[1] See References in Text note below.
Editorial Notes
References in Text
Subsecs. (aa) and (w) of section 1602 of this title, referred to in subsec. (f)(2)(B), were redesignated subsecs. (bb) and (x), respectively, of section 1602 of this title by Pub. L. 111–203, title X, § 1100A(1)(A), July 21, 2010, 124 Stat. 2107.
Amendments
2010—Subsec. (d). Pub. L. 111–203 substituted “Bureau” for “Board” in introductory provisions.
1995—Subsec. (a). Pub. L. 104–29, § 2(a), in introductory provisions inserted after second sentence “The finance charge shall not include fees and amounts imposed by third party closing agents (including settlement agents, attorneys, and escrow and title companies) if the creditor does not require the imposition of the charges or the services provided and does not retain the charges.”
Subsec. (a)(6). Pub. L. 104–29, § 2(b)(1), added par. (6).
Subsec. (d)(3). Pub. L. 104–29, § 2(c), added par. (3).
Subsec. (e)(2). Pub. L. 104–29, § 2(d), amended par. (2) generally, substituting “loan-related” for “a deed, settlement statement, or other”.
Subsec. (e)(5). Pub. L. 104–29, § 2(e), inserted before period “, including fees related to any pest infestation or flood hazard inspections conducted prior to closing”.
Subsec. (f). Pub. L. 104–29, § 3(a), added subsec. (f).
1980—Subsec. (a). Pub. L. 96–221, § 606(a), inserted provisions excluding charges of a type payable in comparable cash transactions and indicated that pars. (1) to (5) are examples of charges.
Subsec. (d). Pub. L. 96–221, § 606(b), struck out pars. (3) and (4) setting forth applicability to taxes and any other type of charge, respectively.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Amendment by Pub. L. 111–203 effective on the designated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees.
Effective Date of 1995 Amendment
Pub. L. 104–29, § 2(b)(2), Sept. 30, 1995, 109 Stat. 271, provided that:
“The amendment made by paragraph (1) [amending this section] shall take effect on the earlier of—
“(A)
60 days after the date on which the Board of Governors of the Federal Reserve System issues final regulations under paragraph (3) [set out below]; or
“(B)
the date that is 12 months after the date of the enactment of this Act [Sept. 30, 1995].”
Effective Date of 1980 Amendment
Amendment by Pub. L. 96–221 effective on expiration of two years and six months after Mar. 31, 1980, with all regulations, forms, and clauses required to be prescribed to be promulgated at least one year prior to such effective date, and allowing any creditor to comply with any amendments, in accordance with the regulations, forms, and clauses prescribed by the Board prior to such effective date, see section 625 of Pub. L. 96–221, set out as a note under section 1602 of this title.
Regulations
Pub. L. 104–29, § 2(b)(3), Sept. 30, 1995, 109 Stat. 271, provided that:
“The Board of Governors of the Federal Reserve System shall promulgate regulations implementing the amendment made by paragraph (1) [amending this section] by no later than 6 months after the date of the enactment of this Act [Sept. 30, 1995].”
Ensuring That Finance Charges Reflect Cost of Credit
Pub. L. 104–29, § 2(f), Sept. 30, 1995, 109 Stat. 272, provided that:
“(1) Report.—
“(A) In general.—Not later than 6 months after the date of the enactment of this Act [Sept. 30, 1995], the Board of Governors of the Federal Reserve System shall submit to the Congress a report containing recommendations on any regulatory or statutory changes necessary—
“(i)
to ensure that finance charges imposed in connection with consumer credit transactions more accurately reflect the cost of providing credit; and
“(ii)
to address abusive refinancing practices engaged in for the purpose of avoiding rescission.
“(B) Report requirements.—In preparing the report under this paragraph, the Board shall—
“(i)
consider the extent to which it is feasible to include in finance charges all charges payable directly or indirectly by the consumer to whom credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit (especially those charges excluded from finance charges under section 106 of the Truth in Lending Act [15 U.S.C. 1605] as of the date of the enactment of this Act), excepting only those charges which are payable in a comparable cash transaction; and
“(ii)
consult with and consider the views of affected industries and consumer groups.
“(2) Regulations.—
The Board of Governors of the Federal Reserve System shall prescribe any appropriate regulation in order to effect any change included in the report under paragraph (1), and shall publish the regulation in the Federal Register before the end of the 1-year period beginning on the date of enactment of this Act.”
