Home Equity Loan Consumer Protection Act of 1988

(Measure passed House, amended)

Home Equity Loan Consumer Protection Act of 1988 - Amends the Truth in Lending Act to prescribe disclosure requirements for any open end credit plan secured by a consumer's dwelling, including: (1) the fixed annual percentage rate; (2) the variable percentage rate with a detailed description of how such rate is calculated and adjusted; (3) an itemization of other fees imposed by the creditor; (4) estimates of fees which may be imposed by third parties; (5) a statement that the consumer risks the loss of the dwelling in the event of any default; (6) any conditions to which disclosed terms may be subject; (7) a statement of the rights of the creditor with respect to extensions of credit; (8) a description of repayment options and the minimum periodic payments required; (9) an example, based on a $10,000 outstanding balance, of minimum payments and the maximum repayment period; (10) a statement concerning balloon payments; (11) a statement concerning negative amortization, if applicable; (12) a description of any limitations and minimum amount requirements on extensions of credit; (13) a statement that the consumer should consult a tax adviser regarding the deductibility of interest and charges under the plan; and (14) any other requirements established by the Federal Reserve Board (Board). Sets forth requirements for: (1) the time and form of such disclosures; and (2) disclosures with respect to third party credit applications.

Requires creditors to provide to any applicant for such an open end consumer credit plan a pamphlet, to be published by the Board, which contains: (1) a general description of open end credit plans secured by consumer dwellings and the terms and conditions on which such loans are generally extended; and (2) a discussion of the potential advantages and disadvantages of such plans.

Imposes additional disclosure requirements for advertisements of open end credit plans secured by consumers' dwellings. Requires such advertisements to disclose loan fees and opening cost estimates, periodic rates expressed as annual percentage rates, the highest annual percentage rate that may be imposed, and any other term which the Board may require. Prohibits the use of advertisements for any home equity loan which refer to such loan as "free money" or use other terms determined by the Board to be misleading. Prohibits any advertisment from being misleading concerning the tax deductibility of interest expense. Requires that information concerning discounted initial interest rates and any required balloon payments be included with such advertisements.

Requires that the index or other rate of interest to which changes in the annual percentage rate of such credit plans are related must be based on an index or rate of interest which is publicly available and not under the control of the creditor.

Prohibits a creditor from unilaterally terminating such a credit plan or requiring immediate repayment of the outstanding balance of such a credit plan, except in cases of: (1) fraud or material misrepresentation on the part of the consumer; (2) failure by the consumer to meet repayment terms; or (3) other acts or failures on the part of the consumer which adversely affect the creditor's security.

Prohibits a creditor from making any unilateral changes in the terms of such a credit plan, except under specified circumstances. Requires a creditor to refund all application fees of a consumer if the creditor changes any terms of the credit time between the time an application is made and the time the account is opended. Prohibits the imposition of any nonrefundable fees by a creditor before the end of the three-day period beginning after the consumer receives all the required disclosures.

Requires the Board to conduct a study and report to the Congress on whether the use of the same term, such as annual percentage rate, to discribe the cost to the consumer for extensions of credit under all forms of consumer credit plans may unduly mislead consumers with respect to the comparability of the various forms of such extensions of credit.