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With all of the recent regulatory changes, you may have placed compliance with the completion of Truth-In-Lending (TIL) disclosures for closed-end consumer loans on the back burner. Although all the talk recently has centered around open-end lending, the same old closed-end disclosures are still on the books and are still being enforced. One particular aspect of the TIL that seems to get overlooked is the Itemization of Amount Financed.
Section 226.18 of Regulation Z requires creditors to provide a written itemization of the amount financed. With closed-end consumer loans, this is typically included within the TIL disclosure. The itemization must include the following information:
- The amount of any proceeds distributed directly to the consumer. This includes funds given to the consumer in the form of cash, check, and funds placed in an asset account.
- The amount credited to the consumer’s account with the creditor. This refers to an account in the nature of a debt with that creditor. It may include, for example, an unpaid balance on a prior loan, a credit sale balance or other amounts owing to that creditor. It does not include asset accounts of the consumer.
- Any amounts paid to other persons by the creditor on the consumer’s behalf, including the identity of those persons.
- Any prepaid finance charge.
Credit unions often only enter the amount financed into the itemization section and fail to list where the money is going. Others frequently just list all the funds as paid directly to the consumer. The itemization of amount financed is an important part of Regulation Z and your credit union must ensure that it is completed properly. In reality, it is an easy requirement to comply with. All you have to do is list the amount financed and everywhere those funds are going. It is really just that easy.
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