I have a regulation question around specific lender credits and the APR. I have been looking today in regulation, but haven't been able to find the specific ruling on this:

Is it acceptable to exclude from the APR disclosed pre-paid finance charge items that we apply a specific line item lender credit to?

Example: If a bank applies $300 line item credit for processing fees, can it exclude the $300 from the APR?

Any help would greatly appreciated.

Yes - because it can only be a finance charge if the borrower actually pays for it. This is compared to general lender credits, which cannot be used to impact the APR.