No, we do not believe you were incorrect in disclosing that the customer was giving a security interest in the goods or property being purchased when the proceeds of the consumer loan were used to purchase the CD securing the loan.

For covered transactions other than mortgage loans, Section 1026.18(m) of Regulation Z requires the creditor to disclose “[t]he fact that the creditor has or will acquire a security interest in the property purchased as part of the transaction” for purchase transactions or “in other property identified by item or type” for nonpurchase transactions. Regulation Z does not distinguish between consumer goods and other types of property for purposes of this disclosure requirement.

Regulation Z’s Official Interpretations state that when the collateral is the item purchased as part of the credit transaction, you may use an abbreviated identification, such as “the property purchased in this transaction,” in your disclosure (although you may identify the property by item or type if you so choose). The Official Interpretations also state that “[a]ny transaction in which the credit is being used to purchase the collateral is considered a purchase money transaction and the abbreviated identification may be used.” Consequently, we believe that you may provide the abbreviated disclosure when loan proceeds are being used to purchase the CD that is serving as collateral.

Additionally, even if the transaction was a nonpurchase money transaction, you would be required to identify the collateral only by item or type under Section 1026.18(m), and a general disclosure of the category of property subject to the security interest would suffice. We do not believe that you would be required to specify that the CD was “assigned.”

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.18(m) (“For each transaction other than a mortgage transaction subject to § 1026.19(e) and (f), the creditor shall disclose the following information as applicable: . . . The fact that the creditor has or will acquire a security interest in the property purchased as part of the transaction, or in other property identified by item or type.”)

• Regulation Z, Official Interpretations, Paragraph 18(m), Comment 1 (“When the collateral is the item purchased as part of, or with the proceeds of, the credit transaction, § 1026.18(m) requires only a general identification such as ‘the property purchased in this transaction.” However, the creditor may identify the property by item or type instead of identifying it more generally with a phrase such as ‘the property purchased in this transaction.’ For example, a creditor may identify collateral as ‘a motor vehicle,’ or as ‘the property purchased in this transaction.’ Any transaction in which the credit is being used to purchase the collateral is considered a purchase money transaction and the abbreviated identification may be used, whether the obligation is treated as a loan or a credit sale.”)

• Regulation Z, Official Interpretations, Paragraph 18(m), Comment 2 (“In nonpurchase money transactions, the property subject to the security interest must be identified by item or type. This disclosure is satisfied by a general disclosure of the category of property subject to the security interest, such as ‘motor vehicles,’ ‘securities,’ ‘certain household items,’ or ‘household goods.’ (Creditors should be aware, however, that the Federal credit practices rules, as well as some state laws, prohibit certain security interests in household goods.) At the creditor’s option, however, a more precise identification of the property or goods may be provided.”)