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Finance Charge Violations

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In a R/E transaction (construction loan) if the APR is understated and the finance charge is overstated (due to improperly calculating the estimated interest on the entire balance method) is the violation reimbursable? In reviewing 226.18 and 226.22 it appears that if the finance charge disclosed is greater than the amount required to be disclosed then it is considered accurate and no reimbursement is required. Is this correct?

I believe you will have to look at the APR and Finance Charge separately. You should be correct on the overstatement no longer being a violation. The APR however, will have to be reviewed.

I would recommend reviewing the March/April 1998 ABA Compliance Magazine. The article, Compliance Alert: Restitution Redux: The TILA Reimbursement Rules After The Rodash Amendments by Alan J. Dombrow, CRCM, and Walter E. Zalenski will prove useful.

First published on 10/1/01

First published on 10/01/2001

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