FAQs
(a) “Finance charge” definedExcept as otherwise provided in this section, the amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by ...
Does 15 US code 1662 mean no down payment is required? ›
15 USC 1662 states that no advertisem*nt concerning consumer credit may state that a specified down payment amount is required in connection with the extension of consumer credit unless the creditor usually and customarily arranges down payments in that amount.
What is the finance charge under the Truth in Lending Act? ›
The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit.
How is a finance charge determined? ›
Credit card companies calculate finance charges in different ways that many consumers may find confusing. A common method is the average daily balance method, which is calculated as (average daily balance × annual percentage rate × number of days in the billing cycle) ÷ 365.
Why was I charged a finance charge? ›
Finance charges are a form of compensation to the lender for providing the funds, or extending credit, to a borrower. These charges can include one-time fees, such as an origination fee on a loan, or interest payments, which can amortize on a monthly or daily basis.
What is the USC 1605 law? ›
Charges or premiums for insurance, written in connection with any consumer credit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property, shall be included in the finance charge unless a clear and specific statement in writing is furnished by the creditor ...
How not to pay a down payment? ›
The easiest way to avoid a down payment is to qualify for one of the two no-down payment mortgage programs backed by the government: a USDA or a VA loan.
What happens if you don't have 20 down payment? ›
In other words, if you put down less than 20 percent, it will add a bit more to your monthly payments in the form of PMI. The exact amount depends on how much you did put down and what your interest rate is. Fortunately, PMI will not usually extend for the entire life of a conventional loan.
What is the minimum the government requires to a down payment? ›
FHA loans require as little as 3.5 percent, and VA loans and USDA loans have no down payment requirement at all. Most homeowners don't put 20 percent down. In 2023, the median down payment among homebuyers was 14 percent, according to the National Association of Realtors (NAR).
What is 15 usc 1662 b in layman's terms? ›
In this way, USC 15 Section 1662(b) protects consumers from predatory lenders who use advertising to get people in debt. If you see an advertisem*nt that promises credit in exchange for a down payment or that guarantees a certain amount of money after the application, it may run afoul of the Truth in Lending Act.
TILA disclosures include the number of payments, the monthly payment, late fees, whether a borrower can prepay the loan without penalty and other important terms. TILA disclosures is often provided as part of the loan contract, so the borrower may be given the entire contract for review when the TILA is requested.
Do I have to pay the finance charge on a loan? ›
When you take out the loan, you generally agree to pay certain finance charges upfront or with your monthly payments. If you can pay your loan off early, you'll save some of the money you would have paid in finance charges over the life of the loan.
Can you avoid finance charge? ›
With credit cards, the easiest way to save money is by paying off the full outstanding balance on the customer's credit card bill each month. By doing that, the borrower avoids interest charges entirely and only need to pay finance charges such as annual fees.
What is the most expensive method for determining finance charges? ›
The previous balance method can be more expensive than other types of finance charge calculation methods. If your credit card issuer uses this method, you can minimize the amount you pay in finance charges each month by paying more money to the account than the amount you charge during the month.
How does a finance charge work on a loan? ›
A finance charge is the total amount of interest and loan charges you would pay over the entire life of the mortgage loan. This assumes that you keep the loan through the full term until it matures (when the last payment needs to be paid) and includes all pre-paid loan charges. Loan charges include: Origination charges.
What are the finance charges for USC? ›
Finance Charges
The university currently assesses a monthly finance charge on all past due balances. The current annual rate is 12 percent, subject to change.
What is a finance charge in the United States Code? ›
Interest, time price differential, and any amount payable under a point, discount, or other system or additional charges. Service or carrying charge. Loan fee, finder's fee, or similar charge.
What is a finance charge in real estate? ›
A finance charge is the total amount of interest and loan charges you would pay over the entire life of the mortgage loan. This assumes that you keep the loan through the full term until it matures (when the last payment needs to be paid) and includes all pre-paid loan charges. Loan charges include: Origination charges.
What is the finance charge on a car loan? ›
What Is A Finance Charge? The finance charge is the real interest, fees, taxes, and other costs paid during the life of a car loan are referred to as the financing charge. It includes all the upfront price to finance the vehicle, as well as all of the interest you pay throughout the length of the loan.
