October 18, 2013
The Consumer Financial Protection Bureau has a very helpful Finance Charge Chart (page 13) in its Truth In Lending Act examination procedure manual. The manual is “intended for use by CFPB examiners in examining the mortgage companies and other financial institutions subject to the new regulations.”
Figuring out the finance charge for the purposes of calculating the Annual Percentage Rate (APR) can be very difficult. The manual states that the finance charge
initially includes any charge that is, or will be, connected with a specific loan. Charges imposed by third parties are finance charges if the creditor requires use of the third party. Charges imposed on the consumer by a settlement agent are finance charges only if the creditor requires the particular services for which the settlement agent is charging the borrower and the charge is not otherwise excluded from the finance charge. (14)
The chart makes clear which charges are always included, which are included unless certain conditions are met, which are typically not included and which are never included.
The guide also has a useful history of TILA and overview of Regulation Z (which implements TILA). It also includes (on page 9) a flowchart that explains what kind of credit is covered by Regulation Z.