Regulation Z requires lenders to round credit report fees to the nearest whole dollar on the Loan Estimate. Amounts ending in $0.49 or under must be rounded down, and amounts ending in $0.50 or up must be rounded up.
Under both Regulation X and Regulation Z, the general rule is that a lender must charge and disclose the actual amount for a settlement service, such as providing credit reports. However, in lieu of reporting an exact credit report fee, your bank may instead choose to disclose and charge an average credit report fee — provided that your bank complies with the calculation and recordkeeping requirements for average charges. The conditions for doing this are fairly onerous; for example, before using an average charge, your bank must track and retain records of credit report fees over an “appropriate period of time” of at least thirty days and no more than six months, with ongoing retrospective analyses to ensure that consumers are not overcharged under your average cost pricing program.
For resources related to our guidance, please see:
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Regulation Z, 12 CFR 1026.37(o)(4)(i)(A) (Credit report fees disclosed under 12 CFR 1026.27(f) “shall be rounded to the nearest whole dollar . . . .”)
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Regulation Z, Official Interpretations, Paragraph 37(o)(4)(i)(A), Comment 1 (“Section 1026.37(o)(4)(i)(A) requires that certain dollar amounts be rounded to the nearest whole dollar. For example, pursuant to § 1026.37(o)(4)(i)(A), periodic mortgage insurance payments of $164.50 are required to be disclosed under § 1026.37(c)(2)(ii) as $165. However, if the periodic mortgage insurance payment equaled $164.49, the creditor would disclose $164.”)
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Regulation X, 12 CFR 1024.8(b)(2) (“(i) The average charge for a settlement service shall be no more than the average amount paid for a settlement service by one settlement service provider to another settlement service provider on behalf of borrowers and sellers for a particular class of transactions involving federally related mortgage loans. The total amounts paid by borrowers and sellers for a settlement service based on the use of an average charge may not exceed the total amounts paid to the providers of that service for the particular class of transactions. . . .”)
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Regulation Z, 12 CFR 1026.19(f)(3)(ii) (“A creditor or settlement service provider may charge a consumer or seller the average charge for a settlement service if the following conditions are satisfied: (A) The average charge is no more than the average amount paid for that service by or on behalf of all consumers and sellers for a class of transactions; (B) The creditor or settlement service provider defines the class of transactions based on an appropriate period of time, geographic area, and type of loan; (C) The creditor or settlement service provider uses the same average charge for every transaction within the defined class; and (D) The creditor or settlement service provider does not use an average charge: (i) For any type of insurance; (ii) For any charge based on the loan amount or property value; or (iii) If doing so is otherwise prohibited by law.”)
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Regulation Z, Official Interpretations, Paragraph 19(f)(3)(ii), Comment 2 (“ . . . For purposes of § 1026.19(f)(3)(ii)(B), a period of time is appropriate if the sample size is sufficient to calculate average costs with reasonable precision, provided that the period of time is not less than 30 days and not more than six months. . . .”)
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Regulation Z, Official Interpretations, Paragraph 19(f)(3)(ii), Comment 2 (“Creditors using average charges must ensure that the total amount paid by or imposed on consumers for a service does not exceed the total amount paid to the providers of that service for the particular class of transactions. A creditor may find that, even though it developed an average cost pricing program in accordance with the requirements of § 1026.19(f)(3)(ii), over time it has collected more from consumers than it has paid to settlement service providers. . . .”)