When we renew a HELOC, we charge certain renewal-related loan fees that we classify as finance charges. What is the appropriate way to disclose these renewal-related loan fees on a periodic statement? If we treat the renewal as a new loan and issue a new “first” statement, our software would permit us to include the renewal-related fees as “start up” charges that we could add to the finance charge. However, if we treat the renewal as a continuation of the existing HELOC and issue a regular periodic statement, our software does not permit us to include the renewal-related loan fees as part of the finance charge. Our HELOC renewals typically involve extending the maturity date and adjusting the interest rate. We use Regulation Z’s “home secured” format for our periodic statements.

Dec 14, 2017

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We do not have enough information to determine exactly how to classify your “renewal-related” loan fees. However, if you include the fees as part of the finance charge, Regulation Z’s “home-secured” periodic statement rules require the fees to be itemized and identified on a periodic statement, regardless of whether it is the first periodic statement for a new HELOC or a subsequent periodic statement on an existing HELOC.

In our view, charging new fees associated with renewing the HELOC is comparable to charging account opening fees. In such a case, we believe you should treat the renewal as a new account and disclose the renewal-related fees on a new first periodic statement. Note, too, that if you renew a HELOC after its maturity date, Regulation Z would treat this as a new transaction, requiring a new first statement.

You have indicated your software permits you to include “start-up” fees as part of the finance charge on initial periodic statements. The Official Interpretations to Regulation Z describe “start-up” fees as “points, loan fees, and similar finance charges relating to the opening of the account.” Note that your bank should confirm that your renewal-related fees actually fit this description of “start-up” fees and are includable in the finance charge before identifying them that way on an initial periodic statement.

For resources related to our guidance, please see:

Regulation Z, 12 CFR 1026.7(a)(6)(i) (“The creditor shall furnish the consumer with a periodic statement that discloses the following items, to the extent applicable: . . . The amount of any finance charge debited or added to the account during the billing cycle, using the term finance charge. The components of the finance charge shall be individually itemized and identified to show the amount(s) due to the application of any periodic rates and the amounts(s) of any other type of finance charge. . . .”)
Official Interpretations, Regulation Z, 12 CFR 1026, Paragraph 7(a)(6)(i), Comment 8 (“START-UP FEES. Points, loan fees, and similar finance charges relating to the opening of the account that are paid prior to the issuance of the first periodic statement need not be disclosed on the periodic statement. If, however, these charges are financed as part of the plan, including charges that are paid out of the first advance, the charges must be disclosed as part of the finance charge on the first periodic statement. However, they need not be factored into the annual percentage rate. (See § 1026.14(c)(3).)”)
Official Interpretations, Regulation Z, Comment 2 (“ . . . A new plan results, however, if the plan is renewed (with or without changes to the terms) after the scheduled expiration. The new plan is subject to all open-end credit rules, including §§ 1026.6, 1026.15, and 1026.40.”)