15 USC Sec. 1637a (01/16/96)

§ 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
  - (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.