Credit Union Consumer Loan Variable/Simple Interest Note. Multistate Completion Guide

Transcription

1 Credit Union Consumer Loan Variable/Simple Interest Note Multistate Completion Guide

2 Table of Contents INTRODUCTION... 1 GLOSSARY... 2 Warranties and Limitations... 4 Warranties and Limitations for this Guide... 4 Warranties and Limitations for the Form(s) That Are the Subject of this Guide... 5 Other Important Terms for the Use of this Guide... 5 Consumer Loan Variable/Simple Interest Note (CL-CU-XX)... 6 PART A - LENDER/BORROWER/LOAN INFORMATION PART B TRUTH-IN-LENDING DISCLOSURES PART C - ITEMIZATION OF AMOUNT FINANCED PART D - PROMISE TO PAY AND PAYMENT TERMS PART E - SECURITY AGREEMENT PART F - INSURANCE DISCLOSURE PART G THIRD PARTY AGREEMENT/FTC NOTICE PART H - SIGNATURE Form PM-CLCU 1/2011 ii

3 INTRODUCTION USE OF THIS GUIDE. Use of this guide will constitute an express acceptance of all the terms set forth in the "Introduction," "Warranties and Limitations" and "Other Important Terms for the Use of this Guide" sections of this guide. Forms and Purpose. This guide is intended to assist credit unions that have purchased the following copyrighted Wolters Kluwer Financial Services form: CL-CU - [state abbreviation] Usage. The form listed above should only be used for the purpose for which it is intended. Please note that this form has been designed for use in closed-end direct loans by credit unions to members that are subject to federal Truth in Lending (Regulation Z) and state-enacted laws and regulations. The form listed above in bold type is intended for loans which are either unsecured or secured by most forms of personal property. THIS FORM SHOULD NOT BE USED FOR LOANS SECURED BY REAL ESTATE OR PERSONAL PROPERTY THAT IS USED AS A DWELLING (MANUFACTURED HOMES, BOATS, RVs, ETC.). CAUTION: THIS FORM IS NOT DESIGNED FOR AND SHOULD NOT BE USED IN THE FOLLOWING WAYS: open-end credit multiple advance lending commercial or agricultural lending (i.e., non-consumer) loans which require credit insurance (i.e., life, accident) loans where mortgage insurance (PMI) is charged, collected, etc. assumable loans transactions subject to retail installment sales laws loans secured by real property or personal property that is used as a dwelling (manufactured homes, boats, RVs, etc.) loans for the purchase of property (real or personal) where you are also the seller of the property (e.g., a loan for someone to buy property that you repossessed). Format. In this guide, we attempt to answer the most common questions and problems you might confront in completing this form. This guide is not intended to address state specific laws. The explanatory text begins with a simple statement of what should ordinarily be filled in on the line being discussed. In some cases, this simple explanation is followed by a more detailed explanation and cross-references to other portions of the form which need to be considered with the item under discussion. Form PM-CLCU 1/2011 1

4 The entire front side of the form is reproduced at the beginning of this guide. Each separate item of the form which receives separate discussion in the guide is numbered. GLOSSARY Throughout the text of this guide we use certain abbreviations and terms: The Term: APR Finance Charge Additional Finance Charge Prepaid Finance Charge Variable Rate Market Rate Discounted Rate Premium Rate Means: Annual Percentage Rate Any charge that is a cost of credit that is not otherwise excluded by Regulation Z. It does not include any charge that would be payable in a comparable cash transaction. Any charge that is a finance charge other than simple interest applied to declining balance. Examples include origination fees, documentation fees, loan fees, etc. Any finance charge paid separately in cash or by check before or at the consummation of a loan, or withheld from the proceeds of the loan at any time. An interest rate that can change during the term of the loan. This includes a "fixed rate" loan with a balloon payment where you have agreed (either orally or in writing) to refinance the balloon when it comes due. Regulation Z requires specific disclosures for variable rate loans. In a variable rate loan, the rate charged at any given time is usually calculated by adding an amount (usually known as a "margin" or "spread") to an index value. The total of the margin or spread plus the index value is the "market rate." In a variable rate transaction, if the initial rate that you charge is less than the "market rate," then you are charging a "discounted rate." Regulation Z requires you to take into account the fact that the rate will increase even if higher than the initial rate that you charge. In a variable rate transaction, if the initial rate that you charge is more than the "market rate," then you are charging a "premium rate." Regulation Z requires you to take into account the fact that the rate will decrease even if the index rate does not change. Thus, the annual percentage rate will be lower than the initial rate that you charge. Residential Mortgage Transaction This term is used in this guide as it is defined in Regulation Z. This means a loan where a lien is taken against the member's principal dwelling to finance the acquisition or initial construction of that dwelling. Form PM-CLCU 1/2011 2

