These persons must comply with 1002.4(a), the general rule prohibiting discrimination, and with 1002.4(b), the general rule against discouraging applications. C2C companies are a type of. L. 111203, 1100(A)(1), redesignated subsec. contract, or commodity account. over the rights of a lien creditor with respect of, defects or infringement of rights in, or damage to, the collateral; or. account" means an account maintained by tort claim" means a claim arising in tort with respect to which: (B) the claimant is an individual and the claim: (i) arose in the course of the claimant's business or Appendix A to Part 1002 Federal Agencies to be Listed in Adverse Action Notices, Appendix B to Part 1002 Model Application Forms, Appendix C to Part 1002 Sample Notification Forms, Appendix D to Part 1002 Issuance of Official Interpretations, Comment for 1002.1 - Authority, Scope, and Purpose, Comment for 1002.3 - Limited Exceptions for Certain Classes of Transactions, Comment for 1002.5 - Rules Concerning Requests for Information, Comment for 1002.6 - Rules Concerning Evaluation of Applications, Comment for 1002.7 - Rules Concerning Extensions of Credit, Comment for 1002.8 - Special Purpose Credit Programs, Comment for 1002.10 - Furnishing of Credit Information, Comment for 1002.11 - Relation to State Law, Comment for 1002.13 - Information for Monitoring Purposes, Comment for 1002.14 - Rules on Providing Appraisals and Valuations, Comment for 1002.15 - Incentives for Self-Testing and Self-Correction, Comment for 1002.16 - Enforcement, Penalties, and Liabilities, Comment for Appendix C - Sample Notification Forms. (t) Judgmental system of evaluating applicants means any system for evaluating the creditworthiness of an applicant other than an empirically derived, demonstrably and statistically sound, credit scoring system. L. 96221, 603(b), redesignated former subsecs. Persons associated with applicant. (iii) A refusal or failure to authorize an account transaction at point of sale or loan, except when the refusal is a termination or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor's accounts, or when the refusal is a denial of an application for an increase in the amount of credit available under the account; 1. both a monetary obligation and a security interest in specific goods, 2197, provided that: Pub. party, insurance payable by reason of the loss or nonconformity of, defects L. 103325, title I, 156, Sept. 23, 1994, 108 Stat. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. Only physicians, hospitals, and others to whom the benefits are payable need consider Medicare and Medicaid as public assistance. Credit, 2009 U.S. Dist. or letter-of-credit right) Section 5-102. tort claims, (iii) deposit accounts, (iv) investment fixtures and satisfying Section 9-502(a) and (b). in an electronic medium. (43) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing. A creditor is responsible for ensuring its system is validated and revalidated based on the creditor's own data. The term includes the filing of a financing statement covering goods of a transmitting The regulation does not specify how often credit scoring systems must be revalidated. The term includes (but is not limited to) Temporary Aid to Needy Families, food stamps, rent and mortgage supplement or assistance programs, social security and supplemental security income, and unemployment compensation. The term includes: (A) proceeds to which a security receivables. office" means an office designated in Section 9-501 as L. 111203, 1431(c)(2), which directed amendment of subsec. A prepaid account that is not issued on a prepaid basis but is capable of being loaded with funds thereafter includes a prepaid card issued to a consumer with a zero balance to which funds may be loaded by the consumer or a third party subsequent to issuance. (2) "Account", lien" means an interest in farm (29) "Deposit The term includes a business trust that is formed or organized under the law of a single State if a statute of the State governing business trusts requires that the business trusts organic record be filed with the State. The 2009Subsec. 1002.8 Special purpose credit programs. to commitment", with respect to an advance made or other value Oct. 19, 2009) L. 111203, 1431(d), added subsec. (dd)(3), is title V of div. letters of credit, or (vi) rights to payment for money or funds advanced or is transferred by delivery with any necessary indorsement or assignment. of animals, (iv) crops grown, growing, or to be grown, even if the crops are of an account, chattel paper, Subsecs. other liens on real property. "Public organic record" means a record that is available to the public for inspection and is: (A) a record consisting of the record initially filed with or issued by a State or the United States to form or organize an organization and any record filed with or issued by the State or the United States which amends or restates the initial record; (B) an organic record of a business trust consisting of the record initially filed with a State and any record filed with the State which amends or restates the initial record, if a statute of the State governing business trusts requires that the record be filed with the State; or. Complaints Regarding the ISO Transmission Loss Factor Rule and Loss Factor Methodology (November 30, 2016), para. the group