InfoSight Spotlight: Is a credit report fee a finance charge or not?

According to InfoSight, Regulation Z does provide some examples of finance charges and examples of charges that are not finance charges.

Despite these examples, it is sometimes difficult to determine whether a particular charge is a finance charge or not. Here is a short test to improve your knowledge and understanding of finance charges:

Select the correct statement or statements concerning credit report fees.

  • A. Credit report fees are always considered finance charges under Regulation Z.
  • B. Credit report fees are never considered finance charges under Regulation Z.
  • C. Credit report fees are considered finance charges on transactions secured by real property and are not considered finance charges for all other loans.
  • D. Credit report fees are not considered finance charges on transactions secured by real property but are considered finance charges for all other loans

Answer:

  • Regulation Z Section 1026.4(b)(4) indicates that credit report fees are considered finance charges unless specifically excluded. Paragraph (c) states that credit report fees are excluded from the finance charge for transactions secured by real property or in a residential mortgage transaction if the fees are bona fide and reasonable in amount.
  • Therefore, credit report fees are not considered finance charges for mortgage loans as long as they are bona-fide and the amount is reasonable, however credit report fees are considered finance charges for all other loans.

Therefore, the correct answer is “D.”

Read the full InfoSight newsletter here.