Regulation Z Definition
Regulation Z is a Federal Reserve Regulation and a part of the Truth in Lending Act of 1968. The regulation requires the lenders to disclose all the terms and conditions of a loan to the borrowers. The regulation protects the interest of the borrowers against unfair practices by lenders. The terms of loans include but not limited to the interest rates, fees and length of the loan. Credit card companies, mortgage lenders and other creditors are obligated to disclose all the important credit terms in writing to its borrowers. They are also required to update the borrowers at regular intervals if the situation demands. The regulation also makes it mandatory for the lenders to respond to the complaints of the borrowers truthfully and responsibly on the occasions of error in periodic billing.
A Little More on Regulation Z
U.S. Federal Reserve Board and the Consumer Financial Protection Bureau are responsible for enforcing this rule. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 shifted most of the responsibilities of enforcement to the Consumer Financial Protection Bureau.
The Truth in Lending Act was enacted to prohibit lenders from providing misleading information to the borrowers regarding the loan terms. The act was amended and updates several times to protect the consumers against ever-changing deceiving methods of the lending firms.
Regulation Z standardizes the format of disclosing the information in order to ensure the borrower knows all the terms correctly while signing up for a loan. According to the regulation, a credit card issuer or a mortgage loan provider must clearly state the interest rate of the loan in terms of an annual percentage rate. It prohibits the lender to initially quote a lower interest rate to entice a borrower and then in the fine print increase the rate stating the earlier stated rate was the monthly percentage. The lenders are also required to provide all information regarding the service and other charges associated with the loan.
The lenders are also obligated to send monthly billing statements to the borrower detailing all the charges and mentioning any changes in the interest rate in case of adjustable rate loans. If there is any change in the loan terms the lender must communicate it in advance within a prescribed time period. The prescribed time depends on the type of loan and the changes made. Credit card issuers need to notify any such changes to it consumers 45 days in advance. All these communications must be done in written format.
The regulation also regulates the compensation provided by the creditor to the mortgage brokers or any other mortgage originator. It states a mortgage broker is only entitled to receive a compensation based on the credit amount. The loan terms and conditions should not affect the compensation amount.
Reference for Regulation Z
Academic Research on Regulation Z
- · A Flip Look at Predatory Lending: Will the Fed’s Revised Regulation Z End Abusive Refinancing Practices, Pyle, M. J. (2002). Yale LJ, 112, 1919. According to this research paper, the Predatory Lending was studied and the correlation between this phenomenon and the Regulation Z was analyzed. One major question this research puts out is Will the Feds revise the End Abusive Refinancing Practices?
- · Searching for the Truth in Lending: Identifying Some Problems in the Truth in Lending Act and Regulation Z, Griffith, E. (2000). Baylor L. Rev., 52, 265. According to this paper, the process of looking for the main answer behind the Truth in Lending was explained and this paper also identifies some likely problems in the Truth of the Lending Act and Regulation Z.
- · Truth in Lending: Regulation Z-Its Limitations and Applicability, Roisman, A. Z. (1968). Geo. Wash. L. Rev., 37, 1154. According to this research analysis, the Truth in Lending was explained as a result of Regulation Z. Also, this paper explained the applicability and limitations of this process as well as the implication on the Bank Lending activities.
- · The Truth and Nothing But the Truth: Confronting the Challenge in the Truth in Lending Act and Regulation Z, Griffith, E. (2003). Hous. L. Rev., 40, 345. This paper explains the confronting challenges in the Truth Lending Act and the Regulation Z. according to this paper, the truth was discussed and the steps to following in correcting wrong assumptions were also developed.
- · Lenders and Consumers Continue the Search for the Truth In Lending Under the Truth in Lending Act and Regulation Z, Griffith, E. (2007). San Diego L. Rev., 44, 611. According to the conclusion drawn from this research thesis, it states that consumers and Lenders are still searching for the correlation and truth in Lending under the Truth in Lending Act and the Regulation Z. this study explains the steps taken to determine the truth behind this two phenomenon.
- · A New Look at Credit Advertising Under Regulation Z, Garwood, G. L. (1974). Banking LJ, 91, 48. This paper studies the new implementation stated at the studying of the new development in Advertising under Regulation Z. According to this research, this study was carried put to explain the reform that has been endorsed in the Truth in Lending Act as regards Regulation Z.
- · New Tools for Combating Unfair, Deceptive and Abusive Mortgage Practices: New Amendments to Regulation Z, Maman, S. (2008). Loy. Consumer L. Rev., 21, 194. This paper studies the new tool adopted while protesting against the Deceptive, unfair and abusive mortgage practices via the new amendments made on Regulation Z according to the Truth under the Lending Act.
- · Effect of Federal Truth in Lending Act and Regulation Z on Real Estate, Jensen, R. A. (1969). Real Property, Probate and Trust Journal, 11-28. This research work studies the effect of the Federal Truth in Lending Act and Regulation Z on the aspect of Real Estate management. This study shows the implication of the Federal Truth on the assumption of the Regulation as regards Lending of Real estate.
- · Credit Card Disclosures and the Elderly: Will the Proposed Amendments to Regulation Z Help the Elderly Understand Credit Card Documents, Paulsen, J. K. (2009). Elder LJ, 17, 125. According to this research thesis, the help rendered to the Elderly to understanding the Credit Car documents were studied. Also, according to this paper, the correlation between the disclosure of credit cards and the elderly was practically described and evaluated according to the proposed amendments on Regulation Z.
- · Credit Advertising Under Truth in Lending Simplification and Revised Regulation Z, Greenfield, J. L. (1983). Banking LJ, 100, 388. This research paper studied the advertisement of Credit under the influence of the Truth in Lending Act. The simplification of the acts as well as the Revision of Regulation Z regarding credit advertising was also described.
- · Regulation Z and the UCCC: The Bewildering Maze of Credit Disclosure Provisions, Clark, R. S. (1979). BYU L. Rev., 394. This research paper explains the Bewildering Maze of the credit disclosure provision according to the UCCC and Regulation Z.