You Gurus must think you're beating a dead horse. I've researched previous posts. But would you please explain the underlined part of the following to me. when completing an audit I found 3 files with understated FC over $100. I think we have to refund it, but not sure what the following means.


"A) does not vary from the actual finance charge by more than $100; or
(B) is greater than the amount required to be disclosed under this title; and
(2) shall be treated as being accurate for purposes of section 125 if--
(A) except as provided in subparagraph (B), the amount disclosed as the finance charge does not vary from the actual finance charge by more than an amount equal to one-half of one percent of the total amount of credit extended; or
(B) in the case of a transaction, other than a mortgage referred to in section 103(aa), which--
(i) is a refinancing "

Thank you . . .again!

Bumb

Section 125 is Right of Rescission.

Thank you for responding. But just to be sure my thick skull is getting this, if the FC is understated on a non-rescindable loan, then this 1/2 of 1% thing does not apply when determining whether we should pay back those understated finance charges. The APRWIN program is stating the FC is understated, but is disclosing no restitution amount when I click on that tab. I'm sure it is better to give back to the customer when it is overstated, but is it required? Will be required to when the examiners get here next month.
Thanks again.

You are required to reimburse if the understated finance charge results in an understated APR that is outside the tolerence levels permitted per the transaction type(.125 % or .25%).

The Enforcement Policy concept that's missing from this discussion is "cross tolerance."

The TILA and Reg. Z set the standards for APR and FC precision. Anything outside these limits is a violation and causes civil liability under Sec. 130(a) of the TILA. If you want total protection from lawsuits, you must "take the cure" spelled out in Sec. 130(b)--including full reimbursement. Sec. 130(b) does not tell you how to compute the amount of reimbursement, however.

Enforcement actions are a different source of risk. Regulators do not create liability, they force you to protect yourself from it by taking the cure. They tell you how to compute the amount of reimbursement via APRWIN.

Recognizing various arguments about the effects of tolerances, the regulators provide more leeway than the TILA. This includes the ability to compute the dollar-equivalent of the APR tolerance for a loan and use it as an additional FC tolerance. (The same applies in reverse, but the % equivalent of the FC tolerance rarely produces a more favorable APR tolerance than the ones in the Regulation.)

Think about it--an eighth or quarter of a point in a long term loan is worth A LOT MORE than $100.

APRWIN has this Enforcement Policy feature built in. It doesn't tell you how much the "bonus" FC tolerance is, but computes and uses it to determine whether a FC reimbursement is necessary.