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#20904 - 06/17/02 03:47 PM Use of Annual Percentage Rate in Oral Disclosures
Anonymous
Unregistered

Some of our lending officers have questioned the disclosure of APR when a customer inquires about loan rates. Do we have to disclose APR if it is just a general call for rates and no other specifics given (loan amount, term, etc) or do we have to give the customer an APR example in addition to rates quoted?

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Lending Compliance
#20905 - 06/17/02 03:59 PM Re: Use of Annual Percentage Rate in Oral Disclosures
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,762
On the Net
Reg. Z is all about credit shopping.
12 CFR §226.26 Use of annual percentage rate in oral disclosures. 1. Information that may be given. The creditor may state other annual or periodic rates that are applied to an unpaid balance, along with the required annual percentage rate. This rule permits disclosure of a simple interest rate, for example, but not an add-on, discount, or similar rate. If the creditor cannot give a precise annual percentage rate in its oral response because of variables in the transaction, it must give the annual percentage rate for a comparable sample transaction; in this case, other cost information may, but need not, be given. For example, the creditor may be unable to state a precise annual percentage rate for a mortgage loan without knowing the exact amount to be financed, the amount of loan fees or mortgage insurance premiums, or similar factors. In this situation, the creditor should state an annual percentage rate for a sample transaction; it may also provide information about the consumer’s specific case, such as the contract interest rate, points, other finance charges, and other charges.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#20906 - 06/17/02 03:59 PM Re: Use of Annual Percentage Rate in Oral Disclosures
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,765
Central City, NE
Here is the information from Reg Z:

12 CFR §226.26 Use of annual percentage rate in oral disclosures.
(a) Open-end credit. In an oral response to a consumer’s inquiry about the cost of open-end credit, only the annual percentage rate or rates shall be stated, except that the periodic rate or rates also may be stated. If the annual percentage rate cannot be determined in advance
because there are finance charges other than a periodic rate, the corresponding annual percentage rate shall be stated, and other cost information may be given.

(b) Closed-end credit. In an oral response to a consumer’s inquiry about the cost of closed-end credit, only the annual percentage rate shall be stated, except that a simple annual rate or periodic rate also may be stated if it is applied to an unpaid balance. If the annual
percentage rate cannot be determined in advance, the annual percentage rate for a sample transaction shall be stated, and other cost information for the consumer’s specific transaction may be given.


The Commentary states:
1. Application of rules. The restrictions of §226.26 apply only if the creditor chooses to respond orally to the consumer’s request for credit cost information. Nothing in the regulation requires the creditor to supply rate information orally. If the creditor volunteers information (including rate information) through oral solicitations directed generally to prospective customers, as through a telephone solicitation, those communications may be advertisements subject to the rules in §§226.16 and 226.24.

26(a) Open-end credit.
1. Information that may be given. The creditor may state periodic rates in addition to the required annual percentage rate, but it need not do so. If the annual percentage rate is unknown because transaction charges, loan fees, or similar finance charges may be imposed, the
creditor must give the corresponding annual percentage rate (that is, the periodic rate multiplied by the number of periods in a year, as described in §§226.6(a)(2) and 226.7(d)). In such cases, the creditor may, but need not, also give the consumer information about other
finance charges and other charges.

26(b) Closed-end credit.
1. Information that may be given. The creditor may state other annual or periodic rates that are applied to an unpaid balance, along with the required annual percentage rate. This rule permits disclosure of a simple interest rate, for example, but not an add-on, discount, or similar
rate. If the creditor cannot give a precise annual percentage rate in its oral response because of variables in the transaction, it must give the annual percentage rate for a comparable sample transaction; in this case, other cost information may, but need not, be given. For example, the creditor may be unable to state a precise annual percentage rate for a mortgage loan without knowing the exact amount to be financed, the amount of loan fees or mortgage insurance premiums, or similar factors. In this situation, the creditor should state an annual percentage rate for a sample transaction; it may also provide information about the consumer’s specific case, such as the contract interest rate, points, other finance charges, and other charges.
_________________________
David Dickinson
http://www.bankerscompliance.com

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