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Reg Z: Errors In Disclosures

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Question 1: Regarding Reg Z - Errors in Disclosures- please define "the creditor notifies the person concerned of the error and makes whatever adjustments in the appropriate account are necessary to assure that the person will not be required to pay an amount in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower".Question 2: Regarding Reg Z - Errors in Disclosures- If the APR is within the allowable tolerance and the finance charge is understated by more than $100.00, is this a Reg Z violation?
Answer: 

Basically these mean that if you disclose a lower amount, that is the most you may charge your customer.

If your APR was understated, but the Finance Charge was not, adjust the FC to be a result of the lower APR. If theAPR was disclosed properly but the FC was entered as a lower amount than it should have been, adjust the APR to be a result of the lower FC.

As to FC tolerances, for closed-end credit, if real estate or a dwelling does not secure the loan, the legal finance charge tolerance is $5 if the amount financed is $1,000 or less and $10 if the amount financed is greater than $1,000. Both understatements and overstatements are viewed as violations of law.

If the loan is secured by real estate or a dwelling, the legal finance charge tolerance is $100 if the loan was made on or after September 30, 1995, and $200 if the loan originated before September 30, 1995. In both cases, overstatements are not violations.

First published on BankersOnline.com 10/1/01

First published on 10/01/2001

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