5 Form Specific. This guide is written solely for use with the above referenced form. The existence of varying state laws means that some of the terms discussed may not be applicable in your state. Additionally, there may be provisions in the form developed for your state which are not discussed in this guide. Feel free to call us at our toll-free number ( ) if you need information about specific sections. This guide is not intended to be used with any other forms. Private Attorneys. In developing this guide, the form to which it pertains, and all of our other technical forms, we have interpreted many statutes, cases and regulations. We strongly encourage you to seek the advice of your own attorney concerning the utility and legality of this guide, the form to which it pertains, and all of our other technical forms. Any legal references in this guide are merely to assist you and your counsel in your review of our forms and this guide. If you or your counsel's interpretations are contrary to ours, you should, of course, follow your own interpretations in using and completing the forms. Comments. We encourage you to comment on and criticize this guide, the forms to which it pertains, and all of our other forms. We make every effort to keep up with statutes, case law and financial institution practices, but the industry is constantly evolving and our effort is often assisted by our customers. We especially appreciate copies of any statutes or cases which you might feel are pertinent. Please submit your comments in writing either to your Sales Representative or to: Compliance Services Wolters Kluwer Financial Services 6815 Saukview Drive P.O. Box 1457 St. Cloud, MN Form PM-CLCU 1/2011 3

6 Warranties and Limitations Warranties and Limitations for this Guide WARRANTY DISCLAIMER. THIS GUIDE (INCLUDING ANY UPDATES TO IT), IS PROVIDED TO YOU AS IS AND WITH ALL FAULTS. WOLTERS KLUWER FINANCIAL SERVICES (WKFS) DOES NOT EXPRESSLY OR IMPLIEDLY WARRANT THE UTILITY OF THIS GUIDE OR THE INFORMATION THAT IT CONTAINS. THE USER OF THIS GUIDE MUST MAKE HIS/HER OWN INDEPENDENT JUDGMENT ON THESE ITEMS. WKFS MAKES NO WARRANTY, EXPRESS, IMPLIED, BY DESCRIPTION, BY SAMPLE OR OTHERWISE, AND IN PARTICULAR WITHOUT LIMITATION, MAKES NO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS OF PURPOSE REGARDING THIS GUIDE. WKFS employees, sales representatives, and other WKFS agents and representatives do not have authority to create any warranty obligations regarding this guide or to modify the above Warranty Disclaimer. Any such created warranty obligations or modifications will not be effective unless they are in writing and signed by the President or the Chief Financial Officer of WKFS. LIMITATION OF LIABILITY AND REMEDIES. WKFS's liability, whether in contract, warranty, in tort, or otherwise arising in any way in connection with the sale or licensing of this guide (including any updates to it) SHALL NOT INCLUDE LIABILITY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS, LOSS OR EXPENSE. WKFS's liability for any damages based on the providing, selling, licensing or using of this guide (including any updates to it), regardless of the form of action, shall not be more than the amount you paid for it or ten dollars, whichever is less. TIME LIMIT. No action, regardless of form, arising out of the providing, selling, licensing or using of this guide, may be brought by either party more than one (1) year after the cause of action has occurred, except that this limitation will not apply to an action for non-payment brought by WKFS. NO SUBSTITUTE FOR LEGAL COUNSEL. Before using this guide, you are advised to have your attorney review it to determine its legal sufficiency for your purposes. You acknowledge that WKFS is not authorized to practice law, nor may any of WKFS's officers, employees or agents provide legal counsel or accounting advice to you or your institution. Thus, any questions requiring legal or accounting advice must be directed to your institution's attorney or accounting professional for whom WKFS has no obligation or liability. The following notice is required by law: WOLTERS KLUWER FINANCIAL SERVICES PRODUCTS AND SERVICES ARE NOT A SUBSTITUTE FOR THE ADVICE OF AN ATTORNEY Form PM-CLCU 1/2011 4

7 Warranties and Limitations for the Form(s) That Are the Subject of this Guide The form(s) that are the subject of this guide are covered by an express warranty as follows: Preprinted Form(s). If you received the form(s) in preprinted format, they are covered by the Compliance Warranty for Lending, Deposit, and Retirement Plan Documents, as it may be updated or amended from time to time. The current Compliance Warranty is located on WKFS's internet website: Refer to the website for terms of the warranty. WKFS Software. If you produce the form(s) using WKFS document generating software, they are covered by the express warranty contained in your WKFS software license agreement. Refer to your license agreement for terms of the warranty. Electronic Format. If you received the form(s) in an electronic format ("EForms" or other electronic images) through a license with WKFS or with a third party provider, they are covered by the express warranty contained in your license agreement with WKFS or the third party provider. Refer to your license agreement for terms of the warranty. Other Important Terms for the Use of this Guide APPLICABLE LAW. The terms under which this guide is provided, sold, licensed or used will be governed by the laws of the State of Minnesota without regard to its conflict of laws provisions or those of any other state. Any action relating in any way to this guide will be exclusively venued in a court of competent jurisdiction in the State of Minnesota. COPYRIGHT. No part of this guide or any of WKFS's copyrighted forms may be reproduced by any person, by any means, or for any reason, without WKFS's express written permission. WKFS vigorously enforces its copyright interests and you should be aware that there are criminal penalties as well as civil penalties for violation of copyright law. For additional information about reproducing, licensing, or purchasing this guide, please contact us at: Wolters Kluwer Financial Services North America Law Department 6815 Saukview Drive P.O. Box 1457 St. Cloud, Minnesota Telephone: Form PM-CLCU 1/2011 5

