B-176481, AUG 11, 1972

B-176481: Aug 11, 1972

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

AS THESE ARE ALLOWABLE UNDER 12 CFR 226.4(E)(5) AND (6). COLE'S RECLAIM OF THE AMOUNT WHICH WAS DISALLOWED ON HIS ORIGINAL VOUCHER AS A SERVICE CHARGE PAID IN CONNECTION WITH THE LOAN ON HIS NEW RESIDENCE. WHICH YOU CITE CONCERNING THE ALLOWANCE OF A SERVICE FEE IN CONNECTION WITH THE LOAN ON A RESIDENCE WAS RENDERED PRIOR TO THE AMENDMENT OF THE CONTROLLING REGULATIONS. UNDER THE REGULATIONS AS REVISED AT THAT TIME ANY AMOUNT CHARGED AN EMPLOYEE WHICH IS CONSIDERED A FINANCE CHARGE FOR PURPOSES OF THE TRUTH IN LENDING ACT. COLE PURCHASED THE RESIDENCE IN QUESTION AFTER THE EFFECTIVE DATE OF THAT AMENDMENT HE IS NOT ENTITLED TO REIMBURSEMENT OF AMOUNTS WHICH ARE FINANCE CHARGES IN TERMS OF THE TRUTH IN LENDING ACT AND REGULATION Z OF THE FEDERAL RESERVE BOARD.

B-176481, AUG 11, 1972

CIVILIAN EMPLOYEE - CHANGE OF STATION - PURCHASE OF RESIDENCE - REIMBURSEMENT OF COST - "SERVICE CHARGE" DECISION ALLOWING, IN PART, CLAIM OF MR. CHARLES H. COLE, AN EMPLOYEE OF THE DEPARTMENT OF COMMERCE, FOR REIMBURSEMENT OF CERTAIN EXPENSES INCURRED IN THE PURCHASE OF A NEW RESIDENCE INCIDENT TO A CHANGE OF STATION. SINCE THE ATTORNEY WHO HANDLED THE PURCHASE NOW HAS FURNISHED AN ITEMIZATION OF COSTS INCLUDED IN THE AMOUNT DESIGNATED AS A "SERVICE CHARGE," THE AMOUNT SHOWN TO REPRESENT THE APPRAISAL FEE AND THE CREDIT REPORT MAY BE PAID, AS THESE ARE ALLOWABLE UNDER 12 CFR 226.4(E)(5) AND (6).

TO MR. ROBERT D. TILEY:

WE REFER TO YOUR LETTER OF MAY 25, 1972, BY WHICH YOU REQUEST OUR DECISION WHETHER YOU MAY PROPERLY CERTIFY FOR PAYMENT THE ATTACHED VOUCHER OF MR. CHARLES H. COLE, FOR REIMBURSEMENT OF CERTAIN EXPENSES HE INCURRED IN THE PURCHASE OF A RESIDENCE AT HIS NEW OFFICIAL STATION IN CONNECTION WITH HIS TRANSFER FROM HUNTSVILLE, ALABAMA, TO ATLANTA, GEORGIA, AS AN EMPLOYEE OF THE ECONOMIC DEVELOPMENT ADMINISTRATION, DEPARTMENT OF COMMERCE.

THE VOUCHER SUBMITTED REPRESENTS MR. COLE'S RECLAIM OF THE AMOUNT WHICH WAS DISALLOWED ON HIS ORIGINAL VOUCHER AS A SERVICE CHARGE PAID IN CONNECTION WITH THE LOAN ON HIS NEW RESIDENCE. THE DECISION B 162494, OCTOBER 26, 1967, WHICH YOU CITE CONCERNING THE ALLOWANCE OF A SERVICE FEE IN CONNECTION WITH THE LOAN ON A RESIDENCE WAS RENDERED PRIOR TO THE AMENDMENT OF THE CONTROLLING REGULATIONS, BUREAU OF THE BUDGET (NOW OFFICE OF MANAGEMENT AND BUDGET) CIRCULAR NO. A-56 ON JUNE 26, 1969. UNDER THE REGULATIONS AS REVISED AT THAT TIME ANY AMOUNT CHARGED AN EMPLOYEE WHICH IS CONSIDERED A FINANCE CHARGE FOR PURPOSES OF THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, MAY 29, 1968, 82 STAT. 146, 15 U.S.C. 1601- 1665, MAY NOT BE REIMBURSED TO HIM BY THE GOVERNMENT. SINCE MR. COLE PURCHASED THE RESIDENCE IN QUESTION AFTER THE EFFECTIVE DATE OF THAT AMENDMENT HE IS NOT ENTITLED TO REIMBURSEMENT OF AMOUNTS WHICH ARE FINANCE CHARGES IN TERMS OF THE TRUTH IN LENDING ACT AND REGULATION Z OF THE FEDERAL RESERVE BOARD, PART 226, TITLE 12, CODE OF FEDERAL REGULATIONS.

