2018 GNYADA Membership Directory

credit applications and consumer credit contracts. Many state laws cap Annual Percentage Rates (APRs) and other charges as do the federal Servicemembers Civil Relief Act and Military Lending Act discussed below. TILA and Regulation Z, and CLA and Regulation M, do not apply to credit transactions and consumer leases in excess of the then-current amount of the cap. However, it is a best practice to comply with TILA and the CLA regardless of the amount of the obligation on all credit transactions and consumer leases. A number of states require compliance with TILA on all credit transactions, regardless of the credit amount. TILA generally treats costs as either part of the amount financed (simplistically, the price of the goods or services financed by the consumer) or as a finance charge (simplistically, the cost to the consumer to finance payment of the goods or services): • Amount financed: Examples of required disclosures in retail installment sales contracts (RISCs) for the cost of the goods or services financed are the amount financed and an itemization of the amount financed. The amount financed includes the cash price of goods or services purchased on credit, and non-finance charge amounts advanced by the dealer to the consumer or paid to others on the consumer’s behalf, such as vehicle cost, taxes, registration fees, and sums paid to pay off credit obligations on a consumer’s trade-in vehicle. The cost of insurance (credit or property) financed in connection with the transaction can be a component of the amount financed (as opposed to finance charge) if properly disclosed. • Finance charge: This includes many types of charges that TILA defines as part of the finance charge and represents the cost of credit. The finance charge must be disclosed as the total dollar amount of finance charges and the cost of credit expressed as an APR in the RISC. These disclosures must be more conspicuous than any other required disclosures (such as by bolding them, outlining them in a border, using all capital letters, etc.).The CLA and Regulation M require that the vehicle’s gross and adjusted capitalized cost, residual value, depreciation and amortization, and rent charges be disclosed in lease agreements. State laws may require other disclosures and mandate that certain contract terms be conspicuous. Both RISCs and lease agreements must state the number, amounts, and timing of payments. TILA and Regulation Z also include specific rules on disclosing negative equity on a trade-in in a financing transaction. Negative equity should either be used to reduce the customer’s down payment or itemized under “Amounts Paid to Others.” It should not be disclosed as part of the sales price of the vehicle. TILA requires listing items that a consumer is not required to purchase in order to obtain credit, but elects to do so. These items are typically disclosed in the Itemization of the Amount Financed on the RISC. Simply including the un-itemized cost of aftermarket items such as vehicle etching, service contracts, rustproofing, and other items into the cash price of the vehicle constitutes “payment packing,” an activity of great interest to the FTC and state Attorneys General. Even if an aftermarket product is permitted under applicable state and federal law, failing to disclose these items in the Itemization of the Amount Financed could subject the dealer to regulatory scrutiny and/or lawsuit. For example, a dealer was sued in a class action alleging a TILA violation for including vehicle etching in the cash price of new motor vehicles without disclosing that it was doing so – or that the vehicle etching was optional. Creditors must disclose additional information regarding the cost of credit, including the Total of Payments (in both credit sales and loans) and Total Sale Price (in credit sales only). In addition, creditors must also disclose the security interest (typically in the vehicle), the amount of any late fees that could be imposed, and whether the

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