Reg Z Home Equity Lines of Credit

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Question:

We are receiving conflicting information on Reg Z disclosure requirements for HELOC. We provide an initial disclosure and booklet at the time of application. However, Reg Z appears to also refer to another disclosure at consumation of the transaction. Must we redisclose assuming no terms have changed from the time of original disclosure?

Answer:

Although seemingly the same, the "preapplication" and new account disclosures fall under different requirements. The confusion stems from the habit of applying Reg. Z's closedend credit principles to openend credit. The disclosure scheme is quite different.

Section 226.5b governs the preapp disclosures. These are designed to give the consumer a quick overview of the most important features of a HELOC plan. Notice that this requirement obligates you to prepare a separate disclosure for each plan you offerallowing the consumer to compare options, prices and features and zero in on the one that's just right. Preapp disclosures can be prepared and printed in advance, like advertisements, so they can be handed out when needed.

Section 226.6 governs the actual account disclosures. These are transactionspecific and include the actual prices and features of your HELOC.

First published on BankersOnline.com 3/11/02