Truth in Lending Act Regulation Z Finance Charge Tolerance Thresholds (Consumer Purpose Loans Only!) Non‐real estate secured loan for $1,000 or less Non‐real estate secured loan for more $1,000 Closed‐end loan secured by real estate or a dwelling (1) ROR Threshold (2) for non‐
purchase money consumer loans secured by principal dwelling ROR Threshold (2) for non‐
purchase money consumer loans secured by principal dwelling if a refinance and no new funds extended ROR Threshold (2) for loans for non‐purchase money consumer loans secured by principal dwelling in foreclosure (3) Finance Charge (FC) $$ Amount Accurate if within $5.00 above or below exact FC Accurate if within $10.00 above or below exact FC Accurate if FC is overstated or does not understate actual FC by more than $100.00 Accurate if FC does not understate the actual FC by more than ½ % of loan amount (example: .0005 x loan of $100,000 = $50.00 tolerance threshold) Accurate if FC does not understate the actual FC by more than 1 % of loan amount (example: .01 x loan of $100,000 = $1,000.00 tolerance threshold) Accurate if FC is overstated or does not understate actual FC by more than $35.00 AND AND OR Annual Percentage Rate (APR) Calculations Accurate if within 1/8 % (.00125) above or
below exact APR for regular transactions and ¼% (.0025) for irregular transactions (4) Accurate if within 1/8 % above or below exact APR for regular transactions and ¼% for irregular transactions (4) Accurate if within 1/8 % above or below exact APR for regular transactions and ¼% for irregular transactions (4) Notes: (1) This may be any category of real estate and the dwelling does not have to be the person’s principal dwelling. (2) One of the triggers to start the three day Right of Rescission (ROR) period for non‐purchase money consumer loans secured by consumer’s principal dwelling is to provide accurate disclosures. The threshold for ROR is higher than the threshold for non‐ROR purposes as specified in the other categories. (3) The tolerance threshold for loans in foreclosure drops significantly for Right of Rescission purposes. For example, if a consumer raises ROR as a defense argument in a $100,000 foreclosure where the original finance charge is understated by $45.00, the ROR threshold drops to $35.00 rather than the ROR threshold it would have been ($100,000 x .0005 = $50.00) had the customer continued to pay loan payments on a timely basis. Enforcement of the ROR Threshold for foreclosure proceedings would result in the bank losing its lien on the mortgaged property and the loss of all interest and fees collected to date! Suddenly you are left with an unsecured loan! Before proceeding to foreclosure if the loan is less than 3 years old, verify that the FC is NOT understated by more than $35.00!!! (4) Irregular transactions are defined under Reg Z (Section 226.22) to be ones that includes one or more of the following features: multiple advances, irregular payment periods, or irregular payment amounts (other than the first period or an irregular first or final payment). Financial Solutions (3/16/09)