15 U.S.C. § 1602 — Definitions and rules of construction

Page 1455 TITLE 15—COMMERCE AND TRADE § 1602 gage loans through the use of disclosures, the Board may, by rule, exempt from or modify disclosure re- quirements, in whole or in part, for any class of resi- dential mortgage loans if the Board determines that such exemption or modification is in the interest of consumers and in the public interest.’’ ANALYSIS OF FURTHER RESTRICTIONS ON OFFERS OF CREDIT OR INSURANCE Pub. L. 108–159, title II, § 213(e), Dec. 4, 2003, 117 Stat. 1979, provided that: ‘‘(1) IN GENERAL.—The Board shall conduct a study of— ‘‘(A) the ability of consumers to avoid receiving written offers of credit or insurance in connection with transactions not initiated by the consumer; and ‘‘(B) the potential impact that any further restric- tions on providing consumers with such written of- fers of credit or insurance would have on consumers. ‘‘(2) REPORT.—The Board shall submit a report sum- marizing the results of the study required under para- graph (1) to the Congress not later than 12 months after the date of enactment of this Act [Dec. 4, 2003], to- gether with such recommendations for legislative or administrative action as the Board may determine to be appropriate. ‘‘(3) CONTENT OF REPORT.—The report described in paragraph (2) shall address the following issues: ‘‘(A) The current statutory or voluntary mecha- nisms that are available to a consumer to notify lenders and insurance providers that the consumer does not wish to receive written offers of credit or in- surance. ‘‘(B) The extent to which consumers are currently utilizing existing statutory and voluntary mecha- nisms to avoid receiving offers of credit or insurance. ‘‘(C) The benefits provided to consumers as a result of receiving written offers of credit or insurance. ‘‘(D) Whether consumers incur significant costs or are otherwise adversely affected by the receipt of written offers of credit or insurance. ‘‘(E) Whether further restricting the ability of lend- ers and insurers to provide written offers of credit or insurance to consumers would affect— ‘‘(i) the cost consumers pay to obtain credit or in- surance; ‘‘(ii) the availability of credit or insurance; ‘‘(iii) consumers’ knowledge about new or alter- native products and services; ‘‘(iv) the ability of lenders or insurers to compete with one another; and ‘‘(v) the ability to offer credit or insurance prod- ucts to consumers who have been traditionally un- derserved.’’ [For definitions of terms used in section 213(e) of Pub. L. 108–159, set out above, see section 2 of Pub. L. 108–159, set out as a Definitions note under section 1681 of this title.] FEDERAL RESERVE STUDY OF HOME EQUITY LENDING AND APPROPRIATE INTEREST RATE INDEX Pub. L. 103–325, title I, § 157, Sept. 23, 1994, 108 Stat. 2197, provided that during the period beginning 180 days after Sept. 23, 1994, and ending 2 years after that date, the Board of Governors of the Federal Reserve System was to conduct a study and submit to the Congress a report, including recommendations for any appropriate legislation, regarding whether consumers engaging in open end credit transactions as defined in section 1602 of this title secured by principal dwellings have ade- quate Federal protection and whether a more appro- priate interest rate index existed for purposes of sec- tion 1602(bb)(1)(A) of this title than the yield on Treas- ury securities. HEARINGS ON HOME EQUITY LENDING Pub. L. 103–325, title I, § 158, Sept. 23, 1994, 108 Stat. 2197, as amended by Pub. L. 111–203, title X, § 1096, July 21, 2010, 124 Stat. 2102, provided that: ‘‘(a) HEARINGS.—Not less than once during the 3-year period beginning on the date of enactment of this Act [Sept. 23, 1994], and regularly thereafter, the Bureau, in consultation with the Advisory Board to the Bureau, shall conduct a public hearing to examine the home eq- uity loan market and the adequacy of existing regu- latory and legislative provisions and the provisions of this subtitle [see Short Title of 1994 Amendment note above] in protecting the interests of consumers, and low-income consumers in particular. ‘‘(b) PARTICIPATION.—In conducting hearings required by subsection (a), the Bureau shall solicit participation from consumers, representatives of consumers, lenders, and other interested parties.’’ STUDY BY FEDERAL RESERVE BOARD OF GOVERNORS COVERING EFFECT OF CHARGE CARD TRANSACTIONS UPON CARD ISSUERS, MERCHANTS, AND CONSUMERS Pub. L. 97–25, title II, § 202, July 27, 1981, 95 Stat. 145, directed Board of Governors of Federal Reserve Sys- tem, not later than 2 years after July 27, 1981, to pre- pare a study and submit its findings to Congress on the effect of charge card transactions upon card issuers, merchants, and consumers. INFERENCE OF LEGISLATIVE INTENT IN SECTION CAPTIONS AND CATCHLINES Pub. L. 90–321, title V, § 502, May 29, 1968, 82 Stat. 167, provided that: ‘‘Captions and catchlines are intended solely as aids to convenient reference, and no inference as to the legislative intent with respect to any provi- sion enacted by this Act [enacting this chapter, section 891 to 896 of Title 18, Crimes and Criminal Procedure, and provisions set out as notes under this section, sec- tions 1631 and 1671 of this title, and section 891 of Title 18] may be drawn from them.’’ GRAMMATICAL USAGES Pub. L. 90–321, title V, § 503, May 30, 1968, 82 Stat. 167, provided that: ‘‘In this Act [enacting this chapter, sec- tions 891 to 896 of Title 18, Crimes and Criminal Proce- dure, and provisions set out as notes under this section, sections 1631 and 1671 of this title, and section 891 of Title 18]: ‘‘(1) The word ‘may’ is used to indicate that an ac- tion either is authorized or is permitted. ‘‘(2) The word ‘shall’ is used to indicate that an ac- tion is both authorized and required. ‘‘(3) The phrase ‘may not’ is used to indicate that an action is both unauthorized and forbidden. ‘‘(4) Rules of law are stated in the indicative mood.’’ DEFINITION Pub. L. 111–203, title XIV, § 1495, July 21, 2010, 124 Stat. 2207, provided that: ‘‘For purposes of this title [see Tables for classification], the term ‘designated transfer date’ means the date established under section 1062 of this Act [12 U.S.C. 5582].’’ § 1602. Definitions and rules of construction (a) The definitions and rules of construction set forth in this section are applicable for the purposes of this subchapter. (b) BUREAU.—The term ‘‘Bureau’’ means the Bureau of Consumer Financial Protection. (c) The term ‘‘Board’’ refers to the Board of Governors of the Federal Reserve System. (d) The term ‘‘organization’’ means a corpora- tion, government or governmental subdivision or agency, trust, estate, partnership, coopera- tive, or association. (e) The term ‘‘person’’ means a natural person or an organization. (f) The term ‘‘credit’’ means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment. Page 1456 TITLE 15—COMMERCE AND TRADE § 1602 (g) The term ‘‘creditor’’ refers only to a person who both (1) regularly extends, whether in con- nection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit trans- action is initially payable on the face of the evi- dence of indebtedness or, if there is no such evi- dence of indebtedness, by agreement. Notwith- standing the preceding sentence, in the case of an open-end credit plan involving a credit card, the card issuer and any person who honors the credit card and offers a discount which is a fi- nance charge are creditors. For the purpose of the requirements imposed under part D of this subchapter and sections 1637(a)(5), 1637(a)(6), 1637(a)(7), 1637(b)(1), 1637(b)(2), 1637(b)(3), 1637(b)(8), and 1637(b)(10) of this title, the term ‘‘creditor’’ shall also include card issuers wheth- er or not the amount due is payable by agree- ment in more than four installments or the pay- ment of a finance charge is or may be required, and the Bureau shall, by regulation, apply these requirements to such card issuers, to the extent appropriate, even though the requirements are by their terms applicable only to creditors offer- ing open-end credit plans. Any person who origi- nates 2 or more mortgages referred to in sub- section (aa) in any 12-month period or any per- son who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of this subchapter. The term ‘‘creditor’’ includes a private edu- cational lender (as that term is defined in sec- tion 1650 of this title) for purposes of this sub- chapter. (h) The term ‘‘credit sale’’ refers to any sale in which the seller is a creditor. The term includes any contract in the form of a bailment or lease if the bailee or lessee contracts to pay as com- pensation for use a sum substantially equivalent to or in excess of the aggregate value of the property and services involved and it is agreed that the bailee or lessee will become, or for no other or a nominal consideration has the option to become, the owner of the property upon full compliance with his obligations under the con- tract. (i) The adjective ‘‘consumer’’, used with ref- erence to a credit transaction, characterizes the transaction as one in which the party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes. (j) The terms ‘‘open end credit plan’’ and ‘‘open end consumer credit plan’’ mean a plan under which the creditor reasonably con- templates repeated transactions, which pre- scribes the terms of such transactions, and which provides for a finance charge which may be computed from time to time on the out- standing unpaid balance. A credit plan or open end consumer credit plan which is an open end credit plan or open end consumer credit plan within the meaning of the preceding sentence is an open end credit plan or open end consumer credit plan even if credit information is verified from time to time. (k) The term ‘‘adequate notice,’’ as used in section 1643 of this title, means a printed notice to a cardholder which sets forth the pertinent facts clearly and conspicuously so that a person against whom it is to operate could reasonably be expected to have noticed it and understood its meaning. Such notice may be given to a cardholder by printing the notice on any credit card, or on each periodic statement of account, issued to the cardholder, or by any other means reasonably assuring the receipt thereof by the cardholder. (l) The term ‘‘credit card’’ means any card, plate, coupon book or other credit device exist- ing for the purpose of obtaining money, prop- erty, labor, or services on credit. (m) The term ‘‘accepted credit card’’ means any credit card which the cardholder has re- quested and received or has signed or has used, or authorized another to use, for the purpose of obtaining money, property, labor, or services on credit. (n) The term ‘‘cardholder’’ means any person to whom a credit card is issued or any person who has agreed with the card issuer to pay obli- gations arising from the issuance of a credit card to another person. (o) The term ‘‘card issuer’’ means any person who issues a credit card, or the agent of such person with respect to such card. (p) The term ‘‘unauthorized use,’’ as used in section 1643 of this title, means a use of a credit card by a person other than the cardholder who does not have actual, implied, or apparent au- thority for such use and from which the card- holder receives no benefit. (q) The term ‘‘discount’’ as used in section 1666f of this title means a reduction made from the regular price. The term ‘‘discount’’ as used in section 1666f of this title shall not mean a sur- charge. (r) The term ‘‘surcharge’’ as used in this sec- tion and section 1666f of this title means any means of increasing the regular price to a card- holder which is not imposed upon customers paying by cash, check, or similar means.’’ (s) The term ‘‘State’’ refers to any State, the Commonwealth of Puerto Rico, the District of Columbia, and any territory or possession of the United States. (t) The term ‘‘agricultural purposes’’ includes the production, harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates, plants, propagates, or nurtures those agricultural products, including but not limited to the acquisition of farmland, real property with a farm residence, and personal property and services used primarily in farming. (u) The term ‘‘agricultural products’’ includes agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any prod- ucts thereof, including processed and manufac- tured products, and any and all products raised or produced on farms and any processed or man- ufactured products thereof. (v) The term ‘‘material disclosures’’ means the disclosure, as required by this subchapter, of the annual percentage rate, the method of deter- mining the finance charge and the balance upon Page 1457 TITLE 15—COMMERCE AND TRADE § 1602 which a finance charge will be imposed, the amount of the finance charge, the amount to be financed, the total of payments, the number and amount of payments, the due dates or periods of payments scheduled to repay the indebtedness, and the disclosures required by section 1639(a) of this title. (w) The term ‘‘dwelling’’ means a residential structure or mobile home which contains one to four family housing units, or individual units of condominiums or cooperatives. (x) The term ‘‘residential mortgage trans- action’’ means a transaction in which a mort- gage, deed of trust, purchase money security in- terest arising under an installment sales con- tract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling. (y) As used in this section and section 1666f of this title, the term ‘‘regular price’’ means 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 plan or a credit card if either (1) no price is tagged or posted, or (2) two prices are tagged or posted, one of which is charged when payment is made by use of an open-end credit plan or a credit card and the other when payment is made by use of cash, check, or similar means. For pur- poses of this definition, payment by check, draft, or other negotiable instrument which may result in the debiting of an open-end credit plan or a credit cardholder’s open-end account shall not be considered payment made by use of the plan or the account. (z) Any reference to any requirement imposed under this subchapter or any provision thereof includes reference to the regulations of the Bu- reau under this subchapter or the provision thereof in question. (aa) The disclosure of an amount or percent- age which is greater than the amount or per- centage required to be disclosed under this sub- chapter does not in itself constitute a violation of this subchapter. (bb) HIGH-COST MORTGAGE.— (1) DEFINITION.— (A) IN GENERAL.—The term ‘‘high-cost mortgage’’, and a mortgage referred to in this subsection, means a consumer credit transaction that is secured by the con- sumer’s principal dwelling, other than a re- verse mortgage transaction, if— (i) in the case of a credit transaction se- cured— (I) by a first mortgage on the con- sumer’s principal dwelling, the annual percentage rate at consummation of the transaction will exceed by more than 6.5 percentage points (8.5 percentage points, if the dwelling is personal property and the transaction is for less than $50,000) the average prime offer rate, as defined in section 1639c(b)(2)(B) of this title, for a comparable transaction; or (II) by a subordinate or junior mort- gage on the consumer’s principal dwell- ing, the annual percentage rate at con- summation of the transaction will ex- ceed by more than 8.5 percentage points the average prime offer rate, as defined in section 1639c(b)(2)(B) of this title, for a comparable transaction; (ii) the total points and fees payable in connection with the transaction, other than bona fide third party charges not re- tained by the mortgage originator, cred- itor, or an affiliate of the creditor or mort- gage originator, exceed— (I) in the case of a transaction for $20,000 or more, 5 percent of the total transaction amount; or (II) in the case of a transaction for less than $20,000, the lesser of 8 percent of the total transaction amount or $1,000 (or such other dollar amount as the Board shall prescribe by regulation); or (iii) the credit transaction documents permit the creditor to charge or collect prepayment fees or penalties more than 36 months after the transaction closing or such fees or penalties exceed, in the aggre- gate, more than 2 percent of the amount prepaid. (B) INTRODUCTORY RATES TAKEN INTO AC- COUNT.—For purposes of subparagraph (A)(i), the annual percentage rate of interest shall be determined based on the following inter- est rate: (i) In the case of a fixed-rate transaction in which the annual percentage rate will not vary during the term of the loan, the interest rate in effect on the date of con- summation of the transaction. (ii) In the case of a transaction in which the rate of interest varies solely in accord- ance with an index, the interest rate deter- mined by adding the index rate in effect on the date of consummation of the trans- action to the maximum margin permitted at any time during the loan agreement. (iii) In the case of any other transaction in which the rate may vary at any time during the term of the loan for any reason, the interest charged on the transaction at the maximum rate that may be charged during the term of the loan. (C) MORTGAGE INSURANCE.—For the pur- poses of computing the total points and fees under paragraph (4), the total points and fees shall exclude— (i) any premium provided by an agency of the Federal Government or an agency of a State; (ii) any amount that is not in excess of the amount payable under policies in ef- fect at the time of origination under sec- tion 203(c)(2)(A) of the National Housing Act (12 U.S.C. 1709(c)(2)(A)), provided that the premium, charge, or fee is required to be refundable on a pro-rated basis and the refund is automatically issued upon notifi- cation of the satisfaction of the underlying mortgage loan; and (iii) any premium paid by the consumer after closing. (2)(A) After the 2-year period beginning on the effective date of the regulations promulgated Page 1458 TITLE 15—COMMERCE AND TRADE § 1602 under section 155 of the Riegle Community De- velopment and Regulatory Improvement Act of 1994, and no more frequently than biennially after the first increase or decrease under this subparagraph, the Bureau may by regulation in- crease or decrease the number of percentage points specified in paragraph (1)(A), if the Bu- reau