12 C.F.R. § 226.4

Finance charge

Read at: eCFRecfr.gov CornellLII GovInfogovinfo.gov CasesGoogle Scholar

(a) Definition. 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. It does not include any charge of a type payable in a comparable cash transaction.

(1) Charges by third parties. The finance charge includes fees and amounts charged by someone other than the creditor, unless otherwise excluded under this section, if the creditor:

(i) Requires the use of a third party as a condition of or an incident to the extension of credit, even if the consumer can choose the third party; or

(ii) Retains a portion of the third-party charge, to the extent of the portion retained.

(2) Special rule; closing agent charges. Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor—

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.

(3) Special rule; mortgage broker fees. Fees charged by a mortgage broker (including fees paid by the consumer directly to the broker or to the creditor for delivery to the broker) are finance charges even if the creditor does not require the consumer to use a mortgage broker and even if the creditor does not retain any portion of the charge.

(b) Examples of finance charges. The finance charge includes the following types of charges, except for charges specifically excluded by paragraphs (c) through (e) of this section:

(1) Interest, time price differential, and any amount payable under an add-on or discount system of additional charges.

(2) Service, transaction, activity, and carrying charges, including any charge imposed on a checking or other transaction account to the extent that the charge exceeds the charge for a similar account without a credit feature.

(3) Points, loan fees, assumption fees, finder's fees, and similar charges.

(4) Appraisal, investigation, and credit report fees.

(5) Premiums or other charges for any guarantee or insurance protecting the creditor against the consumer's default or other credit loss.

(6) Charges imposed on a creditor by another person for purchasing or accepting a consumer's obligation, if the consumer is required to pay the charges in cash, as an addition to the obligation, or as a deduction from the proceeds of the obligation.

(7) Premiums or other charges for credit life, accident, health, or loss-of-income insurance, written in connection with a credit transaction.

(8) Premiums or other charges for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, written in connection with a credit transaction.

(9) Discounts for the purpose of inducing payment by a means other than the use of credit.

(10) Charges or premiums paid for debt cancellation or debt suspension coverage written in connection with a credit transaction, whether or not the coverage is insurance under applicable law.

(1) Application fees charged to all applicants for credit, whether or not credit is actually extended.

(2) Charges for actual unanticipated late payment, for exceeding a credit limit, or for delinquency, default, or a similar occurrence.

(3) Charges imposed by a financial institution for paying items that overdraw an account, unless the payment of such items and the imposition of the charge were previously agreed upon in writing.

(4) Fees charged for participation in a credit plan, whether assessed on an annual or other periodic basis.

(5) Seller's points.

(6) Interest forfeited as a result of an interest reduction required by law on a time deposit used as security for an extension of credit.

(7) Real-estate related fees. The following fees in a transaction secured by real property or in a residential mortgage transaction, if the fees are bona fide and reasonable in amount:

(i) Fees for title examination, abstract of title, title insurance, property survey, and similar purposes.

(ii) Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.

(iii) Notary and credit-report fees.

(iv) Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest-infestation or flood-hazard determinations.

(v) Amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge.

(8) Discounts offered to induce payment for a purchase by cash, check, or other means, as provided in section 167(b) of the Act.

(d) Insurance and debt cancellation and debt suspension coverage—(1) Voluntary credit insurance premiums. Premiums for credit life, accident, health, or loss-of-income insurance may be excluded from the finance charge if the following conditions are met:

(i) The insurance coverage is not required by the creditor, and this fact is disclosed in writing.

(ii) The premium for the initial term of insurance coverage is disclosed in writing. If the term of insurance is less than the term of the transaction, the term of insurance also shall be disclosed. The premium may be disclosed on a unit-cost basis only in open-end credit transactions, closed-end credit transactions by mail or telephone under § 226.17(g), and certain closed-end credit transactions involving an insurance plan that limits the total amount of indebtedness subject to coverage.

(iii) The consumer signs or initials an affirmative written request for the insurance after receiving the disclosures specified in this paragraph, except as provided in paragraph (d)(4) of this section. Any consumer in the transaction may sign or initial the request.

