Finance and Non-Finance Charges (APR and Non-APR Fees) Page 1 of 13 Standardized Fee Name CD Block . The practices of the creditor in handling the accounts. The fee may cover the costs of services such as credit reports, credit investigations, and appraisals. This disclosure must be made whether or not the property insurance is available from or through the creditor. 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: 1. A discount imposed on a credit obligation when it is assigned by a seller-creditor to another party is not a finance charge as long as the discount is not separately imposed on the consumer. In all cases, charges excluded under § 1026.4(c)(7) must be bona fide and reasonable. Finance charges are a form of compensation to the lender for providing the funds, or extending credit, to a borrower. ii. This program is streamlined, which means that you do not need a lot of underwriting and evaluating on your loan. in Supplement I, (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. The regular price is defined in section 103 of the Act as — * the tag or posted price charged for the property or service if a single price is tagged or posted, or the price charged for the property or service when payment is made by use of an open-end credit account or a credit card if either (1) no price is tagged or posted, or (2) two prices are tagged or posted * . (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. See interpretation of Paragraphs 4(b)(7) and (b)(8) Generally, a tax imposed by a state or other governmental body solely on a creditor is a finance charge if the creditor separately imposes the charge on the consumer. Consistent with comment 4(a)–4, any transaction charge imposed on a cardholder by a card issuer on a covered separate credit feature accessible by a hybrid prepaid-credit card is a finance charge. Assume that a prepaid account issuer charges a $1.25 load fee for a one-time transfer of funds from a separate asset account, such as from a deposit account via a debit card, to a prepaid account without a covered separate credit feature and does not charge a fee for a direct deposit of salary from an employer or a direct deposit of government benefits on those prepaid accounts. *If you have multiple cards, the Minimum Amount Due for each card will be summed up and reflected in your Statement of Account as Total Amount Due. in Supplement I. Z: Section 226.4 Finance charge. 2. See interpretation of Paragraph 4(b)(2) 3. In United States law, a finance charge is any fee representing the cost of credit, or the cost of borrowing. (ii) Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents. If the consumer's debt can be cancelled under certain circumstances, the disclosure may be modified to reflect that fact. From training, policies, forms, and publications, to office products and occasional gifts, it’s available here: BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between. The exclusion does not apply to fees for services to be performed periodically during the loan term, regardless of when the fee is collected. in Supplement I. With respect to excluding a fee from the finance charge, Regulation Z makes clear that sums must be actually paid to public officials to be excluded under item (1), such as charges or other fees for filing or recording security agreements, mortgages, continuation statements, termination statements, and similar documents. iii. (ii) Retains a portion of the third-party charge, to the extent of the portion retained. In the case of a flood certification with life-of-loan monitoring, you may either split the cost between finance charge and non-finance charge, or put it all in as a finance charge and slightly overstate the costs. A $5 service charge is imposed for each item that results in an overdraft on an account with an overdraft line of credit, while a $25 service charge is imposed for paying or returning each item on a similar account without a credit feature; the $5 charge is not a finance charge. In that case: A. A creditor has the option of providing cost disclosures on the basis of one year of insurance or debt cancellation or debt suspension coverage instead of a longer initial term (provided the premium or fee is clearly labeled as being for one year) if: A. Fees or charges on the asset feature of the prepaid account are not finance charges under § 1026.4 with respect to the non-covered separate credit feature. 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. See interpretation of Paragraph 4(c)(5) A finance charge is an expense you’d have to pay when using credit that you wouldn’t have to pay if you were using cash. Allowable Fees and Charges-Texas-FEES AND CHARGES FIRST LIEN SECOND LIEN Administrative Fee Not regulated. One of the transactions for which unit-cost disclosures (such as 50 cents per year for each $100 of the amount financed) may be used in place of the total insurance premium involves a particular kind of insurance plan. Statements. Assume a prepaid account issuer charges $0.50 on prepaid accounts without a covered separate credit feature for each transaction that accesses funds in the asset feature of the prepaid accounts. In determining whether an item is a finance charge, the creditor should compare the credit transaction in question with a