determines that the increase or decrease is— (i) consistent with the consumer protections against abusive lending provided by the amendments made by subtitle B of title I of the Riegle Community Development and Reg- ulatory Improvement Act of 1994; and (ii) warranted by the need for credit. (B) An increase or decrease under subpara- graph (A)— (i) may not result in the number of percent- age points referred to in paragraph (1)(A)(i)(I) being less than 6 percentage points or greater than 10 percentage points; and (ii) may not result in the number of percent- age points referred to in paragraph (1)(A)(i)(II) being less than 8 percentage points or greater than 12 percentage points. (C) In determining whether to increase or de- crease the number of percentage points referred to in subparagraph (A), the Bureau shall consult with representatives of consumers, including low-income consumers, and lenders. (3) The amount specified in paragraph (1)(B)(ii) shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index, as reported on June 1 of the year preceding such adjustment. (4) For purposes of paragraph (1)(B), points and fees shall include— (A) all items included in the finance charge, except interest or the time-price differential; (B) all compensation paid directly or indi- rectly by a consumer or creditor to a mort- gage originator from any source, including a mortgage originator that is also the creditor in a table-funded transaction; (C) each of the charges listed in section 1605(e) of this title (except an escrow for fu- ture payment of taxes), unless— (i) the charge is reasonable; (ii) the creditor receives no direct or indi- rect compensation; and (iii) the charge is paid to a third party un- affiliated with the creditor; and (D) premiums or other charges payable at or before closing for any credit life, credit dis- ability, credit unemployment, or credit prop- erty insurance, or any other accident, loss-of- income, life or health insurance, or any pay- ments directly or indirectly for any debt can- cellation or suspension agreement or contract, except that insurance premiums or debt can- cellation or suspension fees calculated and paid in full on a monthly basis shall not be considered financed by the creditor; (E) the maximum prepayment fees and pen- alties which may be charged or collected under the terms of the credit transaction; (F) all prepayment fees or penalties that are incurred by the consumer if the loan refi- nances a previous loan made or currently held by the same creditor or an affiliate of the creditor; and (G) such other charges as the Bureau deter- mines to be appropriate. (5) CALCULATION OF POINTS AND FEES FOR OPEN- END CONSUMER CREDIT PLANS.—In the case of open-end consumer credit plans, points and fees shall be calculated, for purposes of this section and section 1639 of this title, by adding the total points and fees known at or before closing, in- cluding the maximum prepayment penalties which may be charged or collected under the terms of the credit transaction, plus the min- imum additional fees the consumer would be re- quired to pay to draw down an amount equal to the total credit line. (6) This subsection shall not be construed to limit the rate of interest or the finance charge that a person may charge a consumer for any ex- tension of credit. (cc) The term ‘‘reverse mortgage transaction’’ means a nonrecourse transaction in which a mortgage, deed of trust, or equivalent consen- sual security interest is created against the con- sumer’s principal dwelling— (1) securing one or more advances; and (2) with respect to which the payment of any principal, interest, and shared appreciation or equity is due and payable (other than in the case of default) only after— (A) the transfer of the dwelling; (B) the consumer ceases to occupy the dwelling as a principal dwelling; or (C) the death of the consumer. (dd) DEFINITIONS RELATING TO MORTGAGE ORIGINATION AND RESIDENTIAL MORTGAGE LOANS.— (1) COMMISSION.—Unless otherwise specified, the term ‘‘Commission’’ means the Federal Trade Commission. (2) MORTGAGE ORIGINATOR.—The term ‘‘mort- gage originator’’— (A) means any person who, for direct or in- direct compensation or gain, or in the expec- tation of direct or indirect compensation or gain— (i) takes a residential mortgage loan ap- plication; (ii) assists a consumer in obtaining or applying to obtain a residential mortgage loan; or (iii) offers or negotiates terms of a resi- dential mortgage loan; (B) includes any person who represents to the public, through advertising or other means of communicating or providing infor- mation (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in subparagraph (A); (C) does not include any person who is— (i) not otherwise described in subpara- graph (A) or (B) and who performs purely administrative or clerical tasks on behalf of a person who is described in any such subparagraph; or (ii) a retailer of manufactured or mod- ular homes or an employee of the retailer if the retailer or employee, as applicable— (I) does not receive compensation or gain for engaging in activities described Page 1459 TITLE 15—COMMERCE AND TRADE § 1602 in subparagraph (A) that is in excess of any compensation or gain received in a comparable cash transaction; (II) discloses to the consumer— (aa) in writing any corporate affili- ation with any creditor; and (bb) if the retailer has a corporate af- filiation with any creditor, at least 1 unaffiliated creditor; and (III) does not directly negotiate with the consumer or lender on loan terms (including rates, fees, and other costs). (D) does not include a person or entity that only performs real estate brokerage ac- tivities and is licensed or registered in ac- cordance with applicable State law, unless such person or entity is compensated by a lender, a mortgage broker, or other mort- gage originator or by any agent of such lend- er, mortgage broker, or other mortgage originator; (E) does not include, with respect to a resi- dential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any 12-month pe- riod to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan, provided that such loan— (i) is not