8 Consumer Loan Variable/Simple Interest Note (CL-CU-XX) Form PM-CLCU 1/2011 6

9 Form PM-CLCU 1/2011 7

10 Form PM-CLCU 1/2011 8

11 Form PM-CLCU 1/2011 9

12 Form PM-CLCU 1/

13 PART A - LENDER/BORROWER/LOAN INFORMATION A-1 Fill in the name of the lender who is making the disclosures and the address where payments are to be made. MISCELLANEOUS - The identity of the creditor making the disclosures must be disclosed. Reg (a). The identity of the creditor may be made separately from other required Truth-in-Lending disclosures. Reg (a)(1) (footnote 38). The lender's identity is the only required Truth-in-Lending disclosure that may be more conspicuous than the words ANNUAL PERCENTAGE RATE and FINANCE CHARGE. Reg (a)(2). A-2 Fill in the name and address of the borrower. This should be the same address you intend to use for any notice of default or notice of sale of the collateral. A-3 Fill in the date that you are making the disclosures. NORMALLY - In almost all cases, the date you make the disclosures will be the same as the date your member signs the note and the date the loan proceeds are disbursed. A-4 Fill in the date of the last scheduled payment (or "On Demand" if this is a demand loan). A-5 This designation is for your internal reference. You may fill in what will best serve your purposes. The term "Loan Amount" is not defined in the note itself. Presumably, it will be either the Amount Financed or the Total of Payments. A-6 Fill in the loan number of the previous loan if this note is a renewal. This helps to provide a good audit trail. A-7 Fill in your member number and/or loan number. A-8 Space has been left for you to include other information. PART B TRUTH-IN-LENDING DISCLOSURES B-1 Fill in the ANNUAL PERCENTAGE RATE you calculate for this loan. Regulation (c) permits certain disclosures to be made using the designation "estimate." See discussion at line B-28. You should not use that designation for these disclosures, simply because you have contracted for a variable rate of simple interest. Reg (c) and Commentary. The disclosure of the potential changes is adequately described in the variable rate portion of the federal box disclosure and, therefore, there is no need to mark the annual percentage rate and other items as an estimate. TOLERANCE - The tolerance for regular transactions is.125% (1/8%) either way. For example, if the disclosed APR is 15.20% and the actual APR is %, the disclosure is within acceptable limits. Reg (a)(2). The tolerance for "irregular" transactions is.25% (1/4%) either way. An irregular transaction is defined in Reg (a)(3)(footnote 46). CONSPICUOUS - See Reg (a)(2) for requirement that the words ANNUAL PERCENTAGE RATE and FINANCE CHARGE be more conspicuous than other disclosures. See the Commentary to this section for guidelines on compliance with this rule. Form PM-CLCU 1/

14 See Reg (c) for optional rule on one APR calculation when all transactions within a class can be disclosed with same APR. See Appendix J to Truth-in-Lending Regulation for actuarial or U.S. Rule methods of calculation. See Reg (b) for exemption allowed for appropriate use of Federal Reserve's APR tables. DISCOUNTED AND PREMIUM RATE LOANS - If the initial interest rate is not tied to the index used to determine later rates, the disclosures must assume that the rate changes on the first change date to the "market rate." The "market rate" is the rate that would be in effect if the margin (or spread) (see D-12) were combined with the current index (or index rate). The disclosures must also take into account interest caps. See B-18, B-19 below. The APR disclosed on a discounted or premium rate variable rate loan must reflect a composite annual percentage rate based on the initial rate for as long as it applies, and then the "market" rate (or rates) for the remaining of the term. The multiple rates must also be reflected in the calculation of: the finance charge, B-2; the total of payments, B-4; and, the payment schedule, B-9. Reg (f) and Commentary. See 15 U.S.C. 130 for liability exposure for inaccurate or unmade APR disclosures. B-2 Fill in the total finance charge. Generally, this disclosure should be based on the initial rate of interest being charged on this loan, without taking into consideration possible variations throughout the life of the loan. This would be the rate upon consummation of the loan. See B-28 for a discussion of the use of estimates and additional descriptive phrases in association with this disclosure. OTHER CHARGES - Remember to include prepaid finance charges and additional finance charges, if any. TOLERANCE - The tolerance for non-mortgage loans is $5.00 on transactions with an Amount Financed of $1, or less, and $10.00 on transactions with an Amount Financed of more than $1, Reg (d)(2). CAUTION: THIS FORM IS NOT DESIGNED FOR, AND SHOULD NOT BE USED ON, LOANS THAT REQUIRE CREDIT INSURANCE. PREMIUMS FOR REQUIRED CREDIT INSURANCE ARE A FINANCE CHARGE. See PART F below, and Reg (d) for conditions which must be met to exclude credit insurance costs from the finance charge. SECURITY INTEREST CHARGES - You must disclose the cost of perfecting a security interest in order to exclude the cost from the finance charge. See B-7 below. DISCOUNTED OR PREMIUM RATE LOANS - See B-1 above. Form PM-CLCU 1/