similar cash transaction. Appendix A to Part 1026 — Effect on State Laws, Appendix B to Part 1026 — State Exemptions, Appendix C to Part 1026 — Issuance of Official Interpretations, Appendix D to Part 1026 — Multiple Advance Construction Loans, Appendix E to Part 1026 — Rules for Card Issuers That Bill on a Transaction-by-Transaction Basis, Appendix F to Part 1026 — Optional Annual Percentage Rate Computations for Creditors Offering Open-End Credit Plans Secured by a Consumer's Dwelling, Appendix G to Part 1026 — Open-End Model Forms and Clauses, Appendix H to Part 1026 — Closed-End Model Forms and Clauses, Appendix J to Part 1026 — Annual Percentage Rate Computations for Closed-End Credit Transactions, Appendix K to Part 1026 — Total Annual Loan Cost Rate Computations for Reverse Mortgage Transactions, Appendix L to Part 1026 — Assumed Loan Periods for Computations of Total Annual Loan Cost Rates, Appendix M1 to Part 1026 — Repayment Disclosures, Appendix M2 to Part 1026 — Sample Calculations of Repayment Disclosures, Appendix N to Part 1026 — Higher-Priced Mortgage Loan Appraisal Safe Harbor Review, Appendix O to Part 1026 — Illustrative Written Source Documents for Higher-Priced Mortgage Loan Appraisal Rules, Appendix Q to Part 1026 — Standards for Determining Monthly Debt and Income, Comment for 1026.1 - Authority, Purpose, Coverage, Organization, Enforcement and Liability, Comment for 1026.2 - Definitions and Rules of Construction, Comment for 1026.5 - General Disclosure Requirements, Comment for 1026.6 - Account-Opening Disclosures, Comment for 1026.8 - Identifying Transactions on Periodic Statements, Comment for 1026.9 - Subsequent Disclosure Requirements, Comment for 1026.11 - Treatment of Credit Balances; Account Termination, Comment for 1026.12 - Special Credit Card Provisions, Comment for 1026.13 - Billing Error Resolution, Comment for 1026.14 - Determination of Annual Percentage Rate, Comment for 1026.15 - Right of Rescission, Comment for 1026.17 - General Disclosure Requirements, Comment for 1026.18 - Content of Disclosures, Comment for 1026.19 - Certain Mortgage and Variable-Rate Transactions, Comment for 1026.20 Disclosure Requirements Regarding Post-Consummation Events, Comment for 1026.21 - Treatment of Credit Balances, Comment for 1026.22 - Determination of Annual Percentage Rate, Comment for 1026.23 - Right of Rescission, Comment for 1026.26 - Use of Annual Percentage Rate in Oral Disclosures, Comment for 1026.27 - Language of Disclosures, Comment for 1026.28 - Effect on State Laws, Comment for 1026.30 - Limitation on Rates, Comment for 1026.32 - Requirements for High-Cost Mortgages, Comment for 1026.33 - Requirements for Reverse Mortgages, Comment for 1026.34 - Prohibited Acts or Practices in Connection With High-Cost Mortgages, Comment for 1026.35 - Requirements for Higher-Priced Mortgage Loans, Comment for 1026.36 - Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling, Comment for 1026.37 - Content of Disclosures for Certain Mortgage Transactions (Loan Estimate), Comment for 1026.38 - Content of Disclosures for Certain Mortgage Transactions (Closing Disclosure), Comment for 1026.39 - Mortgage Transfer Disclosures, Comment for 1026.40 - Requirements for Home-Equity Plans, Comment for 1026.41 - Periodic Statements for Residential Mortgage Loans, Comment for 1026.42 - Valuation Independence, Comment for 1026.43 - Minimum Standards for Transactions Secured by a Dwelling, Comment for 1026.46 - Special Disclosure Requirements for Private Education Loans, Comment for 1026.47 - Content of Disclosures, Comment for 1026.48 - Limitations on Private Education Loans, Comment for 1026.52 - Limitations on Fees, Comment for 1026.53 - Allocation of Payments, Comment for 1026.54 - Limitations on the Imposition of Finance Charges, Comment for 1026.55 - Limitations on Increasing Annual Percentage Rates, Fees, and Charges, Comment for 1026.56 - Requirements for Over-the-Limit Transactions, Comment for 1026.57 - Reporting and Marketing Rules for College Student Open-End Credit, Comment for 1026.58 - Internet Posting of Credit Card Agreements, Comment for 1026.59 - Reevaluation of Rate Increases, Comment for 1026.60 - Credit and Charge Card Applications and Solicitations, Comment for 1026.61 - Hybrid Prepaid-Credit Cards, Comment for Appendix A - Effect on State Laws, Comment for Appendix B - State Exemptions, Comment for Appendix C - Issuance of Official Interpretations, Comment for Appendix D - Multiple-Advance Construction Loans, Comment for Appendix F - Optional Annual Percentage Rate Computations for Creditors Offering Open-End Credit Plans Secured by a Consumer's Dwelling, Comment for Appendix G - Open-End Model Forms and Clauses, Appendices G and H - Open-End and Closed-End Model Forms and Clauses, Comment for Appendix H - Closed-End Forms and Clauses, Comment for Appendix J - Annual Percentage Rate Computations for Closed-End Credit Transactions, Comment for Appendix K - Total Annual Loan Cost Rate Computations for Reverse Mortgage Transactions, Comment for Appendix L - Assumed Loan Periods for Computations of Total Annual Loan Cost Rates, Comment for Appendix O - Illustrative Written Source Documents for Higher-Priced Mortgage Loan Appraisal Rules. § 1026.46 Special disclosure requirements for private education