source:
  type: regulation
  id: reg-z-1026.4
  authority: 12 CFR §1026.4 — Finance charge (Regulation Z)
  description: 12 CFR §1026.4 — Finance charge.
  coverage_tier: operative
obligations:
- id: reg-z-1026.4-full
  canonical_id: reg-z-1026.4-full
  section: 12 CFR §1026.4 — Finance charge
  type: do
  tags:
  - regulator-direct
  - tila
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 12 CFR §1026.4 — Finance charge
    source_class: cfpb-regulation
    source_url: https://www.law.cornell.edu/cfr/text/12/1026.4
    snapshot_id: 720358f176fff634
    fetched_at: '2026-06-17T18:31:37Z'
    content_hash: sha256:f209a95afd446e2b1a1d47215133f6da42d3a797073c76bc8990f4d923bedf44
    paragraph_quote: '§ 1026.4 Finance charge. (a) Definition. The finance charge
      is the cost of consumer credit as a dollar amount . It includes any charge payable
      directly or indirectly by the consumer and imposed directly or indirectly by
      the creditor as an incident to or a condition of the extension of credit. It
      does not include any charge of a type payable in a comparable cash transaction.
      (1) Charges by third parties. The finance charge includes fees and amounts charged
      by someone other than the creditor, unless otherwise excluded under this section,
      if the creditor: (i) Requires the use of a third party as a condition of or
      an incident to the extension of credit, even if the consumer can choose the
      third party ; or (ii) Retains a portion of the third-party charge, to the extent
      of the portion retained. (2) Special rule; closing agent charges. Fees charged
      by a third party that conducts the loan closing (such as a settlement agent
      , attorney, or escrow or title company) are finance charges only if the creditor:
      (i) Requires the particular services for which the consumer is charged; (ii)
      Requires the imposition of the charge; or (iii) Retains a portion of the third-party
      charge, to the extent of the portion retained. (3) Special rule; mortgage broker
      fees. Fees charged by a mortgage broker (including fees paid by the consumer
      directly to the broker or to the creditor for delivery to the broker) are finance
      charges even if the creditor does not require the consumer to use a mortgage
      broker and even if the creditor does not retain any portion of the charge. (b)
      Examples of finance charges. The finance charge includes the following types
      of charges, except for charges specifically excluded by paragraphs (c) through
      (e) of this section: (1) Interest, time price differential, and any amount payable
      under an add-on or discount system of additional charges. (2) Service, transaction,
      activity , and carrying charges, including any charge imposed on a checking
      or other transaction account (except a prepaid account as defined in § 1026.61
      or a covered asset account as that term is defined in § 1026.62 ) to the extent
      that the charge exceeds the charge for a similar account without a credit feature.
      (3) Points, loan fees, assumption fees, finder''s fees, and similar charges.
      (4) Appraisal, investigation, and credit report fees. (5) Premiums or other
      charges for any guarantee or insurance protecting the creditor against the consumer
      ''s default or other credit loss. (6) Charges imposed on a creditor by another
      person for purchasing or accepting a consumer ''s obligation , if the consumer
      is required to pay the charges in cash , as an addition to the obligation ,
      or as a deduction from the proceeds of the obligation . (7) Premiums or other
      charges for credit life, accident, health, or loss-of-income insurance, written
      in connection with a credit transaction. (8) Premiums or other charges for insurance
      against loss of or damage to property, or against liability arising out of the
      ownership or use of property, written in connection with a credit transaction.