(2) Property insurance premiums. Premiums for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, including single interest insurance if the insurer waives all right of subrogation against the consumer, 5 may be excluded from the finance charge if the following conditions are met:

5 [Reserved]

(i) The insurance coverage may be obtained from a person of the consumer's choice, 6 and this fact is disclosed. (A creditor may reserve the right to refuse to accept, for reasonable cause, an insurer offered by the consumer.)

6 [Reserved]

(ii) If the coverage is obtained from or through the creditor, the premium for the initial term of insurance coverage shall be disclosed. If the term of insurance is less than the term of the transaction, the term of insurance shall also be disclosed. The premium may be disclosed on a unit-cost basis only in open-end credit transactions, closed-end credit transactions by mail or telephone under § 226.17(g), and certain closed-end credit transactions involving an insurance plan that limits the total amount of indebtedness subject to coverage.

(3) Voluntary debt cancellation or debt suspension fees. Charges or premiums paid for debt cancellation coverage for amounts exceeding the value of the collateral securing the obligation or for debt cancellation or debt suspension coverage in the event of the loss of life, health, or income or in case of accident may be excluded from the finance charge, whether or not the coverage is insurance, if the following conditions are met:

(i) The debt cancellation or debt suspension agreement or coverage is not required by the creditor, and this fact is disclosed in writing;

(ii) The fee or premium for the initial term of coverage is disclosed in writing. If the term of coverage is less than the term of the credit transaction, the term of coverage also shall be disclosed. The fee or premium may be disclosed on a unit-cost basis only in open-end credit transactions, closed-end credit transactions by mail or telephone under § 226.17(g), and certain closed-end credit transactions involving a debt cancellation agreement that limits the total amount of indebtedness subject to coverage;

(iii) The following are disclosed, as applicable, for debt suspension coverage: That the obligation to pay loan principal and interest is only suspended, and that interest will continue to accrue during the period of suspension.

(iv) The consumer signs or initials an affirmative written request for coverage after receiving the disclosures specified in this paragraph, except as provided in paragraph (d)(4) of this section. Any consumer in the transaction may sign or initial the request.

(4) Telephone purchases. If a consumer purchases credit insurance or debt cancellation or debt suspension coverage for an open-end (not home-secured) plan by telephone, the creditor must make the disclosures under paragraphs (d)(1)(i) and (ii) or (d)(3)(i) through (iii) of this section, as applicable, orally. In such a case, the creditor shall:

(i) Maintain evidence that the consumer, after being provided the disclosures orally, affirmatively elected to purchase the insurance or coverage; and

(ii) Mail the disclosures under paragraphs (d)(1)(i) and (ii) or (d)(3)(i) through (iii) of this section, as applicable, within three business days after the telephone purchase.

(e) Certain security interest charges. If itemized and disclosed, the following charges may be excluded from the finance charge:

(1) Taxes and fees prescribed by law that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest.

(2) The premium for insurance in lieu of perfecting a security interest to the extent that the premium does not exceed the fees described in paragraph (e)(1) of this section that otherwise would be payable.

(3) Taxes on security instruments. Any tax levied on security instruments or on documents evidencing indebtedness if the payment of such taxes is a requirement for recording the instrument securing the evidence of indebtedness.

(f) Prohibited offsets. Interest, dividends, or other income received or to be received by the consumer on deposits or investments shall not be deducted in computing the finance charge.

[75 FR 7794, Feb. 22, 2010]

Notes of Decisions

Cited in 455 cases (15 in the last 5 years), 1970–2025 · leading case: Cowles v. Bank West, 719 N.W.2d 94 (Mich. 2006).

