1601 of this 
title], and the amendments made by this subtitle, shall apply to every 
mortgage referred to in section 103(aa) of the Truth in Lending Act [15 
U.S.C. 1602(aa)] (as added by section 152(a) of this Act) consummated on 
or after the date on which regulations issued under section 155 [set out 
above] become effective.''

                  Section Referred to in Other Sections

    This section is referred to in sections 78m, 1604, 1605, 1610, 1615, 
1631, 1635, 1638, 1639, 1641, 1667, 1679a, 1693a, 1693g of this title; 
title 12 sections 1735f-5, 1735f-7a, 1834b, 2602, 3401; title 18 section 
1030; title 26 section 6311; title 42 section 5511.