(a) General rule. The annual percentage rate is a measure of the cost of credit, expressed as a yearly rate. An annual percentage rate shall be considered accurate if it is not more than
1/8th of 1 percentage point above or below the annual percentage rate determined in accordance with this section.
31a An error in disclosure of the annual percentage rate or finance charge shall not, in itself, be considered a violation of this regulation if:
31a [Reserved]
(1) The error resulted from a corresponding error in a calculation tool used in good faith by the creditor; and
(2) Upon discovery of the error, the creditor promptly discontinues use of that calculation tool for disclosure purposes, and notifies the Board in writing of the error in the calculation tool.
(b) Annual percentage rate—in general. Where one or more periodic rates may be used to compute the finance charge, the annual percentage rate(s) to be disclosed for purposes of §§ 226.5a, 226.5b, 226.6, 226.7(a)(4) or (b)(4), 226.9, 226.15, 226.16, 226.26, 226.55, and 226.56 shall be computed by multiplying each periodic rate by the number of periods in a year.
(c) Optional effective annual percentage rate for periodic statements for creditors offering open-end plans subject to the requirements of § 226.5b. A creditor offering an open-end plan subject to the requirements of § 226.5b need not disclose an effective annual percentage rate. Such a creditor may, at its option, disclose an effective annual percentage rate(s) pursuant to § 226.7(a)(7) and compute the effective annual percentage rate as follows:
(1) Solely periodic rates imposed. If the finance charge is determined solely by applying one or more periodic rates, at the creditor's option, either:
(i) By multiplying each periodic rate by the number of periods in a year; or
(ii) By dividing the total finance charge for the billing cycle by the sum of the balances to which the periodic rates were applied and multiplying the quotient (expressed as a percentage) by the number of billing cycles in a year.
(2) Minimum or fixed charge, but not transaction charge, imposed. If the finance charge imposed during the billing cycle is or includes a minimum, fixed, or other charge not due to the application of a periodic rate, other than a charge with respect to any specific transaction during the billing cycle, by dividing the total finance charge for the billing cycle by the amount of the balance(s) to which it is applicable
32 and multiplying the quotient (expressed as a percentage) by the number of billing cycles in a year.
33 If there is no balance to which the finance charge is applicable, an annual percentage rate cannot be determined under this section. Where the finance charge imposed during the billing cycle is or includes a loan fee, points, or similar charge that relates to opening, renewing, or continuing an account, the amount of such charge shall not be included in the calculation of the annual percentage rate.
32 [Reserved]
33 [Reserved]
(3) Transaction charge imposed. If the finance charge imposed during the billing cycle is or includes a charge relating to a specific transaction during the billing cycle (even if the total finance charge also includes any other minimum, fixed, or other charge not due to the application of a periodic rate), by dividing the total finance charge imposed during the billing cycle by the total of all balances and other amounts on which a finance charge was imposed during the billing cycle without duplication, and multiplying the quotient (expressed as a percentage) by the number of billing cycles in a year,
34 except that the annual percentage rate shall not be less than the largest rate determined by multiplying each periodic rate imposed during the billing cycle by the number of periods in a year.
35 Where the finance charge imposed during the billing cycle is or includes a loan fee, points, or similar charge that relates to the opening, renewing, or continuing an account, the amount of such charge shall not be included in the calculation of the annual percentage rate. See appendix F to this part regarding determination of the denominator of the fraction under this paragraph.
34 [Reserved]
35 [Reserved]
(4) If the finance charge imposed during the billing cycle is or includes a minimum, fixed, or other charge not due to the application of a periodic rate and the total finance charge imposed during the billing cycle does not exceed 50 cents for a monthly or longer billing cycle, or the pro rata part of 50 cents for a billing cycle shorter than monthly, at the creditor's option, by multiplying each applicable periodic rate by the number of periods in a year, notwithstanding the provisions of paragraphs (c)(2) and (c)(3) of this section.
(d) Calculations where daily periodic rate applied. If the provisions of paragraph (c)(1)(ii) or (c)(2) of this section apply and all or a portion of the finance charge is determined by the application of one or more daily periodic rates, the annual percentage rate may be determined either:
(1) By dividing the total finance charge by the average of the daily balances and multiplying the quotient by the number of billing cycles in a year; or
(2) By dividing the total finance charge by the sum of the daily balances and multiplying the quotient by 365.
[75 FR 7815, Feb. 22, 2010]
Notes of Decisions
Oscar S. Gray v. Am. Express Co., 743 F.2d 10 (D.C. Cir. 1984).
· cites it 2× “See also 12 C.F.R. § 226.14 (d). American Express seems to argue that, despite that provision, it can exercise its right to cancellation for cause unrelated to the disputed amount, or for no cause, thus bringing itself out from under the statute.”
Am. Express Co. v. Koerner, 452 U.S. 233 (1981).
“14 (g) (1980): “This section does not apply to credit other than open end [a term defined to include only consumer credit, see 12 CFR § 2262 (x) (1980)], whether or not a periodic statement is mailed or delivered, unless it is consumer credit extended on an account by use of a…”
Citibank, N.A. v. Dalessio, 756 F. Supp. 2d 1361 (M.D. Fla. 2010).
“12 C.F.R. 226.14(a). An annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with the Act.”
Dorfman v. Moorhous (In Re Moorhous), 180 B.R. 138 (Bankr. E.D. Va. 1995).
“12 C.F.R. § 226.14 and Appendix J. Although the plaintiff presented evidence also of the “effective annual rate" of the transaction, the Court found the witness’s attempted explanation of the difference between the "annual percentage rate” and the “effective annual rate"…”
Jacobs v. Marine Midland Bank, N. A., 124 Misc. 2d 162 (N.Y. Sup. Ct. 1984).
· cites it 2× “14 — “Billing errors — resolution procedure” (12 CFR 226.14). 12 CFR 226.14 (g) clearly and unequivocally states: “This section does not apply to credit other than open end, whether or not a periodic statement is mailed or delivered, unless it is consumer credit extended on an…”
In Re Williams, 330 B.R. 534 (Bankr. M.D. La. 2005).
“” 12 C.F.R. § 226.14 . Disclosure of this rate is required by the Federal Truth-in-Lending Act, 15 U.”
Cappalli v. Nordstrom FSB, 155 F. Supp. 2d 339 (E.D. Pa. 2001).
· cites it 2× “; Regulation Z, 12 C.F.R. §§ 226.14 (b), 226.6. 5 Since the Bank is required to separate late fees and other charges from the APR used to calculate the finance charge I cannot conclude the APR was the maximum amount chargeable to plaintiff to the exclusion of any other charges…”
Medina v. Performance Auto. Grp., Inc., 841 F. Supp. 2d 1121 (E.D. Cal. 2012).
“See 12 C.F.R. § 226.14 . Furthermore, determining which date to use as the starting date on the contract in order to calculate an accurate APR relies upon an interpretation of state law, not Regulation Z.”
— 12 C.F.R. § 226.14(a) — 1 case
Citibank, N.A. v. Dalessio, 756 F. Supp. 2d 1361 (M.D. Fla. 2010).
“12 C.F.R. 226.14(a). An annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with the Act.”
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