15 B-3 Fill in the Amount Financed. There is no tolerance permitted for this disclosure. See C-1 through C-8 below concerning the Itemization of Amount Financed, especially C-7 for treatment of prepaid finance charges. See the discussion under line D-1 below regarding the potential for the Amount Financed to be different from the principal amount of the note. B-4 Fill in the Total of Payments. See lines B-1 and B-2 for the basis of this disclosure, as well as the use of estimates and descriptive phrases. TOLERANCE - There is no mention of a tolerance for this disclosure. The "Total of Payments" is defined as the sum of the payment amounts disclosed pursuant to Reg (g) in the spaces labeled B-9 on this form. The "amounts" of the payments you will disclose on line B-9 will include the finance charge attributable to the payment as well as the portion attributable to the repayment of the Amount Financed. DISCOUNTED OR PREMIUM RATE LOANS - See B-1 above. B-5 You may ignore these if you voluntarily supply an itemization of the Amount Financed. B-6 Otherwise, you should have your borrower check the appropriate box. Of course, you must provide the Itemization if your borrower checks the box for Yes. Reg (c) and Commentary. B-7 On this line, fill in the total taxes and fees prescribed by law that you actually will pay to public officials for determining the existence of, or for perfecting, releasing or satisfying a security interest. Reg (e)(1). ITEMIZATION - The regulation uses the word "itemized." Reg (e)(1). The Commentary to this section permits you to aggregate the cost of these items on one line. DISTINGUISH - Remember to distinguish this line B-7 from line C-5 below. You will fill in line C-5 with the aggregate amount paid to public officials only if you finance these charges (or a part of them). You should fill in line B-7 every time you collect these fees from your borrower, whether paid in cash or financed. NOTARY FEES - See Commentary - Reg (e) for the rule on notarial fees. Notary fees, except in a transaction secured by real estate or a "residential mortgage" must meet the tests in this Commentary to be excluded from the finance charge. B-8 If you charge your member a premium for "non-filing" insurance, a portion of the premium may be excluded from the finance charge if you list the excludable portion of this premium on this line. Form PM-CLCU 1/

16 SINGLE INTEREST INSURANCE - Normally, "non-filing insurance" is sold as part of a lender's "single interest" insurance policy. (Single interest insurance is not provided for in this document.) The insurance company should allocate the total premium for single interest insurance to the various components of the policy. The cost of some components (depending upon the type of policy) may have to be included in the finance charge. Commentary - Reg (d)(10). AMOUNT EXCLUDABLE - The amount of the premium for non-filing insurance that may be excluded from the finance charge is limited to the aggregate fees necessary to perfect the security interest. The amount of the premium in excess of the actual fees must be treated as a finance charge. Commentary - Reg (e)(2). SELF INSURANCE - To exclude any portion of a premium for non-filing insurance, the lender must actually purchase the insurance. If the lender merely charges the customer a fee but does not purchase a policy, the entire fee is to be treated as a finance charge. Commentary - Reg (e)(4). B-9 These columns and spaces are to be used for disclosing the number, amounts, and due dates of payments. Reg (g). Example (1) Example (2) Example (3) Number of Payments Amount of Payments When Payments are Due Monthly beginning July 15, 2003 Number of Payments Amount of Payments When Payments are Due Monthly beginning July 15, , June 15, 2006 For demand obligations with no alternate maturity date, you must disclose (in this section B-9) only the frequency or due dates of scheduled interest payments during the first year. "Interest payable quarterly" is the example used in the Commentary to Reg (g)(1). For a more complete disclosure, using methods consistent with other types of loans we might suggest the following (for a $3, loan with monthly interest payments of $75.25). Reg (g)(1) and Commentary: Number of Payments Amount of Payments When Payments are Due Monthly beginning October 1, , September 1, 2004 Also remember to check box B-11 below. Form PM-CLCU 1/

17 Example (4) For demand notes which include an alternate maturity date, disclose the number, amounts and due dates of all scheduled payments based on the alternate maturity date. Also remember to check box B-10 below. You are permitted, but not required, to include in the amount of each payment disclosed here any additional sums required to be paid with each payment of principal and interest, but which are neither part of the Amount Financed or the finance charge. Commentary - Reg (g). If you add such amounts to the payment amounts disclosed here, of course, the "Total of Payments" that you disclose on line B-4 will also reflect these escrow payments. DISCOUNTED OR PREMIUM RATE LOANS - See example in Commentary (c). IN ADDITION - The comments made under Annual Percentage Rate B-1 and finance charge B-2 regarding the use of estimates and disclosures based on the terms at the consummation of the loan also apply to the payment schedule B-9. B-10 Check this box if the principal amount of your loan is payable on demand with an alternate maturity date. B-11 Check this box if the principal amount of your loan is payable solely on demand. Remember, all disclosures will be based on an assumed maturity of one year. Reg (I). B-12 (VARIABLE RATE ONLY) Check this box if your loan is considered to be a variable rate transaction for purposes of Regulation Z. Commentary (f)(1). B-13 (VARIABLE RATE ONLY) Do not check this box. This disclosure was originally designed for use for a loan with a term of more than one year and secured by the member's principal dwelling. Reg (f)(2). As noted above, this document should no longer be used for transactions secured by real property or personal property that is also a dwelling. B-14 (VARIABLE RATE ONLY) Check the box and complete lines B-14 through B-19. On line B-14, fill in a description of the circumstances under which the annual percentage rate may increase on this loan. Reg (f)(1)(i). EXAMPLE: If line D-13 is completed with the 90-day discount rate of the Federal Reserve Bank of Chicago, this line B-14 would be completed as follows: "the 90-day discount rate of the Federal Reserve Bank of Chicago increases." B-15 (VARIABLE RATE ONLY) This line should be completed with the method by which you are going to collect the additional money due in the event of an increase. If there is a possibility that this additional amount may be collected in more than one way, each of those should be described on this line B-15. Regulation (f)(1)(iii) and Commentary. B-16 (VARIABLE RATE ONLY) For each variable rate transaction (unless it is a demand obligation with no alternate maturity date), it is necessary to disclose an example of the payment terms that would result from an increase in the annual percentage rate. This may be accomplished by giving either a standard example that represents the general type of credit Form PM-CLCU 1/

