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: 15USC1606]

 
                      TITLE 15--COMMERCE AND TRADE
 
                 CHAPTER 41--CONSUMER CREDIT PROTECTION
 
              SUBCHAPTER I--CONSUMER CREDIT COST DISCLOSURE
 
                       Part A--General Provisions
 
Sec. 1606. Determination of annual percentage rate


(a) ``Annual percentage rate'' defined

    The annual percentage rate applicable to any extension of consumer 
credit shall be determined, in accordance with the regulations of the 
Board,
        (1) in the case of any extension of credit other than under an 
    open end credit plan, as
            (A) that nominal annual percentage rate which will yield a 
        sum equal to the amount of the finance charge when it is applied 
        to the unpaid balances of the amount financed, calculated 
        according to the actuarial method of allocating payments made on 
        a debt between the amount financed and the amount of the finance 
        charge, pursuant to which a payment is applied first to the 
        accumulated finance charge and the balance is applied to the 
        unpaid amount financed; or
            (B) the rate determined by any method prescribed by the 
        Board as a method which materially simplifies computation while 
        retaining reasonable accuracy as compared with the rate 
        determined under subparagraph (A).

        (2) in the case of any extension of credit under an open end 
    credit plan, as the quotient (expressed as a percentage) of the 
    total finance charge for the period to which it relates divided by 
    the amount upon which the finance charge for that period is based, 
    multiplied by the number of such periods in a year.

(b) Computation of rate of finance charges for balances within a 
        specified range

    Where a creditor imposes the same finance charge for balances within 
a specified range, the annual percentage rate shall be computed on the 
median balance within the range, except that if the Board determines 
that a rate so computed would not be meaningful, or would be materially 
misleading, the annual percentage rate shall be computed on such other 
basis as the Board may be regulation require.

(c) Allowable tolerances for purposes of compliance with disclosure 
        requirements

    The disclosure of an annual percentage rate is accurate for the 
purpose of this subchapter if the rate disclosed is within a tolerance 
not greater than one-eighth of 1 per centum more or less than the actual 
rate or rounded to the nearest one-fourth of 1 per centum. The Board may 
allow a greater tolerance to simplify compliance where irregular 
payments are involved.

(d) Use of rate tables or charts having allowable variance from 
        determined rates

    The Board may authorize the use of rate tables or charts which may 
provide for the disclosure of annual percentage rates which vary from 
the rate determined in accordance with subsection (a)(1)(A) of this 
section by not more than such tolerances as the Board may allow. The 
Board may not allow a tolerance greater than 8 per centum of that rate 
except to simplify compliance where irregular payments are involved.

(e) Authorization of tolerances in determining annual percentage rates

    In the case of creditors determining the annual percentage rate in a 
manner other than as described in subsection (d) of this section, the 
Board may authorize other reasonable tolerances.

(Pub. L. 90-321, title I, Sec. 107, May 29, 1968, 82 Stat. 149; Pub. L. 
96-221, title VI, Sec. 607, Mar. 31, 1980, 94 Stat. 170.)


                               Amendments

    1980--Subsec. (c). Pub. L. 96-221, Sec. 607(a), substituted 
provisions relating to allowable tolerances for purposes of compliance 
with disclosure requirements, for provisions relating to rounding off of 
annual percentage rates which are converted from single add-on or other 
rates.
    Subsec. (e). Pub. L. 96-221, Sec. 607(b), struck out reference to 
subsection (c) of this section.
    Subsec. (f). Pub. L. 96-221, Sec. 607(c), struck out subsec. (f) 
setting forth requirements for form of expressing percentage rates prior 
to Jan. 1, 1971.


                    Effective Date of 1980 Amendment

    Amendment by Pub. L. 96-221 effective on expiration of two years and 
six months after Mar. 31, 1980, with all regulations, forms, and clauses 
required to be prescribed to be promulgated at least one year prior to 
such effective date, and allowing any creditor to comply with any 
amendments, in accordance with the regulations, forms, and clauses 
prescribed by the Board prior to such effective date, see section 625 of 
Pub. L. 96-221, set out as a note under section 1602 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1607, 1611, 1637, 1638, 1640 
of this title.