made by a person, estate, or trust that has constructed, or acted as a contractor for the construction of, a resi- dence on the property in the ordinary course of business of such person, estate, or trust; (ii) is fully amortizing; (iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan; (iv) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and (v) meets any other criteria the Board may prescribe; (F) does not include the creditor (except the creditor in a table-funded transaction) under paragraph (1), (2), or (4) of section 1639b(c) of this title; and (G) does not include a servicer or servicer employees, agents and contractors, includ- ing but not limited to those who offer or ne- gotiate terms of a residential mortgage loan for purposes of renegotiating, modifying, re- placing and subordinating principal of exist- ing mortgages where borrowers are behind in their payments, in default or have a reason- able likelihood of being in default or falling behind. (3) NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY.—The term ‘‘Nationwide Mort- gage Licensing System and Registry’’ has the same meaning as in the Secure and Fair En- forcement for Mortgage Licensing Act of 2008 [12 U.S.C. 5101 et seq.]. (4) OTHER DEFINITIONS RELATING TO MORT- GAGE ORIGINATOR.—For purposes of this sub- section, a person ‘‘assists a consumer in ob- taining or applying to obtain a residential mortgage loan’’ by, among other things, advis- ing on residential mortgage loan terms (in- cluding rates, fees, and other costs), preparing residential mortgage loan packages, or col- lecting information on behalf of the consumer with regard to a residential mortgage loan. (5) RESIDENTIAL MORTGAGE LOAN.—The term ‘‘residential mortgage loan’’ means any con- sumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit trans- action under an open end credit plan or, for purposes of sections 1639b and 1639c of this title and section 1638(a) (16), (17), (18), and (19) of this title, and sections 1638(f) and 1640(k) of this title, and any regulations promulgated thereunder, an extension of credit relating to a plan described in section 101(53D) of title 11. (6) SECRETARY.—The term ‘‘Secretary’’, when used in connection with any transaction or person involved with a residential mortgage loan, means the Secretary of Housing and Urban Development. (7) SERVICER.—The term ‘‘servicer’’ has the same meaning as in section 2605(i)(2) of title 12. (ee) BONA FIDE DISCOUNT POINTS AND PREPAY- MENT PENALTIES.—For the purposes of deter- mining the amount of points and fees for pur- poses of subsection (aa), either the amounts de- scribed in paragraph (1) or (2) of the following paragraphs, but not both, shall be excluded: (1) Up to and including 2 bona fide discount points payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage’s interest rate will be discounted does not exceed by more than 1 percentage point— (A) the average prime offer rate, as defined in section 1639c of this title; or (B) if secured by a personal property loan, the average rate on a loan in connection with which insurance is provided under title I of the National Housing Act (12 U.S.C. 1702 et seq.). (2) Unless 2 bona fide discount points have been excluded under paragraph (1), up to and including 1 bona fide discount point payable by the consumer in connection with the mort- gage, but only if the interest rate from which the mortgage’s interest rate will be discounted does not exceed by more than 2 percentage points— (A) the average prime offer rate, as defined in section 1639c of this title; or (B) if secured by a personal property loan, the average rate on a loan in connection with which insurance is provided under title I of the National Housing Act (12 U.S.C. 1702 et seq.). (3) For purposes of paragraph (1), the term ‘‘bona fide discount points’’ means loan dis- count points which are knowingly paid by the consumer for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the mortgage. Page 1460 TITLE 15—COMMERCE AND TRADE § 1602 (4) Paragraphs (1) and (2) shall not apply to discount points used to purchase an interest rate reduction unless the amount of the inter- est rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions. (Pub. L. 90–321, title I, § 103, May 29, 1968, 82 Stat. 147; Pub. L. 91–508, title V, § 501, Oct. 26, 1970, 84 Stat. 1126; Pub. L. 93–495, title III, § 303, Oct. 28, 1974, 88 Stat. 1511; Pub. L. 94–222, § 3(a), Feb. 27, 1976, 90 Stat. 197; Pub. L. 96–221, title VI, §§ 602, 603(a), (b), 604, 612(a)(2), (b), Mar. 31, 1980, 94 Stat. 168, 169, 175, 176; Pub. L. 97–25, title I, § 102, July 27, 1981, 95 Stat. 144; Pub. L. 97–320, title VII, § 702(a), Oct. 15, 1982, 96 Stat. 1538; Pub. L. 103–325, title I, §§ 152(a)–(c), 154(a), Sept. 23, 1994, 108 Stat. 2190, 2191, 2196; Pub. L. 110–315, title X, § 1011(b), Aug. 14, 2008, 122 Stat. 3481; Pub. L. 111–24, title I, § 108, May 22, 2009, 123 Stat. 1743; Pub. L. 111–203, title X, § 1100A(1), (2), title XIV, §§ 1401, 1431, July 21, 2010, 124 Stat. 2107, 2137, 2157; Pub. L. 115–174, title I, § 107, May 24, 2018, 132 Stat. 1304.) Editorial Notes REFERENCES IN TEXT The Riegle Community Development and Regulatory Improvement Act of 1994, referred to in subsec. (bb)(2)(A)(i), is Pub. L. 103–325, Sept. 23, 1994, 108 Stat. 2160. Section 155 of the Act is set out below. For classi- fication of subtitle B of title I of the Act, known as the ‘‘Home Ownership and Equity Protection Act of 1994’’, see Short Title of 1994 Amendment note set out under section 1601 of this title. For complete classification of this Act to the Code, see Short Title note set out under section 4701 of Title 12, Banks and Banking, and Tables. The Secure and Fair Enforcement for Mortgage Li- censing Act of 2008, referred to in subsec. (dd)(3), is title V of div. A of Pub. L. 110–289, July 30, 2008, 122 Stat. 2810, also known as the S.A.F.E. Mortgage Licensing Act of 2008, which is classified generally to chapter 51 (§ 5101 et seq.) of Title 12, Banks and Banking. For com- plete classification of this Act to the Code, see Short Title note set out under section 5101 of Title 12 and Ta- bles. The National Housing Act, referred