      (9) Discounts for the purpose of inducing payment by a means other than the
      use of credit. (10) Charges or premiums paid for debt cancellation or debt suspension
      coverage written in connection with a credit transaction, whether or not the
      coverage is insurance under applicable law. (11) With regard to a covered separate
      credit feature and an asset feature on a prepaid account that are both accessible
      by a hybrid prepaid-credit card as defined in § 1026.61 : (i) Any fee or charge
      described in paragraphs (b)(1) through (10) of this section imposed on the covered
      separate credit feature, whether it is structured as a credit subaccount of
      the prepaid account or a separate credit account . (ii) Any fee or charge imposed
      on the asset feature of the prepaid account to the extent that the amount of
      the fee or charge exceeds comparable fees or charges imposed on prepaid accounts
      in the same prepaid account program that do not have a covered separate credit
      feature accessible by a hybrid prepaid-credit card. (12) With regard to a covered
      asset account as that term is defined in § 1026.62(b)(2) : (i) Any service,
      transaction, activity , or carrying charge imposed on the separate credit account
      required by § 1026.62(c) ; and (ii) Any service, transaction, activity , or
      carrying charge imposed on the covered asset account to the extent that the
      charge exceeds a comparable charge imposed on a checking or other transaction
      account that does not have overdraft credit. (iii) For purposes of paragraph
      (b)(12)(ii) of this section, a charge or combination of charges, including a
      per transaction fee, imposed on a covered asset account when overdraft credit
      is extended is not comparable to the following fees or charges imposed on a
      checking or other transaction account that does not have overdraft credit: (A)
      A charge for authorizing or paying a transaction that overdraws the checking
      or other transaction account . (B) A charge for declining to authorize or pay
      a transaction. (C) A charge for returning a transaction unpaid. (D) A charge
      for transferring funds into the checking or other transaction account from any
      credit account . (E) A charge for transferring funds into the checking or other
      transaction account from any other asset account . (c) Charges excluded from
      the finance charge. The following charges are not finance charges: (1) Application
      fees charged to all applicants for credit, whether or not credit is actually
      extended. (2) Charges for actual unanticipated late payment, for exceeding a
      credit limit, or for delinquency, default, or a similar occurrence. (3) Charges
      imposed by a financial institution for paying items that overdraw an account
      , unless the payment of such items and the imposition of the charge were previously
      agreed upon in writing. This paragraph (c)(3) does not apply to credit offered
      in connection with a prepaid account as defined in § 1026.61 . This paragraph
      (c)(3) also does not apply to above breakeven overdraft credit as defined in
      § 1026.62 . (4) Fees charged for participation in a credit plan, whether assessed
      on an annual or other periodic basis. This paragraph does not apply to a fee
      to participate in a covered separate credit feature accessible by a hybrid prepaid-credit
      card as defined in § 1026.61 , regardless of whether this fee is imposed on
      the credit feature or on the asset feature of the prepaid account . (5) Seller''s
      points. (6) Interest forfeited as a result of an interest reduction required
      by law on a time deposit used as security for an extension of credit. (7) Real-estate
      related fees. The following fees in a transaction secured by real property or
      in a residential mortgage transaction, if the fees are bona fide and reasonable
      in amount: (i) Fees for title examination, abstract of title, title insurance,
      property survey, and similar purposes. (ii) Fees for preparing loan-related
      documents, such as deeds, mortgages, and reconveyance or settlement documents.
      (iii) Notary and credit-report fees. (iv) Property appraisal fees or fees for
      inspections to assess the value or condition of the property if the service
      is performed prior to closing, including fees related to pest-infestation or
      flood-hazard determinations. (v) Amounts required to be paid into escrow or
      trustee accounts if the amounts would not otherwise be included in the finance
      charge. (8) Discounts offered to induce payment for a purchase by cash , check
      , or other means, as provided in section 167(b) of the Act. (d) Insurance and
      debt cancellation and debt suspension coverage —(1) Voluntary credit insurance
      premiums. Premiums for credit life, accident, health, or loss-of-income insurance
      may be excluded from the finance charge if the following conditions are met:
      (i) The insurance coverage is not required by the creditor, and this fact is
      disclosed in writing. (ii) The premium for the initial term of insurance coverage
      is disclosed in writing. If the term of insurance is less than the term of the
      transaction, the term of insurance also shall be disclosed. The premium may
      be disclosed on a unit-cost basis only in open-end credit transactions, closed-end
      credit transactions by mail or telephone under § 1026.17(g) , and certain closed-end
      credit transactions involving an insurance plan that limits the total amount
      of indebtedness subject to coverage. (iii) The consumer signs or initials an
      affirmative written request for the insurance after receiving the disclosures
      specified in this paragraph, except as provided in paragraph (d)(4) of this
      section. Any consumer in the transaction may sign or initial the request. (2)
      Property insurance premiums. Premiums for insurance against loss of or damage
      to property, or against liability arising out of the ownership or use of property,
      including single interest insurance if the insurer waives all right of subrogation
      against the consumer , may be excluded from the finance charge if the following
      conditions are met: (i) The insurance coverage may be obtained from a person
      of the consumer ''s choice, and this fact is disclosed. (A creditor may reserve
      the right to refuse to accept, for reasonable cause, an insurer offered by the
      consumer .) (ii) If the coverage is obtained from or through the creditor, the
      premium for the initial term of insurance coverage shall be disclosed. If the
      term of insurance is less than the term of the transaction, the term of insurance
      shall also be disclosed. The premium may be disclosed on a unit-cost basis only
      in open-end credit transactions, closed-end credit transactions by mail or telephone
      under § 1026.17(g) , and certain closed-end credit transactions involving an
      insurance plan that limits the total amount of indebtedness subject to coverage.
