We have a situation and I want to be sure I know how to advise the correction of it. The bank was giving a $2,000 Lender Credit and it was applied on the HUD. However, the TIL did not include any of the $2,000. Is there anything in Reg Z that states the credit should be applied to finance charges first?

Because the TIL was not correct do we need to pay the customer $2,000?

Commentary 18(b) Amount Financed

2. Rebates and loan premiums. In a loan transaction, the creditor may offer a premium in the form of cash or merchandise to prospective borrowers. Similarly, in a credit sale transaction, a seller's or manufacturer's rebate may be offered to prospective purchasers of the creditor's goods or services. At the creditor's option, these amounts may be either reflected in the Truth in Lending disclosures or disregarded in the disclosures. If the creditor chooses to reflect them in the §1026.18 disclosures, rather than disregard them, they may be taken into account in any manner as part of those disclosures.

Thanks for that information. So, if it has been our practice to include the LC and to apply it first to FC would this be considered an exception that needs to be corrected or an isolated incident?