§ 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.
(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
(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.
(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:
(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—
(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
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.