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State Laws
Massachusetts Consumer Credit Cost Discolure
Part 1 Administration of the Government
Title XX Public Safety and Good Order
Chapter 140D Consumer Credit Cost Discolure
Section 1. For the purpose of this chapter, the following words shall, unless the context indicates otherwise, have the following meanings:
"Accepted credit card", 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.
"Adequate notice", 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.
"Advertisement", a commercial message in any medium that promotes, directly or indirectly, a credit transaction.
"Agricultural products", products relating to 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.
"Agricultural purpose", a purpose relating to 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.
"Board", the board of governors of the federal reserve system.
"Cardholder", 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.
"Card issuer", any person who issues a credit card, or the agent of such person with respect to such card.
"Commissioner", the commissioner of banks.
"Consumer", used as an adjective, 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 transactions are primarily for personal, family, or household purposes.
"Credit", the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.
"Credit card", any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit.
"Creditor", a person who both (1) regularly extends, whether in connection with loans, sales or 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 is a creditor. For the purposes of the requirements imposed under this chapter, 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 commissioner 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.
"Credit sale", 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.
"Discount", a reduction made from the regular price. The term "discount" shall not mean a surcharge.
"Dwelling", a residential structure or mobile home which contains one to four family housing units, or individual units of condominiums or cooperatives.
"Material disclosure", the disclosure, as required by this chapter, 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, and the due dates or periods of payments scheduled to repay the indebtedness.
"Open-end-credit plan", 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.
"Organization", a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.
"Person", a natural person or an organization.
"Regular price", 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 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 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 card holder’s open end account shall not be considered payment by use of the plan or the account.
"Residential mortgage transaction", 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.
"Surcharge", any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check or similar means.
"Unauthorized use", 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.
Any reference to any requirement imposed under this chapter or any provision thereof includes reference to the regulations of the commissioner of banks under this chapter or the provision thereof in question.
The disclosure of an amount or percentage which is greater than the amount or percentage required to be disclosed under this chapter does not in itself constitute a violation of this chapter.
Section 2. This chapter shall not apply to the following:
(a) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations.
(b) Transactions in securities or commodities accounts with a broker-dealer registered with the Securities and Exchange Commission.
(c) 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 dwelling of the consumer, in which the total amount financed exceeds twenty-five thousand dollars.
(d) Transactions under public utility tariffs, if the commissioner determines that the public utilities commission regulates the charges for such public utility services involved, the charges for delayed payment, and any discount allowed for early payment.
(e) Loans made, insured, or guaranteed pursuant to a program authorized by 20 USC 1070, et seq. of Title IV of the Higher Education Act of 1965.
Section 3. (a) The commissioner shall prescribe from time to time such rules and regulations as may be necessary or proper in carrying out the provisions of this chapter. Such rules and regulations may contain such classifications, differentiations or other provisions, and may provide for such adjustments and exceptions for any class of transactions, as in the judgement of the commissioner are necessary or proper to carry out the purposes of this chapter, to prevent circumvention or evasion thereof, or to facilitate compliance therewith; provided, however, that no such rule or regulation shall contain any classification, differentiation or other provision with respect to, or provide for any judgement or exception for, any class of transaction which would result in less stringent disclosure requirements than afforded that class of transaction under the Federal Consumer Protection Act and Regulation Z issued by the board.
(b) The commissioner may issue from time to time advisory rulings under section eight of chapter thirty A interpreting any provision or the regulations issued hereunder. Each official board interpretation or official staff interpretation that interprets a provision of the regulations issued under the Truth-in-Lending Act (15 USC 1601 et seq.) (Title VI of Public Law 96-221) that is similar in substance to a provision of this chapter or the regulation issued thereunder, shall, until rescinded by the board, be deemed by the commissioner to be an advisory ruling issued under said section eight of said chapter thirty A; provided, however, that the commissioner may reject a board or staff interpretation.
Section 4. (a) 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.
Charges which are included in the finance charge include any of the following types of charge or similar charge which are applicable.
(1) Interest, time price differential, and any amount payable under a point, discount, or other system of additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder’s fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or insurance protecting the creditor against the obligor’s default or other credit loss.
(6) Borrower-paid mortgage broker fees, including fees paid to the broker or to the lender for delivery to the broker, whether such fees are paid in cash or financed.
(b) Charges or premiums for credit life, accident, health, or involuntary unemployment insurance written in connection with any consumer credit transaction shall be included in the finance charge unless:
(1) the coverage of the debtor by the insurance is not a factor in the approval by the creditor of the extension of credit, and this fact is clearly disclosed in writing to the person applying for or obtaining the extension of credit; and
(2) in order to obtain the insurance in connection with the extension of credit, the person to whom the credit is extended must give specific affirmative written indication of his desire to do so after written disclosure to him of the cost thereof.
