January 30, 2013 at 3:42 pm #2634MarcellaParticipant
On a HELOC, real estate secured, how should the wording for the interest charge be listed on the statment as “fiance charge or interest charged”? Below is the reg, but it’s confusing, which can/should we use?
§ 226.7 Periodic statement.
The creditor shall furnish the consumer with a periodic statement that discloses the following items, to the extent applicable:
(a) Rules affecting home-equity plans. The requirements of paragraph (a) of this section apply only to home-equity plans subject to the requirements of § 226.5b. Alternatively, a creditor subject to this paragraph may, at its option, comply with any of the requirements of paragraph (b) of this section; however, any creditor that chooses not to provide a disclosure under paragraph (a)(7) of this section must comply with paragraph (b)(6) of this section.
(6) Amount of finance charge and other charges. Creditors may comply with paragraphs (a)(6) of this section, or with paragraph (b)(6) of this section, at their option.
(i) Finance charges. The amount of any finance charge debited or added to the account during the billing cycle, using the term finance charge. The components of the finance charge shall be individually itemized and identified to show the amount(s) due to the application of any periodic rates and the amounts(s) of any other type of finance charge. If there is more than one periodic rate, the amount of the finance charge attributable to each rate need not be separately itemized and identified.
(ii) Other charges. The amounts, itemized and identified by type, of any charges other than finance charges debited to the account during the billing cycle.
(b) Rules affecting open-end (not home-secured) plans. The requirements of paragraph (b) of this section apply only to plans other than home-equity plans subject to the requirements of § 226.5b.
(6) Charges imposed. (i) The amounts of any charges imposed as part of a plan as stated in § 226.6(b)(3), grouped together, in proximity to transactions identified under paragraph (b)(2) of this section, substantially similar to Sample G–18(A) in appendix G to this part.
(ii) Interest. Finance charges attributable to periodic interest rates, using the term Interest Charge, must be grouped together under the heading Interest Charged, itemized and totaled by type of transaction, and a total of finance charges attributable to periodic interest rates, using the termTotal Interest, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in appendix G to this part.
(iii) Fees. Charges imposed as part of the plan other than charges attributable to periodic interest rates must be grouped together under the heading Fees, identified consistent with the feature or type, and itemized, and a total of charges, using the term Fees, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in appendix G to this part.February 11, 2013 at 8:04 pm #3059rcooperKeymaster
Take a look at 12 CFR 1026.7(a)(6). It gives you a roadmap of how the finance charge on HELOC statements should be laid out. Basically, you need to identify the finance charges in general and then list the specific charge(s) that make up the finance charge. This will include the interest/periodic rate. For example, you may have a header on your statement that says “Finance Charge Calculation” then you would list specific charge(s) that makes up the FC and show the dollar amount of that charge as the FC. The individual items that make up the FC are detailed and if that includes interest/period rate then it is labelled as such. The commentary below breaks out how you may and may not itemize your finance charges.
Regulation Z Official Interpretation:
1026.7(a)(6)(i): Finance Charges
1. Total. A total finance charge amount for the plan is not required.
2. Itemization—types of finance charges. Each type of finance charge (such as periodic rates, transaction charges, and minimum charges) imposed during the cycle must be separately itemized; for example, disclosure of only a combined finance charge attributable to both a minimum charge and transaction charges would not be permissible. Finance charges of the same type may be disclosed, however, individually or as a total. For example, five transaction charges of $1 may be listed separately or as $5.
3. Itemization—different periodic rates. Whether different periodic rates are applicable to different types of transactions or to different balance ranges, the creditor may give the finance charge attributable to each rate or may give a total finance charge amount. For example, if a creditor charges 1.5% per month on the first $500 of a balance and 1% per month on amounts over $500, the creditor may itemize the two components ($7.50 and $1.00) of the $8.50 charge, or may disclose $8.50.
Keep in mind that the periodic rate(s) along with the corresponding APR are required to be disclosed as well. See 12 CFR 1026.7(a)(4) and the Official Interpretation at https://www.bankersonline.com/regs/12-1026/12-1026-007.html.
“These are my opinions and they do not constitute legal advice.”
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