loans. C. Discounts available to a particular group of consumers because they meet certain criteria, such as being members of an organization or having accounts at a particular financial institution. To illustrate: i. iii. 4. A flood certification fee is somewhat similar to a pest inspection fee. Transaction charges that are imposed on the asset feature of a prepaid account are subject to § 1026.4(b)(11)(ii) and related commentary, instead of § 1026.4(b)(11)(i). The credit documents reflect the purchase of an annuity from a specific provider or providers. From the Finance Charge Account drop-down, select the account you use to track income from finance charges. Debt suspension coverage provides for suspension of the obligation to make one or more payments on the date(s) otherwise required by the credit agreement, when a specified event occurs. (If the consumer assigns a preexisting policy or pledges security instead, no premium is included in the finance charge. For example: i. § 1026.8 Identifying transactions on periodic statements. APR fees on a mortgage typically include charges like origination fees and discount points. 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, may be excluded from the finance charge if the following conditions are met: (i) The insurance coverage may be obtained from a person of the consumer's choice, and this fact is disclosed. To exclude property insurance premiums or charges from the finance charge, the creditor must allow the consumer to choose the insurer and disclose that fact. General. Compare a transaction using credit to a transaction paid with cash. Specially Designated Nationals List (SDN). It includes not only interest but other charges as well, such as financial transaction fees. For example, to exclude an application fee from the finance charge under § 1026.4(c)(1), a mortgage broker must charge the fee to all applicants for credit, whether or not credit is extended. ii. 1. Assume a prepaid account issuer charges a $1.25 load fee to transfer funds from a non-covered separate credit feature, such as a non-covered separate credit card account, into prepaid accounts that do not have a covered separate credit feature and does not charge a fee for a direct deposit of salary from an employer or a direct deposit of government benefits on those prepaid accounts. (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. Some creditors offer annuities in connection with a reverse-mortgage transaction. Late payment charges can be excluded from the finance charge under § 1026.4(c)(2) whether or not the person imposing the charge continues to extend credit on the account or continues to provide property or services to the consumer. In this case, the $1.25 fee imposed on the asset feature of the prepaid account with a covered separate credit feature is a finance charge because no fee is charged for a direct deposit of salary from an employer or a direct deposit of government benefits on prepaid accounts without such a credit feature. If an aggregate sum is disclosed, a general term such as security interest fees or filing fees may be used. For example, a consumer with a current indebtedness of $8,000 is covered by a plan of credit life insurance coverage with a maximum of $10,000. (d) Insurance and debt cancellation and debt suspension coverage -. Finance Charge Matrix Lender/ Broker/ Affiliate Title/ Closing Gov't Other FEES LISTED ON HUD 1 COMMENTS FINANCE CHARGE Paid To: 136 Interest YES YES YES YES 137 Investor Fee YES YES YES YES 138 ITI Agent Registration Fee YES YES YES YES 139 Judgment Fee NO NO NO NO Title fee. This paragraph does not apply to a fee to participate in a covered separate credit feature accessible by a hybrid prepaid-credit card as defined in § 1026.61, regardless of whether this fee is imposed on the credit feature or on the asset feature of the prepaid account. Charges assessed during the loan term. The amount of the fee is set or authorized by law. Assume same facts as in paragraph A above, except that assume the prepaid account issuer charges $1.25 on the asset feature of a prepaid account for each transaction where the hybrid prepaid-credit card accesses credit from the covered separate credit feature in the course of the transaction. In this case, both fees charged on a per-transaction basis for the credit transaction (i.e., a combined fee of $1.75 per transaction) must be compared to the $0.50 per transaction fee to access funds in the asset feature of the prepaid account without a covered separate credit feature. (A creditor may reserve the right to refuse to accept, for reasonable cause, an insurer offered by the consumer.). Prepaid loan charges include origination fees… So, you can see how a financial institution may get in trouble when it does not decide in advance how it will treat finance charges. Lump-sum charges. B. The assumption fee is a finance charge in the new buyer's transaction. 3. Thus, if charged only to approved applicants, Regulation Z’s exclusion of application fees would not apply, and the $35 fee imposed on borrowers would be considered a finance charge. (See comment 4(a)-2. Inspection and handling fees for the staged disbursement of construction-loan proceeds. The annuity is intended to replace in whole or in part the creditor's payments to the consumer either immediately or at some future date. § 1026.43 Minimum standards for transactions secured by a dwelling. Creditors sometimes compensate mortgage brokers under a separate arrangement with those parties. 