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Does a business purpose loan that will be secured by the business owner’s primary residence require a right of rescission under Regulation Z? – IBA Compliance Connection

Does a business purpose loan that will be secured by the business owner’s primary residence require a right of rescission under Regulation Z?

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No, an extension of credit primarily for a business purpose is exempt from the Truth in Lending Act and Regulation Z — including their right of rescission requirements — regardless of the type of collateral securing the loan.

For resources related to our guidance, please see:

  • Truth in Lending Act, 15 USC 1603(1) (“This subchapter does not apply to the following: Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations.”)
  • Regulation Z,12 CFR 1026.3(a)(1) (“The following transactions are not subject to this part or, if the exemption is limited to specified provisions of this part, are not subject to those provisions: . . . An extension of credit primarily for a business, commercial or agricultural purpose.”)