18 you offer or by giving a specific example that directly reflects the terms and conditions of this loan. Regulation (f)(1)(iv) and Commentary. Line B-16 provides a specific example which directly relates to the terms of this loan. Due to the broad use of this form with respect to making different types of loans, and rapidly changing market conditions, we believe this is the more appropriate disclosure. CAUTION: B-16 IS NOT DESIGNED TO BE USED FOR A "STANDARD" EXAMPLE. If you use a "standard" example you should provide it separately and complete line B-16 as follows: "Hypothetical example provided separately." The first space should contain the amount of the increase in the interest rate. The second space should contain the time period at which the rate change will take place, such as in one "day," "month" or "year." The third space should be completed with a description of the method by which the additional funds due will be collected. The fourth space is either the amount of the increase, the total amount of the new payment, or the number of payments. EXAMPLE: Assume your loan of $10, was made at 11%, payable in 36 equal, consecutive, monthly payments of $327.39; the rate can be changed yearly and any additional funds due will be collected by an increase in each payment. This line B-16 would read: "If the rate increases by one % in one year, the amount of each payment will increase to $ " EXAMPLE: Assume the same conditions as the example above, except that the additional amount due will be collected at maturity. This line B-16 would read: If the rate increases by one % in one year, the amount due at maturity will increase to $ B-17 (VARIABLE RATE ONLY) Fill in the frequency (e.g., "month" or "year") in which the rate may increase. B-18 (VARIABLE RATE ONLY) This line provides space to disclose any periodic limitation on the increases. Reg (f)(1)(ii). EXAMPLE: Assume that the interest rate can change once a year and may only increase 2% at each yearly change, even though the index rate may have increased more than 2%, line B-18 should read: "and may not increase more than 2% each year." CAUTION: The Commentary to Regulation (f)(1)(ii) indicates that these limitations and those described in B-19 below do not include legal limits in the nature of usury or rate ceilings under state or federal statutes or regulations. You should fill in only those limitations you have contractually agreed to. If none, leave this line blank or fill in "N/A." B-19 (VARIABLE RATE ONLY) Fill in the ceiling or lifetime interest rate cap that is on line D-16. B-20 Check this box if this loan is being secured by the goods or property being purchased with the proceeds of the loan. FURTHER DESCRIPTION - You are not required (here) to further describe purchase money collateral if you do not want to. However, you may do so if you choose in the space provided immediately following this line B-20, without checking the box B-23. If you have mixed security, see B-23 below. Reg (m) and Commentary. Form PM-CLCU 1/

19 DISTINGUISH - Of course, you must distinguish between the description necessary for Truth in Lending and the description you should use in your security agreement. While you only need to check this box to describe purchase money collateral for Truth in Lending purposes, you must describe the collateral with greater specificity in the security agreement. B-21 Check this box if collateral securing preexisting credit also secures this loan. If you have a preexisting security agreement which secures future debts (including the debt for which you are making the disclosures on this form) you may check this box and you need not list the collateral from that preexisting security agreement. Commentary - Reg (m)(5). You may do so, however, if you wish. B-22 Check this box if you have taken a security interest in your member's account(s) or if, under state or federal law, you consider the right of setoff to be a "security interest." Each lender must decide for itself whether this box should be checked. Federal credit unions may rely on the statutory lien provision at 12 USCA 1757(11) and always select this box. State chartered credit unions subject to credit union acts that include a statutory lien provision may also want to always select this box. State law is not, however, always clear on the subject. The Commentary - Reg (a)(25) provides the following subjective standard: If the creditor is unsure whether a particular interest is a security interest under applicable law (for example, if statutes and case law are either silent or inconclusive on the issue), the creditor may at its option consider such interests as security interests for Truth in Lending purposes." DISTINGUISH - You must distinguish this disclosure from an assignment of a specific time or savings deposit as collateral for a loan. Where you take a specific assignment of a specific account, this assignment should be disclosed under B-23 below. B-23 Check this box and describe in the space that follows any "nonpurchase money" collateral securing this loan by "item or type." See Reg (a)(25) for the definition of a security interest. See Reg (m) for the requirement of disclosure of the security. CROSS-COLLATERAL - See B-21 above for the abbreviated disclosure which may be used where this loan is secured by collateral which also secures preexisting credit. If you check box B-20 (purchase money collateral) and you also want to describe the collateral, we suggest you do so on the line immediately following line B-20, without checking the box B-23. MIXED SECURITY - If you check box B-20, and you also take a security interest in nonpurchase money collateral, the latter must be described in the space provided in B-23. B-24 If you wish to contract for a late fee, check the box at the beginning of line B-24. A late fee for single-pay loans or loans payable on demand with no periodic payments need not be disclosed here. Reg (l) and Commentary, and the Commentary at (a)(1)-5(xv). Form PM-CLCU 1/