(c) 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) If any of the following items is itemized and disclosed in accordance with the regulations of the commissioner 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.
(2) The premium payable for any insurance in lieu of perfecting any security interest otherwise required by the creditor in connection with the transaction, if the premium does not exceed the fees and charges described in clause (1) of this subsection which would otherwise be payable.
(3) Any tax levied on security instruments or on documents evidencing indebtedness if the payment of such taxes is a precondition for recording the instrument securing the evidence of indebtedness.
(e) 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:
(1) Fees or premiums for title examination, title insurance, or similar purposes.
(2) Fees for the preparation of loan-related documents.
(3) Escrows for future payments of taxes and insurance.
(4) Fees for notarizing deeds and other documents.
(5) Appraisal fees, including fees related to any pest infestation or flood hazard inspections conducted prior to closing.
(6) Credit reports.
(7) 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 such fees and amounts or the services provided and does not retain said fees and amounts.
(f) 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 the purposes of this chapter if the amount disclosed as the finance charge—
(a) does not vary from the actual finance charge by more than one hundred dollars; or
(b) is greater than the amount required to be disclosed under this chapter; and
(2) shall be treated as being accurate for the purposes of section ten if:—
(a) except as provided in subsection (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 15 USC 1601 et seq., which:
(i) is a refinancing of the principal balance due and any accrued and unpaid finance charges of a residential mortgage transaction as defined in section one of this chapter, or is any subsequent refinancing of such a transaction; and
(ii) does not provide any new consolidation or new advance 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.
Section 5. (a) The annual percentage rate applicable to any extension of consumer credit shall be determined in accordance with the regulations of the commissioner.
(1) In the case of any extension of credit other than an open-end-credit plan, as
(A) that nominal annual percentage rate which will yield a sum equal to the amount of the finance charge when it is applied to the unpaid balances of the amount financed, calculated according to the actuarial method of allocating payments made on a debt between the amount financed and the amount of the finance charge, pursuant to which a payment is applied first to the accumulated finance charge and the balance is applied to the unpaid amount financed; or
(B) the rate determined by any method prescribed by the commissioner as a method which materially simplifies computation while retaining reasonable accuracy as compared with the rate determined under subclause (A).
(2) In the case of an extension of credit under an open-end-credit plan, as the quotient, expressed as a percentage, of the total finance charge for the period to which it relates divided by the amount upon which the finance charge for that period is based, multiplied by the number of such periods in a year.
(b) Where a creditor imposes the same finance charge for balances within a specified range, the annual percentage rate shall be computed on the median balance within the range, except that if the commissioner determines that a rate so computed would not be meaningful, or would be materially misleading, the annual percentage rate shall be computed on such other basis as the commissioner may by regulation require.
(c) The disclosure of an annual percentage rate is accurate for the purpose of this chapter if the rate disclosed is within a tolerance not greater than one-eighth of one per centum more or less than the actual rate or rounded to the nearest one-fourth of one per centum. The commissioner may allow a greater tolerance to simplify compliance where irregular payments are involved.
(d) The commissioner may authorize the use of rate tables or charts which may provide for the disclosure of annual percentage rates which vary from the rate determined in accordance with subclause (A) of clause (1) of subsection (a) by not more than such tolerances as the commissioner may allow. The commissioner may not allow a tolerance greater then eight percentum of that rate except to simplify compliance where irregular payments are involved.
(e) In the case of creditors determining the annual percentage rate in a manner other than as described in subsection (d), the commissioner may authorize other reasonable tolerances.
Section 6. (1) In carrying out the enforcement provisions of this chapter, or any rule or regulation issued thereunder, the commissioner, in cases where an annual percentage rate or finance charge was inaccurately disclosed, shall notify the creditor of such disclosure error and is authorized in accordance with the provisions of this section to require the creditor to make an adjustment to the account of the person to whom credit was extended, to assure that such person will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower. For the purposes of this section, except where such disclosure error resulted from a willful violation which was intended to mislead the person to whom credit was extended, in determining whether a disclosure error has occurred and in calculating any adjustment, (A) the commissioner shall apply (i) with respect to the annual percentage rate, a tolerance of one-quarter of one per cent more or less than the actual rate, determined without regard to subsection (c) of section five, and (ii) with respect to the finance charge, a corresponding numerical tolerance as generated by the tolerance provided under this section for the annual percentage rate; except that (B) with respect to transactions consummated after April first, nineteen hundred and eighty-two, the commissioner shall apply (i) for transactions that have a scheduled amortization of ten years or less, with respect to the annual percentage rate, a tolerance not to exceed one-quarter of one per cent more or less than the actual rate, determined without regard to said subsection (c) of section five, but in no event a tolerance of less than the tolerances allowed under said subsection (c), (ii) for transactions that have a scheduled amortization of more than ten years, with respect to the annual percentage rate, only such tolerances as are allowed under said subsection (c), and (iii) for all transactions, with respect to the finance charge, a corresponding numerical tolerance as generated by the tolerances provided under this section for the annual percentage rate.
