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U.S. Code as of:
01/19/04
Section 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) The term "Board" refers to the Board of Governors of the
Federal Reserve System.
(c) The term "organization" means a corporation, government or
governmental subdivision or agency, trust, estate, partnership,
cooperative, or association.
(d) The term "person" means a natural person or an organization.
(e) 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.
(f) The term "creditor" refers only to a person who both (1)
regularly extends, whether in connection 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
transaction is initially payable on the face of the evidence of
indebtedness or, if there is no such evidence of indebtedness, by
agreement. Notwithstanding 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 finance 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 whether or not the
amount due is payable by agreement in more than four installments
or the payment of a finance charge is or may be required, and the
Board 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 offering open-end
credit plans. Any person who originates 2 or more mortgages
referred to in subsection (aa) of this section 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.
(g) 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
compensation 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
contract.
(h) The adjective "consumer", used with reference 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.
(i) The term "open end credit plan" means a plan under which the
creditor reasonably contemplates repeated transactions, which
prescribes the terms of such transactions, and which provides for a
finance charge which may be computed from time to time on the
outstanding unpaid balance. A credit plan which is an open end
credit plan within the meaning of the preceding sentence is an open
end credit plan even if credit information is verified from time to
time.
(j) 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.
(k) The term "credit card" means any card, plate, coupon book or
other credit device existing for the purpose of obtaining money,
property, labor, or services on credit.
(l) The term "accepted credit card" means any credit card which
the cardholder has requested 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.
(m) 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
obligations arising from the issuance of a credit card to another
person.
(n) The term "card issuer" means any person who issues a credit
card, or the agent of such person with respect to such card.
(o) 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 authority
for such use and from which the cardholder receives no benefit.
(p) 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 surcharge.
(q) The term "surcharge" as used in this section and section
1666f of this title means any means of increasing the regular price
to a cardholder which is not imposed upon customers paying by cash,
check, or similar means."
(r) 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.
(s) 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.
(t) The term "agricultural products" includes agricultural,
horticultural, viticultural, and dairy products, livestock,
wildlife, poultry, bees, forest products, fish and shellfish, and
any products thereof, including processed and manufactured
products, and any and all products raised or produced on farms and
any processed or manufactured products thereof.
(u) The term "material disclosures" means the disclosure, as
required by this subchapter, of the annual percentage rate, the
method of determining the finance charge and the balance upon 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.
(v) 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.
(w) The term "residential mortgage transaction" means a
transaction in which a mortgage, deed of trust, purchase money
security interest arising under an installment sales contract, or
equivalent consensual security interest is created or retained
against the consumer's dwelling to finance the acquisition or
initial construction of such dwelling.
(x) 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 purposes 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.
(y) Any reference to any requirement imposed under this
subchapter or any provision thereof includes reference to the
regulations of the Board under this subchapter or the provision
thereof in question.
(z) The disclosure of an amount or percentage which is greater
than the amount or percentage required to be disclosed under this
subchapter does not in itself constitute a violation of this
subchapter.
(aa)(1) A mortgage referred to in this subsection means a
consumer credit transaction that is secured by the consumer's
principal dwelling, other than a residential 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 percentage points the
yield on Treasury securities having 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 consumer at or
before closing will exceed the greater of -
(i) 8 percent of the total loan amount; or
(ii) $400.
(2)(A) After the 2-year period beginning on the effective date of
the regulations promulgated under section 155 of the Riegle
Community Development and Regulatory Improvement Act of 1994, and
no more frequently than biennially after the first increase or
decrease under this subparagraph, the Board may by regulation
increase or decrease the number of percentage points specified in
paragraph (1)(A), if the Board 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 Regulatory Improvement
Act of 1994; and
(ii) warranted by the need for credit.
(B) 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.
(C) In determining whether to increase or decrease the number of
percentage points referred to in subparagraph (A), the Board 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 to mortgage brokers;
(C) each of the charges listed in section 1605(e) of this title
(except an escrow for future payment of taxes), unless -
(i) the charge is reasonable;
(ii) the creditor receives no direct or indirect
compensation; and
(iii) the charge is paid to a third party unaffiliated with
the creditor; and
(D) such other charges as the Board determines to be
appropriate.
(5) 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 extension of credit.
(bb) The term "reverse mortgage transaction" means a nonrecourse
transaction in which a mortgage, deed of trust, or equivalent
consensual security interest is created against the consumer'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.
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