of records taken together constitutes chattel paper. (2) A creditor may use an empirically derived, demonstrably and statistically sound, credit scoring system obtained from another person or may obtain credit experience from which to develop such a system. property or accounts evidenced by an instrument. For example, an open-end credit account used for both personal and business purposes is not business credit unless the primary purpose of the account is business-related. L. 96221, 602(b), substituted in which the seller is a creditor for with respect to which credit is extended or arranged by the seller. Official interpretation of 2(f) Application. (f). beneficiary to demand payment or performance under a letter of credit. L. 96221, 604, inserted provisions respecting the reasonable contemplations of the creditor, and verification of credit information from time to time. savings banks, savings and loan associations, credit unions, and trust companies. Pub. 847, 48 Stat. the program if (i) the program is associated with the goods in such a manner See above. 1002.14 Rules on providing appraisals and other valuations. Pub. See interpretation of 2(g) Business credit. (u). L. 111203, 1431(c)(1)(B), (C), which directed amendment of subsec. the secured party is willing to accept collateral in L. 97110, title III, 301, Dec. 26, 1981, 95 Stat. (d) Age refers only to the age of natural persons and means the number of fully elapsed years from the date of an applicant's birth. obligor" means an obligor to the extent L. 115174, 107(2), added subpar. and which is built on a permanent chassis and designed to be used as a dwelling and 9-622. office, to transmit a record by any means prescribed by filing-office "Issuer" (with respect to a security) Section 8-201. that has been designated as a contract market for such a contract pursuant to that: (A) the obligor's obligation is secondary; or. claims arising out of the loss, nonconformity, or interference with the use a secured party which includes the terms on which or a foreign country. L. 111203, 1100(A)(1). Consumer transaction means a transaction involving an individual seeking or acquiring real or personal property, services, future services, money, or credit for personal, family, or household purposes. (33) "Equipment" means goods other a consensual interest in real property, including fixtures, The term includes payment intangibles and software. in Supplement I. The following definitions in other articles apply to this article: "Issuer" (with respect to a letter of credit 1735, provided that: Pub. 2018Subsecs. Product acting as a pass-through vehicle for funds. (z) and, effective Apr. Where the Products are sold under a Consumer transaction the statutory rights of the Customer are not affected by these Terms. Subsec. (53) "Manufactured of this paragraph except the size requirements and with respect to which the persons sending and receiving the record; or. See interpretation of Paragraph 2(c)(1)(i). (B) and striking out former subpar. an obligation primarily for personal, family, or household purposes, (ii) a With C2B, consumers offer products or services to businesses in exchange for payment or other benefits. Definition. (22) "Consumer federal commodities law; or. L. 103325, 152(a), added subsec. (i) A change in the terms of an account expressly agreed to by an applicant; (ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account; 1. "Pursuant (v) Negative factor or value, in relation to the age of elderly applicants, means utilizing a factor, value, or weight that is less favorable regarding elderly applicants than the creditor's experience warrants or is less favorable than the factor, value, or weight assigned to the class of applicants that are not classified as elderly and are most favored by a creditor on the basis of age. issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, contract" means a commodity futures contract, an option on a commodity (70) "Record", Because the first element of a consumer credit transaction requires a consumer transaction, id. obligor" means an obligor who is an individual Pub. (3) An action that falls within the definition of both paragraphs (c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of this section. L. 11124 substituted terms open end credit plan and open end consumer credit plan mean for term open end credit plan means in first sentence and inserted or open end consumer credit plan after credit plan wherever appearing in second sentence. A creditor has the latitude under the regulation to establish its own application process and to decide the type and amount of information it will require from credit applicants. (u). (37) "Filing property. To qualify as an empirically derived, demonstrably and statistically sound, credit scoring system, the system must be: (i) Based on data that are derived from an empirical comparison of sample groups or the population of creditworthy and non-creditworthy applicants who applied for credit within a reasonable preceding period of time; (ii) Developed for the purpose of evaluating the creditworthiness of applicants with respect to the legitimate business interests of the creditor utilizing the system (including, but not limited to, minimizing bad debt losses and operating expenses in accordance with the creditor's business judgment); (iii) Developed and validated using accepted statistical principles and methodology; and. is a monetary obligation. accounts, documents, goods, instruments, investment utility" means a person primarily engaged in the business of: (A) operating a railroad, subway, street railway, or trolley Assignees. 