US Laws, Codes, Statutes & Cases

From the U.S. Code Online via GPO Access
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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: 15USC1637a]

 
                      TITLE 15--COMMERCE AND TRADE
 
                 CHAPTER 41--CONSUMER CREDIT PROTECTION
 
              SUBCHAPTER I--CONSUMER CREDIT COST DISCLOSURE
 
                       Part B--Credit Transactions
 
Sec. 1637a. Disclosure requirements for open end consumer credit 
        plans secured by consumer's principal dwelling
        

(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) of this section:

                  (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) of this section, 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

        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.

     (4) Estimates of fees which may be imposed by third parties

        (A) Aggregate amount

            An estimate, based on the creditor's experience with such 
        plans and stated as a single amount or as a reasonable range, of 
        the aggregate amount of additional fees that may be imposed by 
        third parties (such as governmental authorities, appraisers, and 
        attorneys) in connection with opening an account under the plan.

        (B) Statement of availability

            A statement that the consumer may ask the creditor for a 
        good faith estimate by the creditor of the fees that may be 
        imposed by third parties.

              (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) the initial extension of credit to an account under 
            the plan;
                (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 consultation of tax advisor

        A statement that the consumer should consult a tax advisor 
    regarding the deductibility of interest and charges under the plan.

          (14) Disclosure requirements established by Board

        Any other term which the Board 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) of this 
        section 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) of this section 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) of this section and the pamphlet required under 
        subsection (e) of this section 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) of this section 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) of this 
        section 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 Board.

        (C) Precedence of certain information

            The disclosures required by paragraphs (5), (6), and (7) of 
        subsection (a) of this section 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) 
        of this section are provided on the application form, the 
        variable rate information described in subsection (a)(2) of this 
        section 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) of 
    this section, 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) of this section which 
is provided to a consumer by any person other than the creditor--
        (1) such person shall provide such consumer with--
            (A) the disclosures required under subsection (a) of this 
        section with respect to such plan, in accordance with subsection 
        (b) of this section; and
            (B) the pamphlet required under subsection (e) of this 
        section; or

        (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) 
    of this section with respect to the application.

(d) ``Principal dwelling'' defined

    For purposes of this section and sections 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) of this 
section 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 Board 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 Board.

(Pub. L. 90-321, title I, Sec. 127A, as added Pub. L. 100-709, 
Sec. 2(a), Nov. 23, 1988, 102 Stat. 4725.)

                       References in Text

    Section 4 of the Home Equity 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.


                             Effective Date

    For effective date of section, see Regulations; Effective Date note 
below.


                       Regulations; Effective Date

    Section 7 of Pub. L. 100-709 provided that:
    ``(a) Regulations.--Before the end of the 60-day period beginning on 
the date of the enactment of this Act [Nov. 23, 1988], the Board of 
Governors of the Federal Reserve System shall prescribe such regulations 
as may be necessary to carry out the proposes [sic] of the amendments 
made by this Act [enacting this section and sections 1647 and 1665b of 
this title, amending sections 1632 and 1637 of this title, and enacting 
provisions set out as notes under this section and section 1601 of this 
title].
    ``(b) Effective Date.--The amendments made by this Act, and the 
regulations prescribed pursuant to subsection (a) with respect to such 
amendments, shall apply to--
        ``(1) any agreement to open an account under an open end 
    consumer credit plan under which extensions of credit are secured by 
    a consumer's principal dwelling which is entered into after the end 
    of the 5-month period beginning on the date on which the regulations 
    prescribed under subsection (a) become final; and
        ``(2) any application to open such an account which is 
    distributed by, or received by a creditor, after the end of such 5-
    month period.
    ``(c) Voluntary Compliance.--Notwithstanding subsection (b), any 
creditor may comply with the amendments made by this Act, in accordance 
with the regulations prescribed by the Board, before the effective date 
established under such subsection.''


                           Consumer Education

    Section 4 of Pub. L. 100-709 provided that: ``The Board of Governors 
of the Federal Reserve System shall develop and prepare a pamphlet for 
distribution to consumers which contains--
        ``(1) a general description of open end consumer credit plans 
    secured by the consumer's principal dwelling and the terms and 
    conditions under which such loans are generally extended; and
        ``(2) a discussion of the potential advantages and disadvantages 
    of such plans, including how to compare among home equity plans and 
    between home equity and closed end credit plans.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1632, 1647, 1665b of this 
title.