Sec. 226.1 Authority, purpose, coverage, organization,
enforcement and liability.
(a) Authority. This regulation, known as Regulation
Z, is issued by the Board of Governors of the Federal Reserve System to
implement the Federal Truth in Lending Act, which is contained in title
I of the Consumer Credit Protection Act, as amended (15 U.S.C. 1601 et
seq.). This regulation also implements title XII, section 1204 of the Competitive
Equality Banking Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Information-collection
requirements contained in this regulation have been approved by the Office
of Management and Budget under the provisions of 44 U.S.C. 3501 et seq.
and have been assigned OMB number 7100-0199.
(b) Purpose. The purpose of this regulation is to promote the informed use of consumer credit by requiring disclosures about its
terms and cost. The regulation also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. The regulation does not govern charges for consumer credit. The regulation requires a maximum interest rate to be stated in variable-rate contracts secured by the consumer's dwelling. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and mortgages that are subject to the requirements of Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer's principal dwelling.
(c) Coverage. (1) In general, this regulation applies to each individual or business that offers or extends credit when
four conditions are met: (i) The credit is offered or extended to consumers; (ii) the offering or extension of credit is done regularly;1
(iii) the credit is subject to a finance charge or is payable by a written
agreement in more than 4 installments; and (iv) the credit is primarily
for personal, family, or household purposes.
1 The meaning of regularly is explained in the
definition of creditor in Sec. 226.2(a).
(2) If a credit card is involved, however,
certain provisions apply even if the credit is not subject to a finance
charge, or is not payable by a written agreement in more than 4 installments,
or if the credit card is to be used for business purposes.
(3) In addition, certain requirements of Sec.
226.5b apply to persons who are not creditors but who provide applications
for home equity plans to consumers.
(d) Organization. The regulation is divided
into subparts and appendices as follows:
(1) Subpart A contains general information.
It sets forth: (i) The authority, purpose, coverage, and organization of
the regulation; (ii) the definitions of basic terms; (iii) the transactions
that are exempt from coverage; and (iv) the method of determining the finance
charge.
(2) Subpart B contains the rules for open-end
credit. It requires that initial disclosures and periodic statements be
provided, as well as additional disclosures for credit and charge card
applications and solicitations and for home equity plans subject to the
requirements of Secs. 226.5a and 226.5b, respectively.
(3) Subpart C relates to closed-end credit.
It contains rules on disclosures, treatment of credit balances, annual
percentage rate calculations, rescission requirements, and advertising.
(4) Subpart D contains rules on oral disclosures,
Spanish language disclosure in Puerto Rico, record retention, effect on
state laws, state exemptions, and rate limitations.
(5) Subpart E contains special rules for mortgage transactions. Section 226.32 requires certain disclosures and provides limitations for loans that have rates and fees above specified amounts. Section 226.33 requires disclosures, including the total annual loan cost rate, for reverse mortgage transactions. Section 226.34 prohibits specific acts and practices in connection with mortgage transactions.
Effective 10/1/2009, paragraph (d)(5) is amended to read as follows:
(5) Subpart E contains special rules for mortgage transactions. Section 226.32 requires certain disclosures and provides limitations for loans that have rates and fees above specified amounts. Section 226.33 requires disclosures, including the total annual loan cost rate, for reverse mortgage transactions. Section 226.34 prohibits specific acts and practices in connection with mortgage transactions that are subject to Sec. 226.32. Section 226.35 prohibits specific acts and practices in connection with higher-priced mortgage loans, as defined in Sec. 226.35(a). Section 226.36 prohibits specific acts and practices in connection with credit secured by a consumer's principal dwelling.
(6) Several appendices contain information
such as the procedures for determinations about state laws, state exemptions
and issuance of staff interpretations, special rules for certain kinds
of credit plans, a list of enforcement agencies, and the rules for computing
annual percentage rates in closed-end credit transactions and total annual
loan cost rates for reverse mortgage transactions.
(e) Enforcement and liability. Section 108
of the act contains the administrative enforcement provisions. Sections
112, 113, 130, 131, and 134 contain provisions relating to liability for
failure to comply with the requirements of the act and the regulation.
Section 1204(c) of title XII of the Competitive Equality Banking Act of
1987, Pub. L. 100-86, 101 Stat. 552, incorporates by reference administrative
enforcement and civil liability provisions of sections 108 and 130 of the
act.
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