SECTION 226.4 OF TITLE 12, CODE OF FEDERAL REGULATIONS, PROVIDES IN PERTINENT PART:

"(A) GENERAL RULE. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT OF THE FINANCE CHARGE IN CONNECTION WITH ANY TRANSACTION SHALL BE DETERMINED AS THE SUM OF ALL CHARGES, PAYABLE DIRECTLY OR INDIRECTLY BY THE CUSTOMER, AND IMPOSED DIRECTLY OR INDIRECTLY BY THE CREDITOR AS AN INCIDENT TO OR AS A CONDITION OF THE EXTENSION OF CREDIT, WHETHER PAID OR PAYABLE BY THE CUSTOMER, THE SELLER, OR ANY OTHER PERSON ON BEHALF OF THE CUSTOMER TO THE CREDITOR OR TO A THIRD PARTY, INCLUDING ANY OF THE FOLLOWING TYPES OF CHARGES:

"(1) INTEREST, TIME PRICE DIFFERENTIAL, AND ANY AMOUNT PAYABLE UNDER A DISCOUNT OR OTHER SYSTEM OF ADDITIONAL CHARGES.

"(2) SERVICE, TRANSACTION, ACTIVITY, OR CARRYING CHARGE.

"(3) LOAN FEE, POINTS, FINDER'S FEE, OR SIMILAR CHARGE.

"(4) FEE FOR AN APPRAISAL, INVESTIGATION, OR CREDIT REPORT.

"(E) EXCLUDABLE CHARGES, REAL PROPERTY TRANSACTIONS. THE FOLLOWING CHARGES IN CONNECTION WITH ANY REAL PROPERTY TRANSACTION, PROVIDED THEY ARE BONA FIDE, REASONABLE IN AMOUNT, AND NOT FOR THE PURPOSE OF CIRCUMVENTION OR EVASION OF THIS PART, SHALL NOT BE INCLUDED IN THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

"(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, ABSTRACT OF TITLE, TITLE INSURANCE, OR SIMILAR PURPOSES AND FOR REQUIRED RELATED PROPERTY SURVEYS.

"(2) FEES FOR PREPARATION OF DEEDS, SETTLEMENT STATEMENTS, OR OTHER DOCUMENTS.

"(3) AMOUNTS REQUIRED TO BE PLACED OR PAID INTO AN ESCROW OR TRUSTEE ACCOUNT FOR FUTURE PAYMENTS OF TAXES, INSURANCE, AND WATER, SEWER, AND LAND RENTS.

"(4) FEES FOR NOTARIZING DEEDS AND OTHER DOCUMENTS.

"(5) APPRAISAL FEES.

"(6) CREDIT REPORTS."

IT IS CLEAR THAT THE CHARGES DESIGNATED ONLY AS "SERVICE CHARGE" AND "ORIGINATION FEE" AND NOT IDENTIFIED AS BEING IN PAYMENT OF AN OTHERWISE ALLOWABLE EXPENSE ARE CONSIDERED PART OF THE COST OF MONEY UNDER THE TRUTH IN LENDING ACT AND MAY NOT RESULT IN REIMBURSEMENT TO THE EMPLOYEE. 162560, JUNE 2, 1971. SEE ALSO 49 COMP. GEN. 483, 486 (1970). THE ATTORNEY WHO HANDLED CLOSING ON THE RESIDENCE HAS FURNISHED AN ITEMIZATION OF COSTS INCLUDED IN THE AMOUNT DESIGNATED AS A SERVICE CHARGE ON THE CLOSING DOCUMENTS. ACCORDING TO THAT STATEMENT THE SERVICE CHARGE INCLUDED CHARGES OF $75 FOR "APPRAISAL FEE" AND $10 FOR "CREDIT REPORT." SUCH CHARGES APPEAR TO BE FOR ALLOWANCE UNDER 12 CODE OF FEDERAL REGULATIONS, SECTION 226.4(E)(5) AND (6) AS QUOTED ABOVE.

IN VIEW OF THE DISCUSSION HEREIN, NO ANSWERS TO THE SPECIFIC QUESTIONS WHICH YOU PRESENTED ARE DEEMED NECESSARY. THE VOUCHER IS RETURNED HEREWITH FOR HANDLING IN ACCORDANCE WITH THE FOREGOING.