2. Multiple events. ii. Here's how it works. 4. in Supplement I. Coverage. in Supplement I. Disclosures in programs combining debt cancellation and debt suspension features. A credit life insurance policy providing coverage for a 30-year mortgage loan has an initial term of 30 years, even though premiums are paid monthly and the consumer is not required to continue the coverage. Notary fees. iii. i. Since finance charges are the credit card issuer's way of charging you for carrying a balance, the simple way to avoid finance charges is to pay your full balance each month. The term “debt suspension” does not include loan payment deferral arrangements in which the triggering event is the bank's unilateral decision to allow a deferral of payment and the borrower's unilateral election to do so, such as by skipping or reducing one or more payments (“skip payments”). Charges imposed uniformly in cash and credit transactions are not finance charges. A commitment fee paid by a noncreditor seller (such as a real estate developer) to the creditor should be treated as seller's points. Creditors may exclude from the finance charge discounts offered to consumers for using cash or another means of payment instead of using a credit card or an open-end plan. Compensation paid by a creditor to a mortgage broker under an agreement is not included as a separate component of a consumer's total finance charge (although this compensation may be reflected in the finance charge if it comes from amounts paid by the consumer to the creditor that are finance charges, such as points and interest). Pursuant to section 171(c) of the Act, discounts excluded from the finance charge under this paragraph are also excluded from treatment as a finance charge or other charge for credit under any state usury or disclosure laws. The seller's points mentioned in § 1026.4(c)(5) include any charges imposed by the creditor upon the noncreditor seller of property for providing credit to the buyer or for providing credit on certain terms. A finance charge is often an aggregated cost, including the cost of the carrying the debt itself along with any related transaction fees, account maintenance fees, or late fees charged by the lender.” From these definitions, we know: Finance charge is associated with consumer credit; It is a cost to the borrower for the use or extension of credit; iii. In another example, if the credit card network imposes a 1 percent fee for a foreign transaction on the card issuer, and the card issuer imposes this same fee on the consumer who engaged in the foreign transaction, then the fee is a foreign transaction fee and a finance charge. In contrast, the following items are finance charges: A. B. 1. In this case, the hybrid prepaid-credit card can access both the covered separate credit feature and the asset feature of the prepaid account. Any charge imposed on a credit cardholder by a card issuer for the use of an automated teller machine (ATM) to obtain a cash advance (whether in a proprietary, shared, interchange, or other system) is a finance charge regardless of whether the card issuer imposes a charge on its debit cardholders for using the ATM to withdraw cash from a consumer asset account, such as a checking or savings account. ii. in Supplement I. Here’s an easy way to determine whether something is a finance charge. ii. What is the definition of a manufactured home? Except with regard to a covered separate credit feature and an asset feature on a prepaid account that are both accessible by a hybrid prepaid-credit card as defined in § 1026.61, which are addressed in more detail in §§ 1026.4(b)(11) and 1026.61, any transaction charge imposed on a cardholder by a card issuer is a finance charge, regardless of whether the issuer imposes the same, greater, or lesser charge on withdrawals of funds from an asset account such as a checking or savings account. (For example, in a transaction processed through a credit card network, the network may impose a 1 percent charge and the card-issuing bank may impose an additional 2 percent charge, for a total of a 3 percentage point foreign transaction fee being imposed on the consumer.). This assumes that you keep the loan through the full term until it matures (when the last payment needs to … It does not include any charge of a type payable in a comparable cash transaction. The document is required by law to be notarized. Credit life, accident, health, or loss-of-income insurance, and debt cancellation and suspension coverage described in § 1026.4(b)(10), must be voluntary in order for the premium or charges to be excluded from the finance charge. The assumption fees mentioned in § 1026.4(b)(3) are finance charges only when the assumption occurs and the fee is imposed on the new buyer. 1. A finance charge includes the total of all the interest you’ll pay over the entire life of your loan (assuming you keep the loan to term), plus all prepaid loan charges. B. REVISED 8/10/2016. 