20 NOTE: Not all states allow for a late fee. Federal credit unions, however, have the authority to preempt any state law limitations on late fees. 12 C.F.R B-25 This form includes the disclosure required by Regulation Z for required deposits. Generally, this disclosure is not needed even if you require a deposit because of the extensive exceptions to the rule. The required deposit disclosure is not needed if: 1) you pay interest or dividends of at least 5% per year on the deposit; 2) the deposit is an escrow account for taxes, insurance or repairs; or 3) the deposit is payments under a Morris plan. See Reg (r), f.n.45 B-26 If you require a deposit and if the deposit does not meet any of the above exceptions, then select the box. If you are permitted by law to and have contracted for an additional finance charge at D-6 and provided for "pro rata" collection of the fee at D-9 then you must disclose at B-26 what will happen to that fee if the loan is paid off early. You are permitted (but not required) to also make the disclosure if you collect the additional finance charge in cash D-8 or by taking it out of the proceeds of the loan D-10. Reg (k) and Commentary. CAUTION: If the finance charge that you disclosed at B-2 above is composed entirely of a simple interest rate applied to the unpaid principal balance from time to time, the disclosure at B-26 should not be given. B-27 While the assumption disclosure is required for a "residential mortgage transaction," it is also allowed, but not required, for transactions other than "residential mortgage transactions." Commentary - Reg (a)(1)(5). Reg (q). B-28 If any information necessary for an accurate disclosure is unknown, you must make the disclosure based on the best information available and label such a disclosure as an estimate ("e"). It is unlikely, on this form at least, that you would ever estimate any disclosure. (See Reg (c)(2) and Commentary for the standard on what can legitimately be estimated.) Also, see the discussion at line B-1, regarding the use of estimates for a variable rate loan. PART C - ITEMIZATION OF AMOUNT FINANCED C-1 Fill in the amount of the loan proceeds paid to the borrower directly or, if applicable, the amount deposited to his or her asset account. Commentary - Reg (c)(1)(i). C-2 Fill in the amount of this loan (if any) that has been applied toward the payment of a previous loan for you. If you actually pay a portion of the loan proceeds to a third-party creditor, that third-party creditor should be specifically listed on line C-6. Reg (c)(iii). If more than one loan is paid off with you, you may aggregate these loan pay-offs on this line. Form PM-CLCU 1/

21 C-3 If you are permitted by law to collect a prepaid finance charge, fill in the amount of any prepaid finance charge you are financing for the borrower by increasing the face amount of the note. Describe the charge on the blank line to the left. EXAMPLE: To Lender $20.00 If the borrower is paying more than one type of charge to you, for example, an origination fee and an administrative fee which are both being financed, you should aggregate these charges and fill in the total amount on line C-3. The charges being paid by the borrower may constitute finance charges for purposes of Regulation Z. See Reg Any finance charge that is withheld from the proceeds of the loan is a prepaid finance charge and should also be listed on line C-7 below. Reg (a)(23) and (c). If you do not collect such a charge or the borrower pays the charge by cash or check at or before consummation of the loan, do not list anything on this line C-3. C-4 Fill in the total amount of insurance premiums (including credit life, credit disability and property insurance) you are financing for the borrower. CREDIT LIFE AND DISABILITY - Include in this total any credit insurance premiums you have financed. Note: All required disclosures (see lines F-1 through F-8 below) must be given. PROPERTY - Include in this total any property insurance premium you have financed. Do this when the borrower purchases the property insurance from or through you, or when you make out a draft for the loan proceeds to an insurer selected by the borrower. All required disclosures (see lines F-9 and F-10) must be given. C-5 Fill in the aggregate fees paid to public officials as part of this transaction to the extent such fees are financed. This amount is not necessarily the same as B-7 above. For example, if you collect in cash from your borrower the fees necessary to perfect a security, you should list the fees on line B-7, but you will not list them here because they are not financed C-6 List on the lines C-6 any other third parties paid by the lender with the proceeds of the loan. These should be identified by name. Reg (c)(iii). For example, if the loan is for an automobile and the lender pays the car dealer directly, the name of the dealership and the amount paid should be filled in here. C-7 Fill in the amount of any and all prepaid finance charges, whether financed or not. C-8 Calculate the Amount Financed by aggregating lines C-1 through C-6, and (if applicable) subtracting C-7. Remember, if there are any prepaid finance charges, your Amount Financed C-8 and Principal Loan Amount D-1 will differ. Form PM-CLCU 1/