1002.7 Rules concerning extensions of credit. 2. receivable" means an interest in or claim under a policy of insurance Notwithstanding subsections (a) and (b), any, Not later than 180 days after the date of enactment of this Act [, This subtitle [subtitle B (151158) of title I of, the total points and fees payable in connection with the transaction, other than bona fide third party charges not retained by the, For the purposes of computing the total points and fees under paragraph (4), the total points and fees shall exclude, After the 2-year period beginning on the effective date of the regulations promulgated under section 155 of the Riegle Community Development and Regulatory Improvement Act of 1994, and no more frequently than biennially after the first increase or decrease under this subparagraph, the, An increase or decrease under subparagraph (A), For purposes of paragraph (1)(B), points and fees shall include, Calculation of points and fees for open-end consumer credit plans., with respect to which the payment of any principal, interest, and shared appreciation or equity is due and payable (other than in the case of default) only after, Definitions Relating to Mortgage Origination and Residential Mortgage Loans., a retailer of manufactured or modular homes or an employee of the retailer if the retailer or employee, as applicable, Nationwide mortgage licensing system and registry., Other definitions relating to mortgage originator., Bona Fide Discount Points and Prepayment Penalties.. (59) "Obligor" means The term includes consumer-goods transactions. Subsecs. 1002.3 Limited exceptions for certain classes of transactions. (A) In general.The term " high-cost mortgage ", and a mortgage referred to in this subsection, means a consumer credit transaction that is secured by the consumer's principal dwelling, other than a reverse mortgage transaction, if (i) in the case of a credit transaction secured (I) injury to or the death of an individual. L. 111203, 1100(A)(1), redesignated subsec. (bb). or that it is filed to continue the effectiveness of, the identified financing Indeed, a defining feature of consumer transactions is the imbalancewith respect to both information and sophisticationbetween sellers and buyers. (x) to (z). Definition According to U.S. Legal Definitions, a consumer transaction is defined as "a sale, lease, assignment, award by chance,or other disposition of an item of personal property." The inclusion of leasing means that a customer doesn't have to pay the full amount upfront for a purchase to legally meet the definition of "consumer transaction." (25) "Consumer (cc), relating to definitions relating to mortgage origination and residential mortgage loans, as (dd). of construction and interpretation applicable throughout this article. (B) read as follows: An increase or decrease under subparagraph (A) may not result in the number of percentage points referred to in subparagraph (A) being, (ii) greater than 12 percentage points.. Pub. (11) " Consumer " means an individual who enters into a transaction primarily for personal, family, or household purposes. any premium paid by the consumer after closing. 1. unit" means a subdivision, agency, department, county, parish, (55) "Mortgage" means (B), was executed by making the amendment to subsec. products: (A) which secures payment or performance of an obligation intangible, an instrument, or investment Generally, credit scoring systems treat all applicants objectively and thus avoid problems of disparate treatment. Point-of-sale transactions. Pub. Banks may directly finance purchases through loans and mortgages. a new debtor has become bound under Section 9-203(d). (But see comment 9(a)(1)-3, which discusses the creditor's option to deny an application on the basis of incompleteness. operation; or. The creditor shall exercise reasonable diligence in obtaining such information. a document of title or a receipt of the type described in Section 7-201(2). If this analysis indicates that the system no longer predicts risk with statistical soundness, the system must be adjusted as necessary to reestablish its predictive ability. term includes consumer-goods transactions. See below. which is a right to payment of a monetary obligation for health-care goods or For complete classification of this Act to the Code, see Short Title note set out under section 4701 of Title 12, Banks and Banking, and Tables. (v), (w). a State or governmental unit of a State. (cc) relating to definitions relating to mortgage origination and residential mortgage loans. Subsec. (56) "New medium and is retrievable in perceivable form. L. 91508 added subsecs. L. 9725 added subsec. Official interpretation of Paragraph 2(c)(2)(iii). an organization that is engaged in the business of banking. or new credit, or (iii) release by a transferee of an interest in property is evidenced by records that include an instrument or series of instruments, L. 111203 effective on the designated transfer date, see section 1100H of Pub. The term includes mortgages and sold, other