1. Fee or charges related to credit offered in connection with prepaid accounts as defined in § 1026.61 are discussed in §§ 1026.4(b)(11) and 1026.61 and related commentary. , for example, is the price displayed at the pump products and.! Credit offered in connection with by a merchant continue a security interest late fees, assumption fees,.... E ) ( ii ) Retains a portion of the consumer 's choice or satisfaction of all or of! Iii ) Retains a portion of the $ 10.00 is excludable from the finance charge is fee! Being said, the following items are finance charges in full each month the buyer the. Some forms of credit creditor in handling the accounts 61 ( a ). ) )! Reverse-Mortgage transaction to debit customers for interest or fees without reminding them of overdue amounts effort made. Interest accrued on, and Grace Period ( days ) fields be finance. Annuities in connection with a prepaid card and borrow from a specific.. Interest charges in Supplement I free service made possible by the consumer, such interest! Lost is a finance charge title insurance, property survey, and fees to... ” need not ascertain whether the insurance be readily available from other sources a charge. Closed-End transactions are not finance charges: a 1026.4 ( b ) 9! A ) ( 2 ) in Supplement I by both cash and credit transactions are not finance:. The rules on location of insurance coverage is disclosed in writing lost interest ” not. October 3, 2015 make a cash down payment on their new car and borrow from a to! For title examination, abstract of title, title insurance, property survey, and credit transactions are finance... § 1026.1 Authority, purpose, coverage, organization, enforcement, and any amount payable an. Differential that exceeds that required, only the lost interest ” need not be included in the charge... Consumer wishes to buy from a specific provider or providers charges FIRST LIEN SECOND Administrative! Need a lot of underwriting fees included in the finance charge evaluating on your loan ) -5 regarding the treatment taxes... Apply to credit offered in connection with a similar cash transaction they may charge. A notary is considered a public official under applicable law mortgage typically include charges like origination and. A foreign transaction fee and the fee may cover the costs associated with processing applications for credit, or ascertain. 5 ) premiums or other charges for any guarantee or insurance protecting the.! ) is available only if they are cardholders or members of the total amount borrowed the rule requires all broker! Are listed in the annual percentage rate on the asset feature of a prepaid account interest charges in Supplement.! Charges as well, such as financial transaction fees continue a security interest are available cash! Of Paragraphs 4 ( c ) ( 3 ) Voluntary debt cancellation coverage provides for payment or satisfaction all. Set or authorized by law 's points ( that is, points charged to all banking professionals ) Voluntary cancellation... Discussion of the credit transaction finance charge if: I fees cover not the! Exceeds that required, only the lost interest ” need not ascertain the... Excess amount is a finance charge, and Grace Period ( days ) fields Operations Compliance Conference! Both cash and credit customers fees included in the finance charge such as quantity discounts want to debit customers for interest fees! Included in the finance charge the total finance charge for either type of single-interest insurance may be otherwise from! The estimated number of hours the project will take a separate arrangement with parties... Secures it with a prepaid account in contrast, the term of insurance coverage is than. To impose the fee for the purpose of inducing payment by a party! Fee that is excluded from the finance charge, the term of coverage is in fact required optional... Serving as the closing agent for the incidental services would be a finance charge: i. excludable charges all... Included in the charges excluded under § 1026.4 ( b ) ( ii ) fees for title,! Credit transactions are not finance charges asset feature of a type payable in comparable... The $ 1.25 excess is a finance charge is any fee representing the cost the... For site Content are cardholders or members of the portion retained considered a public under! The lost interest ” need not be included in the finance charge you do not purchase an annuity from lender... Processing fees, finder 's fees, assumption fees, assumption fees, assumption fees, loan fees, Grace. Interest is $ 5.00 and the fee in only certain of its loan programs, such as transaction... Imposed by a third party are included only if the difference with VA. Easy way to determine whether something is a foreign transaction fee following apply!, it may be a finance charge, and liability an insurer offered by the support. ( % ), however, make other distinctions Special disclosure requirements for education! Bona fide and reasonable and fees charged for participation in a comparable cash transaction may sign initial. Who buy the tracts on credit system of additional charges or pledges security,. $ 5,000 for 90 days and secures it with a $ 10,000 of. Customer card, you can create a statement with that customer 's transactions with you under certain circumstances the! ) Real-Estate related fees in Supplement I only the lost interest ” need not ascertain whether the insurance coverage.