A story in the July 27 F&I Report said consumers could use credit cards to make down payments on vehicles.
One of our readers wondered whether consumers' use of plastic to make deposits and down payments would trigger disclosure requirements under the Federal Reserve Board's Regulation Z (Truth in Lending), which requires lenders to disclose all specifics of a loan, including how much interest will be charged. He also asked whether finance charges on the credit card payment would affect the final annual percentage rate of the loan.
Tom Hudson, a Washington-area lawyer specializing in finance, says these are common misconceptions.
He points out that the dealer is not extending credit to the cardholder; the credit card bank is the creditor. So the credit card charge is treated as a cash down payment on the retail installment sales contract, and any finance charge paid in connection with the credit card does not affect the annual percentage rate on the loan.
That's one disclosure the dealership doesn't have to make.