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#2156075 - 12/05/17 07:33 PM Consumer Equipment Loans
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
An equipment manufacturer (tractors) would like to partner with a bank in offering their equipment to consumers. This sounds similar to indirect lending, but would appreciate feedback based on the below scenario to determine how the disclosures should be provided in regards to the APR.
If a bank makes a loan to a consumer with an APR of 2.99% fixed for 5 years, but the bank receives a discount from the equipment manufacturer such that the effective yield is 4.99%, which APR is the bank required to disclose to the consumer? It seems that the APR for the consumer would reflect only what they are a party to, meaning $30,000 equipment price, payment of $x.xx and term of “yy” months results in an APR of 2.99%.
Since the discounts do not impact the consumers responsibility, the thought is that the consumer's rate (2.99%) and payment information is the only piece that has to be disclosed. Appreciate feedback. Thank you!

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Lending Compliance
#2156136 - 12/06/17 03:55 AM Re: Consumer Equipment Loans fretzer
Richard Insley Online
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Richard Insley
Joined: Oct 2000
Posts: 10,056
Toano, VA
Your answer is the sum of Section 1026.17(c)(1) and the ownership of the discount. If you receive the discount under a B2B agreement and the borrower is not a party to that agreement, then the discount is excluded from the disclosure.
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#2156328 - 12/06/17 09:43 PM Re: Consumer Equipment Loans fretzer
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
Thank you Richard! Appreciate the confirmation.

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