|
|
|
U.S. Code as of:
01/19/04
Section 1647. Home equity plans
(a) Index requirement
In the case of extensions of credit under an open end consumer
credit plan which are subject to a variable rate and are secured by
a consumer's principal dwelling, the index or other rate of
interest to which changes in the annual percentage rate are related
shall be based on an index or rate of interest which is publicly
available and is not under the control of the creditor.
(b) Grounds for acceleration of outstanding balance
A creditor may not unilaterally terminate any account under an
open end consumer credit plan under which extensions of credit are
secured by a consumer's principal dwelling and require the
immediate repayment of any outstanding balance at such time, except
in the case of -
(1) fraud or material misrepresentation on the part of the
consumer in connection with the account;
(2) failure by the consumer to meet the repayment terms of the
agreement for any outstanding balance; or
(3) any other action or failure to act by the consumer which
adversely affects the creditor's security for the account or any
right of the creditor in such security.
This subsection does not apply to reverse mortgage transactions.
(c) Change in terms
(1) In general
No open end consumer credit plan under which extensions of
credit are secured by a consumer's principal dwelling may contain
a provision which permits a creditor to change unilaterally any
term required to be disclosed under section 1637a(a) of this
title or any other term, except a change in insignificant terms
such as the address of the creditor for billing purposes.
(2) Certain changes not precluded
Notwithstanding the provisions of subsection (!1) (1), a
creditor may make any of the following changes:
(A) Change the index and margin applicable to extensions of
credit under such plan if the index used by the creditor is no
longer available and the substitute index and margin would
result in a substantially similar interest rate.
(B) Prohibit additional extensions of credit or reduce the
credit limit applicable to an account under the plan during any
period in which the value of the consumer's principal dwelling
which secures any outstanding balance is significantly less
than the original appraisal value of the dwelling.
(C) Prohibit additional extensions of credit or reduce the
credit limit applicable to the account during any period in
which the creditor has reason to believe that the consumer will
be unable to comply with the repayment requirements of the
account due to a material change in the consumer's financial
circumstances.
(D) Prohibit additional extensions of credit or reduce the
credit limit applicable to the account during any period in
which the consumer is in default with respect to any material
obligation of the consumer under the agreement.
(E) Prohibit additional extensions of credit or reduce the
credit limit applicable to the account during any period in
which -
(i) the creditor is precluded by government action from
imposing the annual percentage rate provided for in the
account agreement; or
(ii) any government action is in effect which adversely
affects the priority of the creditor's security interest in
the account to the extent that the value of the creditor's
secured interest in the property is less than 120 percent of
the amount of the credit limit applicable to the account.
(F) Any change that will benefit the consumer.
(3) Material obligations
Upon the request of the consumer and at the time an agreement
is entered into by a consumer to open an account under an open
end consumer credit plan under which extensions of credit are
secured by the consumer's principal dwelling, the consumer shall
be given a list of the categories of contract obligations which
are deemed by the creditor to be material obligations of the
consumer under the agreement for purposes of paragraph (2)(D).
(4) Consumer benefit
(A) In general
For purposes of paragraph (2)(F), a change shall be deemed to
benefit the consumer if the change is unequivocally beneficial
to the borrower and the change is beneficial through the entire
term of the agreement.
(B) Board categorization
The Board may, by regulation, determine categories of changes
that benefit the consumer.
(d) Terms changed after application
If any term or condition described in section 1637a(a) of this
title which is disclosed to a consumer in connection with an
application to open an account under an open end consumer credit
plan described in such section (other than a variable feature of
the plan) changes before the account is opened, and if, as a result
of such change, the consumer elects not to enter into the plan
agreement, the creditor shall refund all fees paid by the consumer
in connection with such application.
(e) Additional requirements relating to refunds and imposition of
nonrefundable fees
(1) In general
No nonrefundable fee may be imposed by a creditor or any other
person in connection with any application by a consumer to
establish an account under any open end consumer credit plan
which provides for extensions of credit which are secured by a
consumer's principal dwelling before the end of the 3-day period
beginning on the date such consumer receives the disclosure
required under section 1637a(a) of this title and the pamphlet
required under section 1637a(e) of this title with respect to
such application.
(2) Constructive receipt
For purposes of determining when a nonrefundable fee may be
imposed in accordance with this subsection if the disclosures and
pamphlet referred to in paragraph (1) are mailed to the consumer,
the date of the receipt of the disclosures by such consumer shall
be deemed to be 3 business days after the date of mailing by the
creditor.
|
|