22 PART D - PROMISE TO PAY AND PAYMENT TERMS D-1 Fill in (in numbers) the principal amount of the debt against which interest will accrue. PRINCIPAL VS. AMOUNT FINANCED - It is possible for the principal amount of the loan that you would fill in on line D-1 to be different from the Amount Financed that you will fill in on lines A-3 and C-8. This would be true, for example, if the borrower pays a prepaid finance charge. D-2 Fill in the initial simple annual interest rate that will be applied toward the principal sum of this loan. This may or may not be the same as the Annual Percentage Rate disclosed on line B-1. OTHER CHARGES - The Annual Percentage Rate disclosed on line B-1 will be larger if you charge additional finance charges. COMPUTATION - The Annual Percentage Rate may also vary from the simple interest rate depending on the method of computation you use and the treatment of odd-days interest. DISCOUNTED AND PREMIUM RATE - In a variable rate transaction, the Annual Percentage Rate will also be different than the beginning rate on the note if you charge a "discount" or "premium" initial interest rate. D-3 If the note is FIXED RATE, fill in the words "Paid in Full." If VARIABLE RATE is checked at D-11, type in the date of the first interest rate change date. D-4 Fill in the method or basis you are using to accrue interest on this note. EXAMPLE: If you assume that each month has 30 days and that a year has 360 days, line D-4 would state that "Interest accrues on a 30/360 basis." EXAMPLE: If you assume that a year has 365 days and you calculate interest according to the actual number of days a principal balance is outstanding, line D-4 would state that "Interest accrues on an actual/365 basis." If you fail to complete line D-4, the "Accrual Method" paragraph on page 2 of the form provides that you may use any reasonable method for calculating interest. D-5 Fill in a simple statement of the (borrower's) purpose for making the loan. You must keep a record of the "purpose" of any loan over $10,000 under the Financial Recordkeeping and Reporting of Currency in Foreign Transactions Regulations, 31 C.F.R and D-6 Check the box and complete this section if you are charging an additional finance charge. D-7 Where permitted by law, we have provided that this fee is nonrefundable. Some states do not permit additional finance charges but since both federally chartered and state chartered credit unions use this document, we have included the provision on the form. (Federal credit unions have specific authority for additional finance charges at 12 C.F.R ) If your credit union is state chartered, you should consult your own counsel about what types of Form PM-CLCU 1/

23 loans and what dollar limitations might apply for additional finance charges. The amount of the charge must be included in the amount shown in the finance charge disclosed (See B-2). This will have the effect of increasing the Annual Percentage Rate B-1. One of the three boxes following this blank line should be checked to indicate how it is being collected. D-8, D-9 or D-10. NOTE: Additional finance charges that are "paid in cash" or "withheld from proceeds" are also "prepaid finance charges" as that term is defined by the regulation. Reg (a)(23) and Commentary. The fact that an additional finance charge is also a prepaid finance charge makes its effect on the Annual Percentage Rate B-1 even greater. D-8 This option should be checked if the fee is paid in cash or by check before or at the closing of the loan. A charge collected in this manner is a prepaid finance charge for purposes of the itemization of amount financed. D-9 This option should be checked if the fee is to be collected pro rata over the term of the loan. For example, in a 20-installment loan transaction with a $20.00 loan fee, $1.00 will be collected with each installment. If a loan were prepaid, you may find that you have collected only part of this fee and the balance would have to be collected in the payoff amount. D-10 Check this box if the amount of the loan fee will be taken out of the loan proceeds. If a finance charge is collected in this manner, it is a prepaid finance charge and the amount of the principal D-1 and the "Amount Financed" B-3 will be different. Checking this box means that interest will be charged on the additional fee. D-11 (VARIABLE RATE ONLY) Check this box if you want to contract for a variable rate of simple D-12 interest. On line D-12 type in the "margin" (or "spread") which is the relationship between the "index rate" and the actual rate of interest to be charged on this note. See D-13 below for discussion of discretionary rate changes. EXAMPLE: Assume the base rate you use is the 90-day discount rate of the Federal Reserve Bank of Chicago. Assume also that your borrower is to pay 2% more than this index rate. Then this line D-12 should be filled in as follows: "2% greater than." EXAMPLE: Assume your borrower is to pay a rate that is equal to the "index rate." Then this line D-12 should be completed as follows: "equal to." EXAMPLE: Assume your borrower is to pay a rate that is 1% less than your index rate. Then this line D-12 should read as follows: "1% less than." If you check box D-11, you must also complete D-13 through D-21 below. D-13 (VARIABLE RATE ONLY) Fill in a description of the "index rate" you will be using to establish the actual interest rate of the note. You will also fill in the description of this rate on line B-14. There are any number of indexes which may be used as your index rate. These would include, but are not limited to, the average annual yield on the auction of 6-month U.S. Treasury Bills or the Federal Reserve Discount Rate in your district (be sure to specify a specific Federal Reserve district, since it may vary). Form PM-CLCU 1/

24 If you choose to vary the rate solely upon your own discretion, you need to state on the blank line that any increase is within your discretion. In that event, line D-12 above should not be completed. Reg (f) and Commentary. CAUTION: In some circumstances, a lender may not be permitted to vary an interest rate within its own discretion, or with an index which is changed at its discretion or control. If you are contemplating (or already) making loans with this type of index rate, you should consult with your attorneys regarding this issue. D-14 (VARIABLE RATE ONLY) Use these blanks to contract for a periodic rate cap. The forms that D-15 Wolters Kluwer Financial Services provides generally do not contain provisions for interest rate "carryover," so if the full amount of an index change is not reflected in a particular time period the "unused" portion of an index change cannot be "carried over" into the next "change" period. Use line D-14 to give the percentage limit and line D-15 to disclose the pertinent time period. Periodic rate caps are not required by federal law. EXAMPLE: The interest rate may not change more than 2% each month. D-16 (VARIABLE RATE ONLY) If you have a ceiling on the interest rate (a rate above which the interest rate cannot go), describe the ceiling on the blank line. EXAMPLE: "The annual interest rate in effect on this note will not at any time be more than 15%." D-17 (VARIABLE RATE ONLY) If there will be a floor on the interest rate (a rate below which the interest rate cannot go), describe the floor on the blank line. A floor is not required by federal law. EXAMPLE: "The annual interest rate in effect on this note will not at any time be... or less than 12%." D-18 Fill in here how often the rate change may occur. D-19 Check this box if you have checked box D-11 above and if the effect of a change in the interest rate will be to change each scheduled payment (not just the final payment). D-20 Check this box if you have checked box D-11 above and if the effect of a change in the interest rate will be to change the amount of the final payment. D-21 Check this box if you have checked box D-11 above and if the effect of a change in the interest rate will be to change the number of payments. D-22 Check this box if you want to contract for the ability to charge a late fee. D-23 If you check the box D-22, you must fill in the number of days after which a scheduled payment will be considered late. D-24 Describe the amount of the late charge. You may express the late charge as a percentage of the portion of the payment not made or as a dollar amount, or as a combination of both. Form PM-CLCU 1/

