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: 15USC1647]

 
                      TITLE 15--COMMERCE AND TRADE
 
                 CHAPTER 41--CONSUMER CREDIT PROTECTION
 
              SUBCHAPTER I--CONSUMER CREDIT COST DISCLOSURE
 
                       Part B--Credit Transactions
 
Sec. 1647. Home equity plans


(a) Index requirement

    In the case of extensions of credit under an open end consumer 
credit plan which are subject to a variable rate and are secured by a 
consumer's principal dwelling, the index or other rate of interest to 
which changes in the annual percentage rate are related shall be based 
on an index or rate of interest which is publicly available and is not 
under the control of the creditor.

(b) Grounds for acceleration of outstanding balance

    A creditor may not unilaterally terminate any account under an open 
end consumer credit plan under which extensions of credit are secured by 
a consumer's principal dwelling and require the immediate repayment of 
any outstanding balance at such time, except in the case of--
        (1) fraud or material misrepresentation on the part of the 
    consumer in connection with the account;
        (2) failure by the consumer to meet the repayment terms of the 
    agreement for any outstanding balance; or
        (3) any other action or failure to act by the consumer which 
    adversely affects the creditor's security for the account or any 
    right of the creditor in such security.

This subsection does not apply to reverse mortgage transactions.

(c) Change in terms

                           (1) In general

        No open end consumer credit plan under which extensions of 
    credit are secured by a consumer's principal dwelling may contain a 
    provision which permits a creditor to change unilaterally any term 
    required to be disclosed under section 1637a(a) of this title or any 
    other term, except a change in insignificant terms such as the 
    address of the creditor for billing purposes.

                  (2) Certain changes not precluded

        Notwithstanding the provisions of subsection \1\ (1), a creditor 
    may make any of the following changes:
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    \1\ So in original. Probably should be ``paragraph''.
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            (A) Change the index and margin applicable to extensions of 
        credit under such plan if the index used by the creditor is no 
        longer available and the substitute index and margin would 
        result in a substantially similar interest rate.
            (B) Prohibit additional extensions of credit or reduce the 
        credit limit applicable to an account under the plan during any 
        period in which the value of the consumer's principal dwelling 
        which secures any outstanding balance is significantly less than 
        the original appraisal value of the dwelling.
            (C) Prohibit additional extensions of credit or reduce the 
        credit limit applicable to the account during any period in 
        which the creditor has reason to believe that the consumer will 
        be unable to comply with the repayment requirements of the 
        account due to a material change in the consumer's financial 
        circumstances.
            (D) Prohibit additional extensions of credit or reduce the 
        credit limit applicable to the account during any period in 
        which the consumer is in default with respect to any material 
        obligation of the consumer under the agreement.
            (E) Prohibit additional extensions of credit or reduce the 
        credit limit applicable to the account during any period in 
        which--
                (i) the creditor is precluded by government action from 
            imposing the annual percentage rate provided for in the 
            account agreement; or
                (ii) any government action is in effect which adversely 
            affects the priority of the creditor's security interest in 
            the account to the extent that the value of the creditor's 
            secured interest in the property is less than 120 percent of 
            the amount of the credit limit applicable to the account.

            (F) Any change that will benefit the consumer.

                      (3) Material obligations

        Upon the request of the consumer and at the time an agreement is 
    entered into by a consumer to open an account under an open end 
    consumer credit plan under which extensions of credit are secured by 
    the consumer's principal dwelling, the consumer shall be given a 
    list of the categories of contract obligations which are deemed by 
    the creditor to be material obligations of the consumer under the 
    agreement for purposes of paragraph (2)(D).

                        (4) Consumer benefit

        (A) In general

            For purposes of paragraph (2)(F), a change shall be deemed 
        to benefit the consumer if the change is unequivocally 
        beneficial to the borrower and the change is beneficial through 
        the entire term of the agreement.

        (B) Board categorization

            The Board may, by regulation, determine categories of 
        changes that benefit the consumer.

(d) Terms changed after application

    If any term or condition described in section 1637a(a) of this title 
which is disclosed to a consumer in connection with an application to 
open an account under an open end consumer credit plan described in such 
section (other than a variable feature of the plan) changes before the 
account is opened, and if, as a result of such change, the consumer 
elects not to enter into the plan agreement, the creditor shall refund 
all fees paid by the consumer in connection with such application.

(e) Additional requirements relating to refunds and imposition of 
        nonrefundable fees

                           (1) In general

        No nonrefundable fee may be imposed by a creditor or any other 
    person in connection with any application by a consumer to establish 
    an account under any open end consumer credit plan which provides 
    for extensions of credit which are secured by a consumer's principal 
    dwelling before the end of the 3-day period beginning on the date 
    such consumer receives the disclosure required under section 
    1637a(a) of this title and the pamphlet required under section 
    1637a(e) of this title with respect to such application.

                      (2) Constructive receipt

        For purposes of determining when a nonrefundable fee may be 
    imposed in accordance with this subsection if the disclosures and 
    pamphlet referred to in paragraph (1) are mailed to the consumer, 
    the date of the receipt of the disclosures by such consumer shall be 
    deemed to be 3 business days after the date of mailing by the 
    creditor.

(Pub. L. 90-321, title I, Sec. 137, as added Pub. L. 100-709, Sec. 3, 
Nov. 23, 1988, 102 Stat. 4731; amended Pub. L. 103-325, title I, 
Sec. 154(c), Sept. 23, 1994, 108 Stat. 2197.)


                               Amendments

    1994--Subsec. (b). Pub. L. 103-325 inserted at end ``This subsection 
does not apply to reverse mortgage transactions.''


                             Effective Date

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


                       Regulations; Effective Date

    For provisions relating to promulgation of regulations to implement 
amendment by Pub. L. 100-709 [enacting this section], and effective date 
of such amendment in connection with those regulations, see section 7 of 
Pub. L. 100-709, set out as a note under section 1637a of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 1637a of this title; title 12 
section 1715z-20.