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One of the most important parts of ensuring compliance with Regulation Z is to understand which transactions apply. While regulation Z often applies to the typical mortgage transaction, coverage can often appear to get complicated when considering certain loan types, such as consumer purpose loans done through the commercial loan department. Generally, the rules in Regulation Z apply to credit that is for personal, family, or household purposes, extended to a consumer by a creditor that is not otherwise exempt.
The following transactions are exempt from Regulation Z (1026.3):
Credit extended primarily for a business, commercial, or agricultural purpose;
Credit extended to other than a natural person (including credit to government agencies or instrumentalities);
NOTE: Credit extended to trusts established for tax or estate planning purposes or to land trusts is considered to be extended to a natural person for purposes of the definition of “consumer” (12 CFR 1026.2(a)(11), Comment 2(a)(11)-3).Credit in excess of an annually adjusted threshold not secured by real property or by personal property used or expected to be used as the principal dwelling of the consumer;19
Public utility credit;
Credit extended by a broker-dealer registered with the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC), involving securities or commodities accounts;
Home fuel budget plans not subject to a finance charge; and
Certain student loan programs.
The use of flowcharts facilitates the determination of whether certain regulatory requirements apply to a particular transaction. The Regulation Z Coverage Flowchart is a tool to easily determine if a transaction is covered by Regulation Z. The flowchart includes a step-by-step process of considering each trigger and exception for coverage to identify if a specific transaction is subject to the requirements of Regulation Z.
Click the button below to download the Regulation Z Coverage Flow Chart.
