What is a finance charge and what isn't?

The Federal Reserve is requesting comment for the definition of what constitutes a finance charge in Regulation Z. At issue is how the regulation should define finance charge to properly take into account the wide variety of charges that relate to loans. With the Rodash case in mind, one purpose of this proposal would be to reduce risk by clarifying the definition. One possibility for accomplishing this could be to classify every charge as a finance charge. This has the advantage of reducing the knowledge required to make accurate decisions for disclosures; it has the disadvantage of increasing the dollar amount disclosed. We can expect this issue to be debated for some time.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 2, 1/96