15 U.S.C. § 1605 : US Code - Section 1605: Determination of finance charge

Search 15 U.S.C. § 1605 : US Code - Section 1605: Determination of finance charge

(a) "Finance charge" defined
Except 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 the creditor as an incident to
the extension of credit. The finance charge does not include
charges of a type payable in a comparable cash transaction. 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. Examples of charges which are included in the
finance charge include any of the following types of charges which
are applicable:
(1) Interest, time price differential, and any amount payable
under a point, discount, or other system or additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder's fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or insurance
protecting the creditor against the obligor's default or other
credit loss.
(6) Borrower-paid mortgage broker fees, including fees paid
directly to the broker or the lender (for delivery to the broker)
whether such fees are paid in cash or financed.
(b) Life, accident, or health insurance premiums included in
finance charge
Charges or premiums for credit life, accident, or health
insurance written in connection with any consumer credit
transaction shall be included in the finance charges unless
(1) the coverage of the debtor by the insurance is not a factor
in the approval by the creditor of the extension of credit, and
this fact is clearly disclosed in writing to the person applying
for or obtaining the extension of credit; and
(2) in order to obtain the insurance in connection with the
extension of credit, the person to whom the credit is extended
must give specific affirmative written indication of his desire
to do so after written disclosure to him of the cost thereof.
(c) Property damage and liability insurance premiums included in
finance charge
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 to
the person to whom the credit is extended, setting forth the cost
of the insurance if obtained from or through the creditor, and
stating that the person to whom the credit is extended may choose
the person through which the insurance is to be obtained.
(d) Items exempted from computation of finance charge in all credit
transactions
If any of the following items is itemized and disclosed in
accordance with the regulations of the Board in connection with any
transaction, then the creditor need not include that item in the
computation of the finance charge with respect to that transaction:
(1) Fees and charges prescribed by law which actually are or
will be paid to public officials for determining the existence of
or for perfecting or releasing or satisfying any security related
to the credit transaction.
(2) The premium payable for any insurance in lieu of perfecting
any security interest otherwise required by the creditor in
connection with the transaction, if the premium does not exceed
the fees and charges described in paragraph (1) which would
otherwise be payable.
(3) Any tax levied on security instruments or on documents
evidencing indebtedness if the payment of such taxes is a
precondition for recording the instrument securing the evidence
of indebtedness.
(e) Items exempted from computation of finance charge in extensions
of credit secured by an interest in real property
The following items, when charged in connection with any
extension of credit secured by an interest in real property, shall
not be included in the computation of the finance charge with
respect to that transaction:
(1) Fees or premiums for title examination, title insurance, or
similar purposes.
(2) Fees for preparation of loan-related documents.
(3) Escrows for future payments of taxes and insurance.
(4) Fees for notarizing deeds and other documents.
(5) Appraisal fees, including fees related to any pest
infestation or flood hazard inspections conducted prior to
closing.
(6) Credit reports.
(f) Tolerances for accuracy
In connection with credit transactions not under an open end
credit plan that are secured by real property or a dwelling, the
disclosure of the finance charge and other disclosures affected by
any finance charge -
(1) shall be treated as being accurate for purposes of this
subchapter if the amount disclosed as the finance charge -
(A) does not vary from the actual finance charge by more than
$100; or
(B) is greater than the amount required to be disclosed under
this subchapter; and
(2) shall be treated as being accurate for purposes of section
1635 of this title if -
(A) except as provided in subparagraph (B), the amount
disclosed as the finance charge does not vary from the actual
finance charge by more than an amount equal to one-half of one
percent of the total amount of credit extended; or
(B) in the case of a transaction, other than a mortgage
referred to in section 1602(aa) of this title, which -
(i) is a refinancing of the principal balance then due and
any accrued and unpaid finance charges of a residential
mortgage transaction as defined in section 1602(w) of this
title, or is any subsequent refinancing of such a
transaction; and
(ii) does not provide any new consolidation or new advance;
if the amount disclosed as the finance charge does not vary
from the actual finance charge by more than an amount equal to
one percent of the total amount of credit extended.