      (3) Voluntary debt cancellation or debt suspension fees. Charges or premiums
      paid for debt cancellation coverage for amounts exceeding the value of the collateral
      securing the obligation or for debt cancellation or debt suspension coverage
      in the event of the loss of life, health, or income or in case of accident may
      be excluded from the finance charge, whether or not the coverage is insurance,
      if the following conditions are met: (i) The debt cancellation or debt suspension
      agreement or coverage is not required by the creditor, and this fact is disclosed
      in writing; (ii) The fee or premium for the initial term of coverage is disclosed
      in writing. If the term of coverage is less than the term of the credit transaction,
      the term of coverage also shall be disclosed. The fee or premium may be disclosed
      on a unit-cost basis only in open-end credit transactions, closed-end credit
      transactions by mail or telephone under § 1026.17(g) , and certain closed-end
      credit transactions involving a debt cancellation agreement that limits the
      total amount of indebtedness subject to coverage; (iii) The following are disclosed,
      as applicable, for debt suspension coverage: That the obligation to pay loan
      principal and interest is only suspended, and that interest will continue to
      accrue during the period of suspension. (iv) The consumer signs or initials
      an affirmative written request for coverage after receiving the disclosures
      specified in this paragraph, except as provided in paragraph (d)(4) of this
      section. Any consumer in the transaction may sign or initial the request. (4)
      Telephone purchases. If a consumer purchases credit insurance or debt cancellation
      or debt suspension coverage for an open-end (not home-secured) plan by telephone,
      the creditor must make the disclosures under paragraphs (d)(1)(i) and (ii) or
      (d)(3)(i) through (iii) of this section, as applicable, orally. In such a case,
      the creditor shall: (i) Maintain evidence that the consumer , after being provided
      the disclosures orally, affirmatively elected to purchase the insurance or coverage;
      and(ii) Mail the disclosures under paragraphs (d)(1)(i) and (ii) or (d)(3)(i)
      through (iii) of this section, as applicable, within three business days after
      the telephone purchase. (e) Certain security interest charges. If itemized and
      disclosed, the following charges may be excluded from the finance charge: (1)
      Taxes and fees prescribed by law that actually are or will be paid to public
      officials for determining the existence of or for perfecting, releasing, or
      satisfying a security interest . (2) The premium for insurance in lieu of perfecting
      a security interest to the extent that the premium does not exceed the fees
      described in paragraph (e)(1) of this section that otherwise would be payable.
      (3) Taxes on security instruments. Any tax levied on security instruments or
      on documents evidencing indebtedness if the payment of such taxes is a requirement
      for recording the instrument securing the evidence of indebtedness. (f) Prohibited
      offsets. Interest, dividends, or other income received or to be received by
      the consumer on deposits or investments shall not be deducted in computing the
      finance charge. [ 76 FR 79772 , Dec. 22, 2011, as amended at 81 FR 84369 , Nov.
      22, 2016; 89 FR 10683 7, Dec. 30, 2024]'
  judgment: false