to in subsec. (ee)(1)(B), (2)(B), is act June 27, 1934, ch. 847, 48 Stat. 1246. Title I of the Act is classified generally to sub- chapter II (§ 1702 et seq.) of chapter 13 of Title 12, Banks and Banking. For complete classification of this Act to the Code, see section 1701 of Title 12 and Tables. AMENDMENTS 2018—Subsecs. (cc), (dd). Pub. L. 115–174, § 107(1), re- designated subsec. (cc), relating to definitions relating to mortgage origination and residential mortgage loans, as (dd). Former subsec. (dd) redesignated (ee). Subsec. (dd)(2)(C). Pub. L. 115–174, § 107(2), added sub- par. (C) and struck out former subpar. (C) which read as follows: ‘‘does not include any person who is (i) not oth- erwise described in subparagraph (A) or (B) and who performs purely administrative or clerical tasks on be- half of a person who is described in any such subpara- graph, or (ii) an employee of a retailer of manufactured homes who is not described in clause (i) or (iii) of sub- paragraph (A) and who does not advise a consumer on loan terms (including rates, fees, and other costs);’’. Subsec. (ee). Pub. L. 115–174, § 107(1), redesignated sub- sec. (dd) as (ee). 2010—Pub. L. 111–203, § 1100A(2), which directed substi- tution of ‘‘Bureau’’ for ‘‘Board’’ wherever appearing, was executed by making the substitution wherever ap- pearing in subsecs. (g), (z), and (bb)(2)(A), (C), (4)(D), but not in subsec. (c), to reflect the probable intent of Congress. Subsecs. (b) to (z). Pub. L. 111–203, § 1100(A)(1), added subsec. (b) and redesignated former subsecs. (b) to (z) as (c) to (aa), respectively. Subsec. (bb). Pub. L. 111–203, § 1431(a), which directed amendment of subsec. (aa) by inserting subsec. heading, adding par. (1), and striking out former par. (1), was ex- ecuted by making the amendment to subsec. (bb) to re- flect the probable intent of Congress and the redesigna- tion of subsec. (aa) as (bb) by Pub. L. 111–203, § 1100(A)(1). See below. Text of former par. (1) read as follows: ‘‘A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer’s principal dwelling, other than a resi- dential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit plan, if— ‘‘(A) the annual percentage rate at consummation of the transaction will exceed by more than 10 per- centage points the yield on Treasury securities hav- ing comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or ‘‘(B) the total points and fees payable by the con- sumer at or before closing will exceed the greater of— ‘‘(i) 8 percent of the total loan amount; or ‘‘(ii) $400.’’ Pub. L. 111–203, § 1100(A)(1), redesignated subsec. (aa) as (bb). Former subsec. (bb) redesignated (cc). Subsec. (bb)(2)(B). Pub. L. 111–203, § 1431(b), which di- rected amendment of subsec. (aa)(2) by adding subpar. (B) and striking out former subpar. (B), was executed by making the amendment to subsec. (bb)(2) to reflect the probable intent of Congress and the redesignation of subsec. (aa) as (bb) by Pub. L. 111–203, § 1100(A)(1). See above. Text of former subpar. (B) read as follows: ‘‘An increase or decrease under subparagraph (A) may not result in the number of percentage points referred to in subparagraph (A) being— ‘‘(i) less that 8 percentage points; or ‘‘(ii) greater than 12 percentage points.’’ Subsec. (bb)(4)(B). Pub. L. 111–203, § 1431(c)(1)(A), which directed amendment of subsec. (aa)(4) by adding subpar. (B) and struck out former subpar. (B), was exe- cuted by making the amendment to subsec. (bb)(4) to reflect the probable intent of Congress and the redesig- nation of subsec. (aa) as (bb) by Pub. L. 111–203, § 1100(A)(1). See above. Text of former subpar. (B) read as follows: ‘‘all compensation paid to mortgage bro- kers;’’. Subsec. (bb)(4)(D) to (G). Pub. L. 111–203, § 1431(c)(1)(B), (C), which directed amendment of subsec. (aa)(4) by adding subpars. (D) to (F) and redesignating former subpar. (D) as (G), was executed by making the amendment to subsec. (bb)(4) to reflect the probable in- tent of Congress and the redesignation of subsec. (aa) as (bb) by Pub. L. 111–203, § 1100(A)(1). See above. Subsec. (bb)(5), (6). Pub. L. 111–203, § 1431(c)(2), which directed amendment of subsec. (aa) by adding par. (5) and redesignating former par. (5) as (6), was executed by making the amendment to subsec. (bb) to reflect the probable intent of Congress and the redesignation of subsec. (aa) as (bb) by Pub. L. 111–203, § 1100(A)(1). See above. Subsec. (cc). Pub. L. 111–203, § 1401, added subsec. (cc) relating to definitions relating to mortgage origination and residential mortgage loans. Pub. L. 111–203, § 1100(A)(1), redesignated subsec. (bb) as (cc) defining the term ‘‘reverse mortgage trans- action’’. Subsec. (dd). Pub. L. 111–203, § 1431(d), added subsec. (dd). 2009—Subsec. (i). Pub. L. 111–24 substituted ‘‘terms ‘open end credit plan’ and ‘open end consumer credit plan’ mean’’ for ‘‘term ‘open end credit plan’ means’’ in first sentence and inserted ‘‘or open end consumer cred- it plan’’ after ‘‘credit plan’’ wherever appearing in sec- ond sentence. 2008—Subsec. (f). Pub. L. 110–315 inserted at end ‘‘The term ‘creditor’ includes a private educational lender Page 1461 TITLE 15—COMMERCE AND TRADE § 1602 (as that term is defined in section 1650 of this title) for purposes of this subchapter.’’ 1994—Subsec. (f). Pub. L. 103–325, § 152(c), inserted at end ‘‘Any person who originates 2 or more mortgages referred to in subsection (aa) in any 12-month period or any person who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of this subchapter.’’ Subsec. (u). Pub. L. 103–325, § 152(b), substituted ‘‘the due dates’’ for ‘‘and the due dates’’ and inserted before period at end ‘‘, and the disclosures required by section 1639(a) of this title’’. Subsec. (aa). Pub. L. 103–325, § 152(a), added subsec. (aa). Subsec. (bb). Pub. L. 103–325, § 154(a), added subsec. (bb). 1982—Subsec. (f). Pub. L. 97–320 struck out provision that a person who regularly arranged for the extension of consumer credit payable in more than four install- ments or for which the payment of a finance charge was or might have been required from persons not creditors was a creditor, and provision that this sub- chapter applied to any creditor, irrespective of his or its status as a natural person or any type of organiza- tion, who was a card issuer. 