§14A-3-304. Calculation of rate to be disclosed.
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(1)Except as otherwise specifically provided, if a lender is required to give to a debtor a statement of the rate of the loan finance charge, the lender shall state the rate in terms of an annual percentage rate as defined in subsection
(2)or in terms of a corresponding nominal annual percentage rate as defined in subsection (3), whichever is appropriate.
(2)"Annual percentage rate"
(a)with respect to a consumer loan other than one made
pursuant to a revolving loan account, is either:
(i)that nominal annual percentage rate which, when
applied to the unpaid balances of the principal
calculated according to the actuarial method,
will yield a sum equal to the amount of the loan
finance charge; or
(ii)that rate determined by any method prescribed by
rule by the Administrator as a method which
materially simplifies computation while retaining
reasonable accuracy as compared with the rate
determined pursuant to subparagraph (i);
(b)with respect to a consumer loan made pursuant to a
revolving loan account, is the quotient expressed as a
percentage of the total loan finance charge for the
period to which it relates divided by the amount upon
which the loan finance charge for that period is
based, multiplied by the number of these periods in a
year.
(3)"Corresponding nominal annual percentage rate" is the percentage or percentages used to calculate the loan finance charge for one billing cycle or other period pursuant to a revolving loan account multiplied by the number of billing cycles or periods in a year.
(4)If a lender is permitted to make the same loan finance charge for all principal amounts within a specified range under subsection
(5)of Section 3-201 of this title or for all balances within a specified range, under subsection
(4)of Section 3-201 and subsection
(5)of Section 3-508A of this title, the lender shall state the annual percentage rate or corresponding nominal annual percentage rate, whichever is appropriate, as applied to the median amount of the range within which the actual principal amount or balance is included.
(5)A statement of rate complies with this part if it does not vary from the accurately computed rate by more than the following tolerances:
(a)the annual percentage rate may be rounded to the
nearest quarter of one percent (1/4 of 1%) or may fall
within a tolerance not greater than one-eighth of one
percent (1/8 of 1%) more or less than the actual rate
for consumer loans payable in substantially equal
installments when a lender determines the total loan
finance charge on the basis of a single add-on,
discount, periodic, or other rate, and the rate is
converted into an annual percentage rate under
procedures prescribed by rule by the Administrator;
(b)the Administrator may authorize by rule the use of
rate tables or charts which may provide for the
disclosure of annual percentage rates which vary from
the rate determined in accordance with paragraph
by not more than the tolerances the Administrator may
allow; the Administrator may not allow a tolerance
greater than eight percent (8%) of that rate except to
simplify compliance where irregular payments are
involved; and
(c)in case a lender determines the annual percentage rate
in a manner other than as described in paragraph
or (b), the Administrator may authorize by rule other
reasonable tolerances.
(6)In connection with credit transactions not under an open-end credit plan that are secured by real property or a dwelling, the disclosure of the finance charge and other disclosures affected by any finance charge:
(a)shall be treated as being accurate for purposes of this
title if the amount disclosed as the finance charge:
(i)does not vary from the actual finance charge by
more than One Hundred Dollars ($100.00); or
(ii)is greater than the amount required to be
disclosed under this title; and
(b)shall be treated as being accurate for purposes of
Section 5-204 of this title if:
(i)except as provided in subparagraph
(ii)of this
paragraph, the amount disclosed as the finance
charge does not vary from the actual finance
charge by more than an amount equal to one-half
of one percent (1/2 of 1%) of the total amount of
credit extended; or
(ii)in the case of a transaction, other than a
subsection 10 mortgage referred to in subsection
(10)of Section 1-301 of this title, which:
(aa)is a refinancing of the principal balance
then due and any accrued and unpaid finance
charges of a residential mortgage
transaction as defined in subsection
(17)of
Section 1-301 of this title, or is any
subsequent refinancing of such a
transaction; and
(bb)does not provide any new consolidation or
new advance; if the amount disclosed as the finance charge does not vary from the actual finance charge by more than an amount equal to one percent (1%) of the total amount of credit extended. Added by Laws 1969, c. 352, § 3-304, eff. July 1, 1969. Amended by Laws 1982, c. 335, § 39, operative Oct. 1, 1982; Laws 2000, c. 217, § 9, eff. July 1, 2000.