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Regulation Z Compliance Policy

Purpose:
This policy ensures that [Dealership Name] complies with the Truth in Lending Act (TILA) and its implementing Regulation Z. The goal is to provide transparency in consumer credit transactions by ensuring proper disclosures, accurate advertising, and clear communication of financing terms.

1. General Policy Statement

[Dealership Name] is committed to full compliance with Regulation Z to protect consumer rights in credit transactions. This includes clear and accurate disclosure of credit terms, adherence to advertising requirements, and consistent application of financing rules.

2. Scope

This policy applies to all dealership employees involved in advertising, offering, or finalizing credit transactions, including financing and leasing agreements.

3. Responsibilities

3.1 Compliance Officer

  • Ensures compliance with Regulation Z requirements.
  • Conducts regular training and audits to confirm adherence to this policy.
  • Reviews all advertising materials and credit agreements for compliance.

3.2 Finance Team

  • Provides consumers with required disclosures in a timely manner.
  • Ensures accurate calculation and presentation of credit terms.

3.3 Sales and Marketing Teams

  • Ensures all advertisements comply with Regulation Z.
  • Avoids misleading or incomplete representations of financing terms.

4. Policy Provisions

4.1 Required Disclosures for Credit Transactions

Regulation Z requires the dealership to provide clear and accurate disclosures for credit transactions, including:

  • Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate.
  • Finance Charge: The total dollar amount of interest and fees paid by the customer over the term of the loan.
  • Amount Financed: The loan amount provided to the customer, minus any prepaid finance charges.
  • Payment Schedule: The number, amount, and timing of payments.
  • Total of Payments: The total amount the customer will pay over the life of the loan.

Disclosures must:

  • Be provided before the customer becomes contractually obligated.
  • Be presented clearly and conspicuously in writing.

4.2 Advertising Compliance

All advertising related to financing must comply with Regulation Z, including:

Triggering Terms:
If the advertisement includes any of the following, it must also disclose the terms of repayment and the APR:

  • The amount of any down payment.
  • The number of payments or period of repayment.
  • The amount of any payment.
  • The amount of any finance charge.

General Advertising Requirements:

  • The APR must be prominently displayed if a rate is mentioned.
  • Avoid misleading terms, such as “no interest” or “low financing,” without proper disclosures.
  • Include all material conditions and limitations in a clear and conspicuous manner.

4.3 Prohibited Practices

  • Failing to provide required disclosures before the consumer becomes obligated.
  • Misrepresenting financing terms in any form of communication.
  • Advertising financing options without including all required disclosures.
  • Using terms like “fixed rate” unless the rate is fixed for the full term of the loan.

5. Record Retention

  • Retain all documentation related to credit disclosures and advertising for a minimum of two years from the date of the transaction.
  • Maintain accurate records of:
    • Credit agreements.
    • Advertising materials.
    • Consumer disclosures provided.

6. Monitoring and Auditing

  • Conduct periodic audits of credit agreements and advertisements to ensure compliance with Regulation Z and UDAP.
  • Review and correct any deficiencies or non-compliance issues identified during audits.

7. Penalties for Non-Compliance

Non-compliance with Regulation Z may result in:

  • Civil penalties, including consumer restitution and regulatory fines.
  • Potential lawsuits or complaints by affected consumers.
  • Reputational harm to the dealership.
  • Disciplinary action for employees found in violation, up to and including termination.

8. Employee Training

  • Provide initial and ongoing training to employees on:
    • Regulation Z requirements for credit disclosures.
    • Advertising compliance standards.
    • Proper procedures for completing and documenting credit agreements.

9. Policy Updates

This policy will be reviewed and updated annually, or as changes to Regulation Z, dealership practices, or industry standards occur.

Acknowledgment
I acknowledge that I have read and understand the Regulation Z Compliance Policy and agree to abide by its provisions.

Employee Signature: ___________________________
Date: ___________________________

Manager Signature: ___________________________
Date: ___________________________

This policy ensures compliance with Regulation Z, promotes transparency in consumer credit transactions, and protects the dealership from regulatory and legal risks.