(2) The commissioner shall require such an adjustment when it is determined that such disclosure error resulted from (A) a clear and consistent pattern or practice of violations, (B) gross negligence, or (C) a willful violation which was intended to mislead the person to whom the credit was extended. Except where such disclosure error resulted from a willful violation which was intended to mislead the person to whom credit was extended, the commissioner need not require such an adjustment if he determines that such disclosure error:
(A) resulted from an error involving the disclosure of a fee or charge that would otherwise be excludable in computing the finance charge, including but not limited to violations involving the disclosures described in subsections (b), (c) and (d) of section four, in which event the commissioner may require such remedial action as he determines to be equitable, except that for transactions consummated after April first, nineteen hundred and eighty-two, such an adjustment shall be ordered for violations of subsection (b) of section four;
(B) involved a disclosed amount which was ten per centum or less of the amount that should have been disclosed and (i) in cases where the error involved a disclosed finance charge, the annual percentage rate was disclosed correctly, and (ii) in cases where the error involved a disclosed annual percentage rate, the finance charge was disclosed correctly; in which event the commissioner may require such adjustment as he determines to be equitable;
(C) involved a total failure to disclose either the annual percentage rate or the finance charge, in which event the commissioner may require such adjustment as he determines to be equitable; or
(D) resulted from any other unique circumstance involving clearly technical and nonsubstantive disclosure violations that do not adversely affect information provided to the consumer and that have not misled or otherwise deceived the consumer.
In the case of other such disclosure errors, the commissioner may require such an adjustment.
(3) Notwithstanding the provisions of subsection (2): (A) the commissioner shall require the full adjustment, but permit the creditor to make the required adjustment in partial payments over an extended period of time which the commissioner considers to be reasonable, if it would have a significant adverse impact upon the safety or soundness of the creditor, (B) no adjustment shall be ordered if the amount of the adjustment would be less than one dollar, or (C) no adjustment shall be ordered except where such disclosure error resulted from a willful violation which was intended to mislead the person to whom credit was extended, as follows:
(i) except in connection with violations arising from practices identified in the current examination and only in connection with transactions that are consummated after the date of the immediately preceding examination, except that where practices giving rise to violations identified in earlier examination have not been corrected, adjustments for those violations shall be required in connection with transactions consummated after the date of the examination in which such practices were first identified; and
(ii) in no event four years after the cause of action accrues.
(4) A creditor shall not be subject to an order to make an adjustment, if within sixty days after discovering a disclosure error, whether pursuant to a final written examination report or through the creditor’s own procedures, the creditor notifies the person concerned of the error and adjusts the account so as to assure that such person will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower.
Section 7. (a) Subject to subsection (b), a creditor shall disclose to the person who is obligated on a consumer credit transaction the information required under this chapter. In a transaction involving more than one obligor, a creditor, except in a transaction under section ten, need not disclose to more than one of such obligors if the obligor given disclosure is a primary obligor.
(b) If a transaction involves one creditor as defined in subsection (f) of section one, such creditor shall make the disclosures. If a transaction involves more than one creditor, only one creditor shall be required to make the disclosures. The commissioner shall by regulation specify which creditor shall make the disclosures.
(c) The commissioner may provide by regulation that any portion of the information required to be disclosed by this chapter may be given in the form of estimates where the provider of such information is not in a position to know exact information. In the case of any consumer credit transaction, a portion of the interest on which is determined on a per diem basis and is to be collected upon the consummation of such transaction, any disclosure with respect to such portion of interest shall be deemed to be accurate for the purposes of this chapter if the disclosure is based on information actually known to the creditor at the time that the disclosure documents are being prepared for the consummation of the transaction.
(d) The commissioner shall determine whether tolerances for numerical disclosures other than the annual percentage rate are necessary to facilitate compliance with this chapter, and if he determines that such tolerances are necessary to facilitate compliance, he shall by regulation permit disclosures within such tolerances.
Section 8. (a) Information required by this chapter shall be disclosed clearly and conspicuously, in accordance with regulations of the commissioner. The terms annual percentage rate and finance charge shall be disclosed more conspicuously than other terms, data or information provided in connection with a transaction, except information relating to the identity of the creditor. Regulations of the commissioner need not require that disclosures pursuant to this chapter be made in the order set forth in this chapter and, except as otherwise provided, may permit the use of terminology different from that employed in this chapter if it conveys substantially the same meaning.
(b) Any creditor may supply additional information or explanation with any disclosures required under this chapter, or regulations promulgated thereunder, except as provided under clause (1) of subsection (b) of section twelve.
MA Massachusetts Official State Code
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