Bank Consumer Loan Disclosure Requirements


In an effort to protect consumers that are receiving credit--either from a consumer loan, consumer credit card or mortgage--issued from the bank, the Consumer Protection Act has certain requirements that banks must follow. The act requires that banks disclose certain information to customers receiving any type of credit or mortgage from the bank.

Consumer Protection Act

The Consumer Protection Act requires banks to disclose certain the terms, fees and conditions of a loan to a consumer. This applies to various types of loans and credit offered by the bank. The full disclosure required protects consumers from inaccurate and unfair credit practices, and covers a home loan, auto loans, personal credit lines and bank-issued credit cards.

Finance Charges

The Consumer Protection Act also requires that all fees related to the credit or loan are fully disclosed. The disclosure must include the finance charge that is being charged to the consumer who is responsible for the credit account. The bank must also disclose other fees that may be included in the finance charge such as interest; points (each point equals one percent of the loan amount--usually charged by the lender to originate a loan); discount points (each point equals one percent of the loan amount--charged by the lender when the consumer wants to buy down their interest rate on the loan); a loan or finder's fee; fee for credit reports; premium for any guarantee or insurance protection for the creditor against default by the consumer; mortgage broker fees; and tax service fees.

Annual Percentage Rate

Banks are required to disclose the annual percentage rate on all loans and credit extended in consumers. The annual percentage rate is the annual cost to a consumer for borrowing the money. The calculation of the APR includes all of the up-front and finance charges so it provides the consumer with the true cost to him for borrowing the money or using the credit account.

Disclosure of Costs

Banks are also required to disclose fees, costs and charges to the consumer in an itemized format. For bank mortgage loans, the bank is required to disclose an itemized estimate of closing costs within three business days after the consumer submits a mortgage application. The actual costs may differ when the loan closes.

Terms and Condition Changes

The bank is required to notify the consumer in writing of changes to loan and credit accounts. This includes changes in finance charges, late fee costs and privacy information regarding the use of the consumer's personal or financial information.

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