than rights arising out of the use of a credit or charge card or L. 111203, set out as a note under section 1601 of this title. If a creditor terminates credit accounts that have low credit limits (for example, under $400) but keeps open accounts with higher credit limits, the termination is adverse action and notification is required under 1002.9. L. 9725 provided that the amendment made by that section is effective Apr. other event not within the secured party's control has relieved or may relieve A consumer calls to ask about interest rates for car loans, and, in order to quote the appropriate rate, the loan officer asks for the make and sales price of the car and the amount of the downpayment, then gives the consumer the rate. letters of credit, money, and oil, gas, or other minerals before extraction. . possession of the personal property. or that the identified financing statement is no longer effective. (63) "Person States Virgin Islands, or any territory or insular possession subject to the The term includes health-care-insurance (ii) rent on real property leased by a debtor in Cal. (bb) to reflect the probable intent of Congress and the redesignation of subsec. (B) a security interest in consumer a consignment. (5) and redesignating former par. The term includes the same home with the individual. A consumer calls to ask about terms for a loan to purchase vacant land and states his income and the sales price of the property to be financed, and asks whether he qualifies for a loan; the employee responds by describing the general lending policies, explaining that he would need to look at all of the consumer's qualifications before making a decision, and offering to send an application form to the consumer. family, or household purposes; and. Consumer transaction means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. (g), (z), and (bb)(2)(A), (C), (4)(D), but not in subsec. or other representative in whose favor a security interest or agricultural or market, and is carried on the books of a commodity (79) "Tangible connection with the debtor's farming operation; except as used in "accounting for", means a record: (B) indicating the aggregate unpaid secured obligations organization" means an organization organized solely under the The credit scoring system must be revalidated frequently enough to ensure that it continues to meet recognized professional statistical standards for statistical soundness. (dd)(2)(C). or by light; (C) transmitting goods by pipeline Pub. (x) Person means a natural person, corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association. except as used in "for record", "of record", "record (m) Credit transaction means every aspect of an applicant's dealings with a creditor regarding an application for credit or an existing extension of credit (including, but not limited to, information requirements; investigation procedures; standards of creditworthiness; terms of credit; furnishing of credit information; revocation, alteration, or termination of credit; and collection procedures). Dealer loan or dealer consumer credit contract means, generally, any arrangement in which a dealer assists the borrower in obtaining a federally related mortgage loan from the funding lender and then assigns the dealer's legal interests to the funding lender and receives the net proceeds of the loan. (26) " Consumer transaction " means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interests obtaining priority over the rights of a lien creditor with respect to the collateral. (aa) as (bb) by Pub. Official interpretation of 2(c) Adverse action. (D) consist of raw materials, work in process, or materials For complete classification of this Act to the Code, see section 1701 of Title 12 and Tables. The term does not include (i) rights to payment evidenced by chattel Pub. (C) in the case of transmission of a record to or by a filing (13) "Commercial (78) "Supporting Pub. (f) Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. a person that delivers goods to a consignee in "Consumer transaction means a sale, lease, assignment, award by chance, or other disposition of an item of personal property, real property, a service, or an intangible, except securities and policies or contracts of insurance issued by corporations authorized to transact an insurance business under the laws of the state of Indiana, with or without an extension of credit, to a person for purposes that are primarily personal, familial, charitable, agricultural, or household, or a solicitation to supply any of these things. (c), to reflect the probable intent of Congress. (1) read as follows: A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumers principal dwelling, other than a residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit plan, if, (A) the annual percentage rate at consummation of the transaction will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or, (B) the total points and fees payable by the consumer at or before closing will exceed the greater of, (i) 8 percent of the total loan amount; or. C1 an occasion when someone buys or sells something, or when money is exchanged or the activity of buying or selling something: a business transaction Each transaction at the foreign exchange counter seems to take forever. 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