Sort: Relevance Newest Treatment

Cowles v. Bank West, 719 N.W.2d 94 (Mich. 2006). · cites it 10× “On February 16, 1999, Cowles filed a second amended complaint, alleging another TILA violation because defendant allegedly had failed to disclose the document preparation fee as required by 15 USC 1605(a) and Regulation Z, 12 CFR 226.4. The trial court certified the class…”

Connie Edwards v. Your Credit, Inc., 148 F.3d 427 (5th Cir. 1998). · cites it 8× “§ 1605 (a); 12 C.F.R. § 226.4 (a). A finance charge includes a “[p]remium or other charge for any guarantee or insurance protecting the creditor against the obligor’s default or other credit loss.”

Bonte v. U.S. Bank, N.A., 624 F.3d 461 (7th Cir. 2010). · cites it 3× “” 12 C.F.R. § 226.4 (a). The APR and the amount financed are derived from the finance charge and the amount of the note.”

Strong v. Option One Mortg. Corp., 356 B.R. 121 (Bankr. E.D. Pa. 2004). · cites it 14× “First, the Guises’ suggested reading of 12 C.F.R. § 226.4 (c)(7)(i) would create tension with the plain language of § 1605(e)(1), the section of TILA that the regulation seeks to implement.”

Brown v. Credithrift of Am. Consum. Disc. Co. (In Re Brown), 106 B.R. 852 (Bankr. E.D. Pa. 1989). · cites it 13× “Z, 12 C.F.R. §§ 226.4 (b), (e), which pretty much parroted the statute, were the following new provisions of 12 C.”

Carroll Guise, Regina Guise, & Mildred Guise v. Bwm Mortg., Llc, Homecomings Fin. Network, Inc., Clearwater Title Co., 377 F.3d 795 (7th Cir. 2004). · cites it 4× “§ 1605 (a) and federal Regulation Z, 12 C.F.R. § 226.4 (c)(7)(I). The plaintiffs argue that because the title insurance and endorsement fees were not disclosed as finance charges, the statement of finance fees was understated in excess of the permitted margin of error provided…”

Jefferies v. Ameriquest Mortg. Co., 543 F. Supp. 2d 368 (E.D. Pa. 2008). · cites it 10× “” 12 C.F.R. § 226.4 . 13 *380 In mortgage refinancing transactions, TILA provides borrowers a three-day period in which they can rescind their loans.”

Cooper v. First Gov't Mortg. & Investors Corp., 238 F. Supp. 2d 50 (D.D.C. 2002). · cites it 7× “§ 1605 (a); 12 C.F.R. § 226.4 (a). Finance charges include charges imposed directly or indirectly by the creditor on the consumer as a condition of the extension of credit.”

Smiley v. Citibank, 900 P.2d 690 (Cal. 1995). · cites it 6× “§ 1605 (a)(1); 12 C.F.R. § 226.4 (b)(1) (1995)) but to exclude, for example, late payment fees ( 12 C.”

Latonya Inge, Jody Holman v. Rock Fin. Corp., 388 F.3d 930 (6th Cir. 2004). · cites it 4× “” 12 C.F.R. § 226.4 (c)(7)(h). In addition, the TILA excludes settlement fees imposed by third party closing agents from the definition of “finance charge,” but only if “ ‘the creditor does not require the imposition of the charges for the services provided and does not retain…”

Gonzales v. Assocs. Fin. Serv. Co. of Kansas, Inc., 967 P.2d 312 (Kan. 1998). · cites it 12× “" 12 C.F.R. § 226.4 (a). 12 C.F.R. § 226.4 (a) explains that a finance charge "includes any charge payable directly or indirectly by the consumer and imposed directly *151 or indirectly by the creditor as an incident to or a condition of the extension of credit.”

Thompson v. 10,000 RV Sales, Inc., 2005 Cal. Daily Op. Serv. 5806 (Cal. Ct. App. 2005). · cites it 6× “( 12 C.F.R. § 226.4 (a).) To address the problem of buried finance charges, Regulation Z extends TILA’s coverage to all credit transactions “ ‘for which either a finance charge is or may be imposed.”

Show all 455 citing cases →

— 12 C.F.R. § 226.4(5)(i)(ii) — 1 case

Simmons v. Am. Budget Plan, Inc., 386 F. Supp. 194 (E.D. La. 1974).

