I was reviewing what was considered a demand feature under 1026.38(l)(2) as defined under Commentary 1026.18(i)-2 and am confused. The commentary provides, "The type of demand feature triggering the disclosures required by § 1026.18(i) includes only those demand features contemplated by the parties as part of the legal obligation. For example, this provision does not apply to transactions that covert to a demand status as a result of the consumer's default. A due-on-sale clause is not considered a demand feature."

If the legal obligation includes under the definition of default, such events such as materially false, incorrect or incomplete financial statements, representation, warranty, death, and other events/occurrences, does that mean because the legal obligation defined such as "defaults" then based on the commentary, we would disclose we do NOT have a demand feature? It would appear then that so long as circumstances or events that would trigger acceleration of the loan are defined under "Default" then "No" would be the disclosure under 1026.38(l)(2), specifically that the loan does not have a demand feature.

Any thoughts?

Correct. A demand feature gives the creditor the ability to demand full payment at anytime - default or not by the consumer

Thank you. That portion of the regulation seems surprisingly flexible.

Well, the regulation only addresses what and when a demand feature must be disclosed. State law and other regulations will tell you if a demand clause is legal on any specific transaction.