25 D-25 Describe the payment schedule for this loan. Here are some examples: EXAMPLE: I agree to pay accrued interest only on April 1, 2003, on July 1, 2003, on October 1, 2003, and I agree to pay the principal and accrued interest on demand, but if no demand is made, then on November 1, EXAMPLE: I agree to pay this note in 36 payments. The first payment will be in the amount of $ and will be due March 15, A payment of $ will be due on the 15th day of each month thereafter. The final payment of the entire unpaid balance of principal and interest will be due February 15, EXAMPLE: Borrower will pay 27 equal monthly installments of $ each month beginning February 1, 2003, and continuing monthly, except for the months of May, June and July of each year, until paid in full. (This is a Skip Payment example.) PART E - SECURITY AGREEMENT E-1 Check this box if the loan is further secured. E-2 Check this box if the loan is not further secured. E-3 Check this box if you wish to take a security interest in any or all of your member's share and/or deposit accounts. (This does not affect your right of set-off under common law.) If you mark this box, you must complete E-4 through E-7. E-4 Select this box if you wish to take a security interest in all of the member's accounts. E-5 Select this box if you wish to take a security interest in one or more, but not all of the E-6 member's accounts. Name the accounts in which you wish to have a security interest. E-7 We suggest you use this area to describe the amount of funds you will require the member to keep in the accounts in which you have taken a security interest. If the credit union takes a security interest in a member's account(s) and requires a specific balance be maintained in the account, the credit union may be established as a creditor in bankruptcy proceedings. The balance in the account(s) must be monitored to demonstrate the credit union's interest. E-8 If you have secured this loan with a separate security agreement, assignment of time or savings account, etc., check the box and fill in the type of interest taken (e.g., assignment, security agreement) and the date of such interest. We encourage you to include pre-existing security interests which secure this loan as well as contemporaneous but separate security interests. NOTE: Be sure that the separate agreement is in fact sufficient to secure this loan. Completing E-8 does not by itself tie this form to pre-existing security agreements. Such security agreements must include "future advance" language to create this relationship. E-9 By checking this box, and describing the collateral below, E-10, you take a security interest in the property described. E-10 Describe by item or type the collateral in which you are taking a security interest to secure this note. Form PM-CLCU 1/

26 GENERALLY - This security agreement is designed for personal property. This security agreement is principally designed for items which are covered by Article 9 of the Uniform Commercial Code. CAUTION: As mentioned previously, this form is designed only for use in consumer transactions and for collateral typically involved in those transactions, such as consumer goods. THIS FORM IS NOT INTENDED, DESIGNED, OR RECOMMENDED FOR ANY OTHER USE. We strongly recommend that you consult your own legal counsel concerning the appropriate ways to describe collateral here and on any financing statement or other filing document. PLEDGES - If the collateral in which you are taking a security interest is pledged collateral (collateral which is delivered to your possession such as corporate stocks, collectibles, etc.) indicate following your description of the collateral, in parenthesis, that the collateral is pledged. NOTE: If you are taking securities as collateral and their aggregate value is greater than $10,000, you may need to check with the Securities Information Center to ascertain whether the securities certificate has been reported missing, lost, counterfeit or stolen as required by Securities and Exchange Commission Rule 17f-1. Also, if you are extending credit in excess of $100,000 that is secured, in whole or in part, by any margin stock, you may need to complete form G-3. There are, in addition, some circumstances where form G-3 may need to be completed for loans of under $100,000. Reg. G, 12 C.F.R AFTER-ACQUIRED PROPERTY - IMPORTANT - If you intend that your security interest attach not only to property which the borrower already owns, but to property of the same type which the borrower might acquire later, be sure to add in this space appropriate language to that effect. Remember, under U.C.C , the application of an after-acquired property security interest to consumer goods is very limited in scope. PART F - INSURANCE DISCLOSURE F-1 This disclosure must be made, and must in fact be true, if you wish to sell credit life or disability insurance and you want to exclude the cost of such insurance from the finance charge. You must also complete lines F-2, F-3, and have your member elect the coverage at F-6 and sign on line F-7 to keep the costs of such insurance out of the finance charge. Of course, if your member wants both Credit Life and Disability coverage, he or she should initial both places. F-2 Fill in the premium for the credit life, disability or joint credit life policy which your borrower may purchase from or through you. UNIT COST METHOD - See Commentary - Reg (d)(4) for the limited circumstances when a unit cost disclosure is permissible. Form PM-CLCU 1/