— 12 C.F.R. § 226.4(a) — 6 cases

Ballew v. Assocs. Fin. Ser. Co. of Neb., Inc., 450 F. Supp. 253 (D. Neb. 1976).

Frazier v. Ctr. Motors, Inc., 418 A.2d 1018 (D.C. 1980).

Noel v. Fleet Fin., Inc., 971 F. Supp. 1102 (E.D. Mich. 1997).

Kriger v. Eur. Health Spa, Inc., of Milwaukee, Wis., 363 F. Supp. 334 (E.D. Wis. 1973).

Taylor v. Union Planters Bank of S. Miss., 964 F. Supp. 1120 (S.D. Miss. 1997).

— 12 C.F.R. § 226.4(a)(1) — 1 case

Trist v. First Fed. S. & L. Ass'n of Chester, 466 F. Supp. 578 (E.D. Pa. 1979).

— 12 C.F.R. § 226.4(a)(2) — 1 case

Strong v. Option One Mortg. Corp., 356 B.R. 121 (Bankr. E.D. Pa. 2004). “First, the Guises’ suggested reading of 12 C.F.R. § 226.4 (c)(7)(i) would create tension with the plain language of § 1605(e)(1), the section of TILA that the regulation seeks to implement.”

— 12 C.F.R. § 226.4(a)(3) — 1 case

Meyers v. Clearview Dodge Sales, Inc., 384 F. Supp. 722 (E.D. La. 1974).

— 12 C.F.R. § 226.4(a)(5) — 7 cases

Whitlock v. Midwest Acceptance Corp., 449 F. Supp. 631 (E.D. Mo. 1977).

Norlinda D. Philbeck v. Timmers Chevrolet, Inc. & Gen. Motors Acceptance Corp.,defendants-Appellants, 499 F.2d 971 (5th Cir. 1974).

Fannie Thomas, Plaintiff-Appellee-Cross v. Myers-Dickson Furniture Co., Defendant-Appellant-Cross, 479 F.2d 740 (5th Cir. 1973).

Philbeck v. Timmers Chevrolet, Inc., 361 F. Supp. 1255 (N.D. Ga. 1973).

In Re Warren, 387 F. Supp. 1395 (S.D. Ohio 1975).

— 12 C.F.R. § 226.4(a)(6) — 1 case

Hennigan v. Heights Sav. Ass'n, 576 S.W.2d 126 (Tex. App. 1978).

— 12 C.F.R. § 226.4(b) — 3 cases

St. Germain v. Bank of Hawaii, 413 F. Supp. 587 (D. Haw. 1976).

Cenance v. Bohn Ford, Inc., 430 F. Supp. 1064 (E.D. La. 1977).

Kocsis v. Pierce, 480 N.W.2d 598 (Mich. Ct. App. 1991).

— 12 C.F.R. § 226.4(b)(2) — 1 case

Taylor v. Union Planters Bank of S. Miss., 964 F. Supp. 1120 (S.D. Miss. 1997).

— 12 C.F.R. § 226.4(b)(3) — 2 cases

Dawson v. Thomas (In Re Dawson), 411 B.R. 1 (D.D.C. 2008).

Johnnie L. Johnson, Barbara Ann Johnson, William L. Mance, Mary L. Mance, Waralene Hopkins & All Persons Similarly Situated v. Fleet Fin., Inc., Fleet Fin., Inc. Of Ga., Tower Fin. Servs., Inc., Mortg. Equity Servs. & Donnetta Lowe, D/B/A Lowe & Assocs., Johnnie J. Johnson, Barbara Ann Johnson, William L. Mance, Mary L. Mance, John Mance, Waralene Hopkins & All Other Persons Similarly Situated v. Fleet Fin., Inc., Fleet Fin., Inc. Of Georgia, Mortg. Equity Servs., & Donnetta Lowe, D/B/A Lowe & Assocs., Tower Fin. Servs., Inc., 4 F.3d 946 (11th Cir. 1993).

