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Board of Governors of the Federal Reserve System

Regulation Z
Truth in Lending
12 CFR 226; as ammended effective November 21, 1997

SECTION 226.4 - Finance Charge

(a) Definition. The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.


Official Staff Commentary
on Regulation Z
Truth in Lending
As ammended effective March 31, 1999

SECTION 226.4 - Finance Charge

4(a) Definition

1. Charges in comparable cash transactions. Charges imposed uniformly in cash and credit transactions are not finance charges. In determining whether an item is a finance charge, the creditor should compare the credit transaction in question with a similar cash transaction. A creditor financing the sale of property or services may compare charges with those payable in a similar cash transaction by the seller of the property or service.