By Amir Dabiri - December 11, 2014
When financing vehicles and loaning funds, it is important to properly disclose the APR and finance charges to your customers. These calculations can be highly debatable and when the situation arises where a customer or other software challenges those calculations, knowing the law and how to validate the calculations used will save both time and money.
In 2010, the Dodd-Frank Act granted the power of administering the rules and regulations given by the Truth in Lending Act (TILA) to the Consumer Financial Protection Bureau (CFPB). The TILA, also known as regulation Z, has been amended and improved since 1969 to protect the consumers from inaccurate disclosure of APR and finance charges involved in closed-end credit transactions which includes car loans. 2 Review these rules and regulations to get a good understanding of the law.
Fortunately, one does not have to review the law in its entirety to confirm the calculations provided. The Office of the Comptroller of the Currency (OCC) has provided a free software download to confirm the APR disclosed on the contract. The OCC charters, regulates and supervises all national banks and federal savings associations. 1 The software they have provided can be considered the standard for APR calculations. APRWIN takes the loan information on the contract and uses that information to calculate the actual APR.3 If the APR given matches the APR disclosed on the contract, then the calculation has been validated and nothing more can be argued. This tool will be used by auditors any time they are testing compliance with the aforementioned laws and regulations so it is important to get a head start. Instead of wasting time and money on court fees due to incorrect calculations, use the standard APRWIN software and confirm your accuracy, laying to rest any doubt.
1 CFPB consumer laws and regulations. (2013, August). Retrieved from http://files.consumerfinance.gov/f/201308_cfpb_tila-narrative-exam-procedures.pdf
2 OCC: About the OCC. (n.d.). Retrieved from http://www.occ.gov/about/what-we-do/mission/index-about.html
3 OCC: Annual percentage rate calculation program for windows (APRWIN). (n.d.). Retrieved from http://www.occ.gov/tools-forms/tools/compliance-bsa/aprwin-software.html
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