— 12 C.F.R. § 226.4(b)(4) — 1 case

Harris v. Ford Motor Credit Co. (In re Smith), 7 B.R. 575 (D. Ga. 1980).

— 12 C.F.R. § 226.4(b)(8) — 1 case

Hofstetter v. Chase Home Fin., LLC, 751 F. Supp. 2d 1116 (N.D. Cal. 2010).

— 12 C.F.R. § 226.4(b)(9) — 1 case

Coelho v. Park Ridge Oldsmobile, Inc., 247 F. Supp. 2d 1004 (N.D. Ill. 2003).

— 12 C.F.R. § 226.4(c) — 3 cases

Reuben J. Katz, on Behalf of Himself & All Others Similarly Situated v. Carte Blanche Corp., 496 F.2d 747 (3rd Cir. 1974).

Saint Francis Mem'l Hosp. v. Weinberger, 413 F. Supp. 323 (N.D. Cal. 1976).

Bright v. Ball Mem'l Hosp. Ass'n, Inc., 463 F. Supp. 152 (S.D. Ind. 1979).

— 12 C.F.R. § 226.4(c)(2) — 2 cases

Eriksen v. Fisher, 421 N.W.2d 193 (Mich. Ct. App. 1988).

Saint-Jean v. Emigrant Mortg. Co., 337 F. Supp. 3d 186 (E.D.N.Y 2018).

— 12 C.F.R. § 226.4(c)(7) — 6 cases

Cowles v. Bank West, 719 N.W.2d 94 (Mich. 2006). “On February 16, 1999, Cowles filed a second amended complaint, alleging another TILA violation because defendant allegedly had failed to disclose the document preparation fee as required by 15 USC 1605(a) and Regulation Z, 12 CFR 226.4. The trial court certified the class…”

Cowles v. Bank West, 687 N.W.2d 603 (Mich. Ct. App. 2004).

Bank One, Nat. Ass'n v. Velten, 917 So. 2d 454 (La. Ct. App. 2005).

Macheda v. Household Fin. Realty Corp., 631 F. Supp. 2d 181 (N.D.N.Y. 2008).

Lowenstein v. U.S. Bank, N.A. (In Re Lowenstein), 459 B.R. 227 (Bankr. E.D. Pa. 2011).

— 12 C.F.R. § 226.4(c)(7)(h) — 1 case

Konynenbelt v. Flagstar Bank, FSB, 617 N.W.2d 706 (Mich. Ct. App. 2000).

— 12 C.F.R. § 226.4(c)(7)(ii) — 1 case

— 12 C.F.R. § 226.4(c)(7)(iii) — 1 case

Lowenstein v. U.S. Bank, N.A. (In Re Lowenstein), 459 B.R. 227 (Bankr. E.D. Pa. 2011).

— 12 C.F.R. § 226.4(d)(2) — 3 cases

Arnett v. Bank of Am., 874 F. Supp. 2d 1021 (D. Or. 2012).

Hofstetter v. Chase Home Fin., LLC, 751 F. Supp. 2d 1116 (N.D. Cal. 2010).

Ritter v. Durand Chevrolet, Inc., 945 F. Supp. 381 (D. Mass. 1996).

— 12 C.F.R. § 226.4(d)(3) — 1 case

Lopez v. Orlor, Inc., 176 F.R.D. 35 (D. Conn. 1997).

— 12 C.F.R. § 226.4(e) — 1 case

Bass v. Boston Five Cent Sav. Bank, 478 F. Supp. 741 (D. Mass. 1979).

— 12 C.F.R. § 226.4(e)(1) — 3 cases

Brodo v. Bankers Trust Co., 847 F. Supp. 353 (E.D. Pa. 1994).

Pignato v. Great W. Bank, 664 So. 2d 1011 (Fla. 4th DCA 1995).

Lewis v. Award Dodge, Inc., 620 F. Supp. 135 (D. Conn. 1985).

— 12 C.F.R. § 226.4(e)(2) — 1 case

Simmons v. Am. Budget Plan, Inc., 386 F. Supp. 194 (E.D. La. 1974).

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.