1994 U.S. Code
Title 15 - COMMERCE AND TRADE
CHAPTER 40 - DEPARTMENT OF COMMERCE
SUBCHAPTER I - CONSUMER CREDIT COST DISCLOSURE
Part A - General Provisions
Sec. 1605 - Determination of finance charge
View Metadata§1605. Determination of finance charge (a) “Finance charge” defined
Except as otherwise provided in this section, the amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge does not include charges of a type payable in a comparable cash transaction. Examples of charges which are included in the finance charge include any of the following types of charges which are applicable:
(1) Interest, time price differential, and any amount payable under a point, discount, or other system or additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder's fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or insurance protecting the creditor against the obligor's default or other credit loss.
(b) Life, accident, or health insurance premiums included in finance chargeCharges or premiums for credit life, accident, or health insurance written in connection with any consumer credit transaction shall be included in the finance charges unless
(1) the coverage of the debtor by the insurance is not a factor in the approval by the creditor of the extension of credit, and this fact is clearly disclosed in writing to the person applying for or obtaining the extension of credit; and
(2) in order to obtain the insurance in connection with the extension of credit, the person to whom the credit is extended must give specific affirmative written indication of his desire to do so after written disclosure to him of the cost thereof.
(c) Property damage and liability insurance premiums included in finance chargeCharges or premiums for insurance, written in connection with any consumer credit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property, shall be included in the finance charge unless a clear and specific statement in writing is furnished by the creditor to the person to whom the credit is extended, setting forth the cost of the insurance if obtained from or through the creditor, and stating that the person to whom the credit is extended may choose the person through which the insurance is to be obtained.
(d) Items exempted from computation of finance charge in all credit transactionsIf any of the following items is itemized and disclosed in accordance with the regulations of the Board in connection with any transaction, then the creditor need not include that item in the computation of the finance charge with respect to that transaction:
(1) Fees and charges prescribed by law which actually are or will be paid to public officials for determining the existence of or for perfecting or releasing or satisfying any security related to the credit transaction.
(2) The premium payable for any insurance in lieu of perfecting any security interest otherwise required by the creditor in connection with the transaction, if the premium does not exceed the fees and charges described in paragraph (1) which would otherwise be payable.
(e) Items exempted from computation of finance charge in extensions of credit secured by an interest in real propertyThe following items, when charged in connection with any extension of credit secured by an interest in real property, shall not be included in the computation of the finance charge with respect to that transaction:
(1) Fees or premiums for title examination, title insurance, or similar purposes.
(2) Fees for preparation of a deed, settlement statement, or other documents.
(3) Escrows for future payments of taxes and insurance.
(4) Fees for notarizing deeds and other documents.
(5) Appraisal fees.
(6) Credit reports.
(Pub. L. 90 321, title I, §106, May 29, 1968, 82 Stat. 148; Pub. L. 96 221, title VI §606, Mar. 31, 1980, 94 Stat. 170.)
Amendments1980—Subsec. (a). Pub. L. 96 221, §606(a), inserted provisions excluding charges of a type payable in comparable cash transactions and indicated that pars. (1) to (5) are examples of charges.
Subsec. (d). Pub. L. 96 221, §606(b), struck out pars. (3) and (4) setting forth applicability to taxes and any other type of charge, respectively.
Effective Date of 1980 AmendmentAmendment 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 SectionsThis section is referred to in sections 1602, 1607, 1638, 1666f of this title; title 12 section 1735f 7a.
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