If an obligation is satisfied and replaced by new obligation to the same bank (or holder of servicer of the original obligation) and is undertaken by the same consumer, the obligation must be treated as a refinancing. A complete set of Regulation Z. disclosures must be furnished to the consumer.
A refinancing may involve money arrangements, such as:
Regardless of the transaction, the new obligation must completely replace the earlier obligation to the considered a refinancing under Regulation Z.
The finance charge on the new disclosure must include any unearned portion of the old finance charge that is not credited to the existing obligation.
The following are not considered refinancings under Regulation Z even if the existing obligation is satisfied and replaced by a new obligation undertaken by the same consumer:
NOTE: If the rate increased or the new amount financed exceeds the unpaid balance plus earned finance charge and premiums for continuation of credit life, property or liability insurance, the transaction is a refinancing.
The renewal of optional insurance purchased by the consumer and added to an existing transaction, if required disclosures were provided for the initial purchase of the insurance.
Even without the cancellation of the old obligation and substitution of a new one, a new transaction is subject to new disclosures if the bank either:
NOTE: If at the time a loan is renewed the rate also is increased, the increase is not considered a variable-rate feature. It is the cost of renewal, similar to a flat fee, as long as the new rate remains fixed during the remaining life of the loan. If the original debt is not cancelled in connection with such a renewal, the regulation does not require new disclosures.