How Would The Consumer Financial Protection Bureau (CFPB) Likely Interpret The Applicability Of The TILA's 'finance Charge' Definition To A Credit Product With A 0% Introductory APR That Later Converts To A Variable APR, Where The Creditor Also Charges An Annual Fee That Is Waived For The First Year, In Light Of The 2010 CARD Act Amendments And The CFPB's Subsequent Guidance In Bulletin 2013-06?
The Consumer Financial Protection Bureau (CFPB) would likely interpret the applicability of the Truth in Lending Act's (TILA) finance charge definition to the described credit product as follows:
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0% Introductory APR: During the introductory period, no interest is charged, so there is no finance charge. Once the APR converts to a variable rate, the interest charged will be considered a finance charge under TILA.
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Annual Fee: The annual fee, even though waived in the first year, is considered a finance charge. Under TILA, fees for the extension of credit, such as annual fees, are finance charges. The CFPB's guidance suggests that such fees should be disclosed even if waived initially, as they are part of the credit terms.
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Disclosure Requirements: The CFPB would expect clear disclosure of both the variable APR and the annual fee. This includes when each charge applies and how they contribute to the total cost of credit, ensuring transparency for consumers.
In conclusion, the CFPB would require the creditor to disclose both the variable APR and the annual fee as finance charges, ensuring that consumers are fully informed about the credit costs beyond the introductory period.