Are all prepaid finance charges included in the APR calculation and vice versa?

You classify certain FCs as prepaid for only one reason--to arrive at the Amount Financed. Since a properly calculated AF is always part of the APR calculation, then the PFC is always reflected in the APR.

Huh???

Thanks for your response. The reason I ask is because I have been asked to create a master list of all the fees charged at my institution and determine whether each fee is a finance charge, a prepaid finance charge, and if it is included in the APR calculation.

I am still learning all of this, but based on what I know, the last two items seem redundant. I just want to make sure that if a fee is a prepaid finance charge, it will be included in the calculation of APR. Also, are there any fees which are included in the APR which are finance charges but not prepaid finance

There is one in Bankers Tools
http://www.bankersonline.com/tools/compliance/regz_finchg.html

Here are Reg. Z's basic rules:
1. All FCs are reflected in the APR.
2. All PFCs are FCs.
3. Fees that are neither FCs nor part of the AF are not reflected in the APR calculation.

Most Reg. Z enthusiasts eventually create a fee grid. Sometimes the grid has separate sections for different product types.

Columns describing each fee are good. This information explains your bank's business decisions regarding fees and can include the circumstances when the fee is appropriate, how it is calculated, minimum/maximum amounts, and other internal pricing decisions.

Next, you need a column to classify each fee as a FC or not. Actually, there can be more than just the Y/N classification. Certain fees can be classified both ways, depending on the circumstances. Appraisal charges are a good example. In loans secured by real property, they are not FCs. If the loan is secured by personal property (jewelry, art, antiques, etc.), appraisal fees are FCs.

Since you will need to document each fee decision, it's a good idea to include a column to cite the chapter and verse where the reg addresses the fee. It will be very handy to pull out this scorecard if you are challenged by an examiner at a later date.

The next column can be used to flag those fees that are both FCs and also PFCs. Here, you review your lending practices to determine the timing of collection of the fee. For Reg. Z purposes, the only thing that matters is whether the fee is collected (a.) after consummation, or (b.) earlier. If the fee is collected afterwards, it is a garden variety FC and part of the payment schedule. FCs collected at or before consummation get the special designation of "prepaid finance charge" and become a deduction when calculating the Amount Financed. Both types of FCs end up in the total disclosed FC.

Special case: There are always exceptions when you are dealing with Reg. Z, and the FC/PFC determination is one of them. Although not collected at or before consummation, any FC that is netted out of a delayed advance must be treated as a PFC. The best example of this exception is construction inspection fees. They are always FCs, but some construction lenders net them out of draws and other lenders choose to send a bill. If netted, these fees become PFCs; if billed, they are disclosed as ordinary FCs.

The APR is affected by changes in the payment schedule and changes in the AF, so both FC collection methods will impact the APR.

Your answer is really helpful. Thank you! As someone who is new to this, I greatly appreciate the detail and explanation.

The grid you are describing is basically what I am creating. I am also including a column to show whether each fee is included in the "point and fees" test under QM and a column for the "points and fees" test under state rules.

Are there any fees which are not FCs or PFCs which would be reflected in the APR?

No. The only dollar amounts that enter into the APR calculation are the Amount Financed and the payment schedule (excluding escrows and any other amount that is neither a Finance Charge nor repayment of a portion of the AF.) Since most fees are paid at the time of consummation, they can't be part of the payment schedule. Even if they are collected later, they are neither a FC nor repayment of a portion of the AF. They also can't be part of the AF because you are collecting them from the borrower, not advancing them to the borrower.

I appreciate all your help.