1981—Subsecs. (x) to (z). Pub. L. 97–25 added subsec. (z) and, effective Apr. 10, 1982, redesignated subsecs. (x), (y), and (z) as (y), (z), and (x), respectively. 1980—Subsec. (f). Pub. L. 96–221, § 602(a), substituted provisions defining term ‘‘creditor’’ as referring only to a person who both regularly extends consumer credit, subject to specified conditions, and is the person to whom the debt arising is initially payable on the face of the indebtedness or by agreement, and notwith- standing such provisions, also refers to a person regu- larly arranging for the extension of consumer credit, and a card issuer and any person honoring the credit card, subject to specified conditions, for provisions de- fining term ‘‘creditor’’ as referring only to creditors who regularly extend, or arrange for the extension of credit payable in more than four installments or where a finance charge is or may be required, and substituted ‘‘(a)(5)’’ for ‘‘(a)(6)’’, ‘‘(a)(6)’’ for ‘‘(a)(7)’’, ‘‘(a)(7)’’ for ‘‘(a)(8)’’, ‘‘(b)(8)’’ for ‘‘(b)(9)’’, and ‘‘(b)(10)’’ for ‘‘(b)(11)’’. Subsec. (g). Pub. L. 96–221, § 602(b), substituted ‘‘in which the seller is a creditor’’ for ‘‘with respect to which credit is extended or arranged by the seller’’. Subsec. (h). Pub. L. 96–221, § 603(a), struck out applica- bility to agricultural purposes. Subsec. (i). Pub. L. 96–221, § 604, inserted provisions respecting the reasonable contemplations of the cred- itor, and verification of credit information from time to time. Subsecs. (s), (t). Pub. L. 96–221, § 603(b), added subsecs. (s) and (t). Former subsecs. (s) and (t) redesignated (x) and (y), respectively. Subsec. (u). Pub. L. 96–221, § 612(a)(2), added subsec. (u). Subsecs. (v), (w). Pub. L. 96–221, § 612(b), added sub- secs. (v) and (w). Subsecs. (x), (y). Pub. L. 96–221, § 603(b), redesignated former subsecs. (s) and (t) as (x) and (y), respectively. 1976—Subsecs. (p) to (t). Pub. L. 94–222 added subsecs. (p) and (q) and redesignated former subsecs. (p) to (r) as (r) to (t), respectively. 1974—Subsec. (f). Pub. L. 93–495 inserted provision re- quiring the credit to be payable by agreement in more than four installments and defining term ‘‘creditor’’ for the purposes of the requirements imposed under the enumerated sections of this chapter. 1970—Subsecs. (j) to (r). Pub. L. 91–508 added subsecs. (j) to (o) and redesignated former subsecs. (j) to (l) as (p) to (r), respectively. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by section 1100A(1), (2) of Pub. L. 111–203 effective on the designated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employ- ees. Amendment by sections 1401 and 1431 of Pub. L. 111–203 effective on the date on which final regulations implementing that amendment take effect, or on the date that is 18 months after the designated transfer date if such regulations have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as a note under section 1601 of this title. EFFECTIVE DATE OF 2009 AMENDMENT Pub. L. 111–24, § 3, May 22, 2009, 123 Stat. 1735, provided that: ‘‘This Act [enacting sections 1616, 1651, 1665c to 1665e, 1666i–1, 1666i–2, and 1693l–1 of this title and sec- tion 1a–7b of Title 16, Conservation, amending this sec- tion and sections 1632, 1637, 1640, 1650, 1666b, 1666c, 1666j, 1681b, 1681j, and 1693m to 1693r of this title, enacting provisions set out as notes under this section and sec- tions 1637, 1638, 1666b, 1681j, and 1693l–1 of this title and section 5311 of Title 31, Money and Finance, and amend- ing provisions set out as notes under sections 1638 and 1693 of this title] and the amendments made by this Act shall become effective 9 months after the date of enact- ment of this Act [May 22, 2009], except as otherwise spe- cifically provided in this Act.’’ EFFECTIVE DATE OF 1982 AMENDMENT Pub. L. 97–320, title VII, § 702(b), Oct. 15, 1982, 96 Stat. 1538, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall take effect on the effective date of title VI of the Depository Institu- tions Deregulation and Monetary Control Act of 1980 [two years and six months after Mar. 31, 1980, see Effec- tive Date of 1980 Amendment note below].’’ EFFECTIVE DATE OF 1981 AMENDMENT Section 102(b) of Pub. L. 97–25 provided that the amendment made by that section is effective Apr. 10, 1982. EFFECTIVE DATE OF 1980 AMENDMENT Pub. L. 96–221, title VI, § 625, Mar. 31, 1980, 94 Stat. 185, as amended by Pub. L. 97–25, title III, § 301, July 27, 1981, 95 Stat. 145; Pub. L. 97–110, title III, § 301, Dec. 26, 1981, 95 Stat. 1515, provided that: ‘‘(a) Except as provided in section 608(b) [set out as an Effective Date of 1980 Amendment note under section 1607 of this title], the amendments made by this title [enacting section 1646 of this title, amending sections 57a, 1602 to 1606, 1610, 1612, 1613, 1631, 1632, 1635, 1637, 1638, 1640, 1641, 1643, 1663, 1664, 1665a, 1666, 1666d, 1667d, and 1691f of this title, repealing sections 1614, 1636, and 1639 of this title, and enacting provisions set out as a note under section 1601 of this title] shall take effect upon the expiration of two years and six months after the date of enactment of this title [Mar. 31, 1980]. ‘‘(b) All regulations, forms, and clauses required to be prescribed under the amendments made by this title shall be promulgated at least one year prior to such ef- fective date. ‘‘(c) Notwithstanding subsections (a) and (b), any creditor may comply with the amendments made by this title, in accordance with the regulations, forms, and clauses prescribed by the Board, prior to such effec- tive date. Any creditor who elects to comply with such amendments and any assignee of such a creditor shall be subject to the provisions of sections 130 and 131 of the Truth in Lending Act, as amended by sections 615 and 616, respectively, of this title [sections 1640 and 1641 of this title].’’ EFFECTIVE DATE OF 1974 AMENDMENT For effective date of amendment by Pub. L. 93–495, see section 308 of Pub. L. 93–495, set out as an Effective Date note under section 1666 of this title. REGULATIONS Pub. L. 111–24, § 2, May 22, 2009, 123 Stat. 1735, provided that: ‘‘The Board of Governors of the Federal Reserve Page 1462 TITLE 15—COMMERCE AND TRADE § 1603 1 See Adjustments for Inflation note below. System (in this Act [see Short Title of 2009 Amendment note set out under section 1601 of this title] referred to as the ‘Board’) may issue such rules and publish such model forms as it considers necessary to carry out this Act and the amendments made by this Act.’’ Pub. L. 103–325, title I, § 155, Sept. 23, 1994, 108 Stat. 2197, provided that: ‘‘Not later than 180 days after the date of enactment of this Act [Sept. 23, 1994], the Board of Governors of the Federal Reserve System shall issue such regulations as may be necessary to carry out this subtitle [subtitle B (§§ 151–158) of title I of Pub. L. 103–325, see Short Title of 1994 Amendment note set out under section 1601 of this title], and such regulations shall become effective on the date on which disclosure regulations are required to become effective under sec- tion 105(d) of the Truth in Lending Act [15 U.S.C. § 1604(d)].’’ APPLICABILITY OF 1994 AMENDMENTS AND REGULATIONS TO SUBSECTION (aa) MORTGAGES Pub. L. 103–325, title I, § 156, Sept. 23, 1994, 108 Stat. 2197, provided that: ‘‘This subtitle [subtitle B (§§ 151–158) of title I of Pub. L. 103–325, see Short Title of 1994 Amendment note set out under section 1601 of this title], and the amendments made by this subtitle, shall apply to every mortgage referred to in section 103(aa) of the Truth in Lending Act [now 15 U.S.C. 1602(bb)] (as added by section 152(a) of this Act) con- summated on or after the date on which regulations issued under section 155 [set out above] become effec- tive.’’ § 1603. Exempted transactions This subchapter does not apply to the fol- lowing: (1) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations. (2) Transactions in securities or commod- ities accounts by a broker-dealer registered with the Securities and Exchange Commis- sion. (3) Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwell- ing of the consumer and other than private education loans (as that term is defined in sec- tion 1650(a) of this title), in which the total amount financed exceeds $50,000.1 (4) Transactions under public utility tariffs, if the Bureau determines that a State regu- latory body regulates the charges for the pub- lic utility services involved, the charges for delayed payment, and any discount allowed for early payment. (5) Transactions for which the Bureau, by rule, determines that coverage under this sub- chapter is not necessary to carry out the pur- poses of this subchapter. (6) Repealed. Pub. L. 96–221, title VI, § 603(c)(3), Mar. 31, 1980, 94 Stat. 169. (7) Loans made, insured, or guaranteed pur- suant to a program authorized by title IV of the Higher Education Act of 1965 [20 U.S.C. 1070 et seq.]. (Pub. L. 90–321, title I, § 104, May 29, 1968, 82 Stat. 147; Pub. L. 93–495, title IV, § 402, Oct. 28, 1974, 88 Stat. 1517; Pub. L. 96–221, title VI, § 603(c), Mar. 31, 1980, 94 Stat. 169; Pub. L. 97–320, title VII, § 701(a), Oct. 15, 1982, 96 Stat. 1538; Pub. L. 104–208, div. A, title II, § 2102(a), Sept. 30, 1996, 110 Stat. 3009–398; Pub. L. 110–315, title X, § 1022, Aug. 14, 2008, 122 Stat. 3488; Pub. L. 111–203, title X, §§ 1100A(2), 1100E(a)(1), July 21, 2010, 124 Stat. 2107, 2111.) Editorial Notes REFERENCES IN TEXT The Higher Education Act of 1965, referred to in par. (7), is Pub. L. 89–329, Nov. 8, 1965, 79 Stat. 1219. Title IV of the Act is classified generally to subchapter IV (§ 1070 et seq.) of chapter 28 of Title 20, Education. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 20 and Tables. AMENDMENTS 2010—Par. (3). Pub. L. 111–203, § 1100E(a)(1), sub- stituted ‘‘$50,000’’ for ‘‘$25,000’’. Pars. (4), (5). Pub. L. 111–203, § 1100A(2), substituted ‘‘Bureau’’ for ‘‘Board’’. 2008—Par. (3). Pub. L. 110–315 inserted ‘‘and other than private education loans (as that term is defined in section 1650(a) of this title)’’ after ‘‘consumer’’. 1996—Pars. (5) to (7). Pub. L. 104–208 added par. (5) and redesignated former pars. (5) and (6) as (6) and (7), re- spectively. 1982—Par. (6). Pub. L. 97–320 added par. (6). 1980—Par. (1). Pub. L. 96–221, § 603(c)(1), inserted provi- sion relating to applicability to agricultural purposes. Par. (3). Pub. L. 96–221, § 603(c)(2), substituted provi- sion excepting security interest in real property, or in personal property used as the consumer’s principal dwelling, for provisions excepting real property trans- actions. Par. (5). Pub. L. 96–221, § 603(c)(3), struck out par. (5) which related to credit transactions primarily for agri- cultural purposes where the amount financed exceeds $25,000. 1974—Par. (5). Pub. L. 93–495 added par. (5). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the des- ignated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 1982 AMENDMENT Section 701(c) of Pub. L. 97–320, as amended by Pub. L. 97–457, § 31, Jan. 12, 1983, 96 Stat. 2511, provided that: ‘‘The amendment made by subsection (a) [amending this section] and subsection (b) [enacting section 1099 of Title 20, Education] shall be effective with respect to loans made prior to, on, and after the date of the enact- ment of this Act [Oct. 15, 1982].’’ EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–221 effective on expiration of two years and six months after Mar. 31, 1980, with all regulations, forms, and clauses required to be pre- scribed to be promulgated at least one year prior to such effective date, and allowing any creditor to com- ply with any amendments, in accordance with the regu- lations, forms, and clauses prescribed by the Board prior to such effective date, see section 625 of Pub. L. 96–221, set out as a note under section 1602 of this title. EFFECTIVE DATE OF 1974 AMENDMENT Amendment by Pub. L. 93–495 effective Oct. 28, 1974, see section 416 of Pub. L. 93–495, set out as an Effective Date note under section 1665a of this title. EXCEPTIONS IN AREAS WHERE MAJOR DISASTER EXISTS Board of Governors of Federal Reserve System au- thorized to make exceptions to requirements of this